RECLAIMING DEMOCRACY FROM THE MARKET / PROJECT SYNDICATE

Reclaiming Democracy From the Market

Meritocracy promised a fairer society, but instead it has deepened the divide between winners and losers and eroded the dignity of work. As AI reorders economies and concentrates power in fewer and fewer hands, the question is no longer whether democracy needs saving, but whether we can save it in time.

Michael J. Sandel interviewed by Daron Acemoglu

With widening inequality fueling populist anger, and AI threatening to displace human labor, Nobel laureate economist Daron Acemoglu of MIT recently sat down with political philosopher Michael J. Sandel of Harvard University to discuss how democracy can be revitalized before the damage becomes irreversible. 

Their wide-ranging conversation explores the dark side of meritocracy, the limits of markets, the meaning of freedom, and the tightening grip of technology companies on the public sphere.

Philosophy Is in the Streets

Daron Acemoglu: From our conversations, and even more from your books, I have the sense that you see political philosophy as not just an inquiry into abstract concepts or a search for absolute truths, but as part of an ongoing dialogue with society about how we should organize our collective life, what we should value, and what we should resist. 

I wanted to get a sense of how you view political philosophy, how your own philosophy has evolved, and how the field as a whole can better focus on this essential task.

Michael Sandel: You have it exactly right. 

Some people imagine philosophy as an activity that resides in the heavens, far beyond the world we live in. 

I think philosophy belongs in the city, where citizens gather.

This understanding of philosophy goes back to Socrates, who wandered the streets of Athens instead of standing behind a lectern or writing books.

He went down to the Port of Piraeus, engaging citizens from every walk of life, asking them questions and inviting them to reflect on the laws and principles by which they lived.

I find this image of philosophy as being engaged with the world very attractive. 

Especially now, as democracies struggle and public debate is impoverished and combative, we need to recover the art of democratic discourse. 

That requires reasoning together about the big questions: What makes a society just? 

What role should money and markets play? 

And what do we owe one another as fellow citizens? 

Citizenship requires each of us to be a philosopher, at least to some extent.

DA: I completely agree, but let me draw an important distinction. 

Some people, both philosophers and others outside the field, also believe that philosophy should focus on the real world, yet they still look for general principles, like Kant’s categorical imperative, Rousseau’s general will, or John Rawls’s difference principle. 

What I hear you advocating is more a way of disciplining the conversation so that we can, democratically or through some other means, reach conclusions or workable compromises. 

Or am I reading too much into this?

MS: Principles do play an important role in philosophy and in moral and political discourse. 

But not in the sense that we begin with fixed principles and then ask how to apply them to particular cases, as though we could derive policy prescriptions directly from Kant’s categorical imperative.

Philosophy is not a matter of applying a one-size-fits-all, a priori principle. 

That impulse would be deeply unphilosophical. 

The kind of engaged philosophy you and I are drawn to moves back and forth between specific dilemmas and the broader principles and commitments by which we live.

I would not say that philosophy disciplines the conversation so much as it invites and provokes it. 

Through that process, we may arrive at a clearer understanding of what a just society would look like.

Just and Unjust Deserts

DA: Let’s turn to the United States today. 

I think a very natural starting point for this conversation is your 2020 book The Tyranny of Merit, in which you argue that American society has organized itself around a meritocratic ideal, placing enormous emphasis on people pulling themselves up by their bootstraps and rising to the top through talent, even though we know we don’t live in a fully meritocratic society.

MS: To speak of a “tyranny” of merit, as I do, is counterintuitive, because we usually think of merit as a good thing. 

If I need surgery, I want a well-qualified surgeon. 

Compared to hereditary privilege, cronyism, and corruption, merit is certainly an improvement, a better way to allocate social roles and rewards.

But over the past five decades, the divide between winners and losers has deepened, poisoning our politics and pulling us apart. 

This is due partly to widening income and wealth inequalities, and partly to the attitudes toward success that have accompanied them. 

Those on top have come to believe that their success is entirely their own doing, the measure of their merit, and therefore fully deserved. 

By implication, those who struggle must also deserve their fate.

This way of thinking flows from the meritocratic ideal: if chances are equal, the winners deserve their winnings. 

But as you mentioned, we all know that chances are not truly equal.

We don’t live in a perfect meritocracy. 

Still, it is tempting to think that if only we did, everything would be fine.

I disagree. 

Meritocracy has a dark side. 

Even a fully realized meritocracy would corrode the common good. 

It would lead the successful to take too much credit for their success, forgetting their good fortune and their indebtedness to those who made their achievements possible. 

This was the view of Michael Young, who coined the term “meritocracy” in the late 1950s as a warning, not as an ideal.

DA: Your argument is more radical than it might appear. 

Progressive taxation, as in the US and Europe, does not change the attitudes embedded in meritocracy. 

Even taxing 50% of tech billionaires’ earnings would not dispel the corrosive conceit that they are superior because they have succeeded.

MS: Exactly. 

That conceit lies at the heart of the anger and resentment that have accompanied the widening divide between winners and losers. 

Even with a fairer distribution of income and wealth, many working people – especially those without college degrees or elite credentials – would still feel that elites look down on them.

DA: Another issue is categorization. 

Even if meritocracy operated within groups defined by demographic characteristics – education, race, gender, and so on – it would still be corrosive. 

But the fact that it operates between groups, pitting the educated against the less educated, is what makes it socially disruptive.

There is also a contextual element to success that often goes unnoticed. 

If you are more intellectually gifted, but I am physically much stronger, then in a different age, you might have been subordinate to me, because I had the power to harm you. 

Today, it’s the opposite. 

Yet we ignore this contextual element and treat the skills we currently reward as inherently superior, as though they were always a mark of virtue.

This becomes even more pronounced as we draw finer distinctions between skills. 

Being a good lawyer may matter less today than being a skilled programmer because our economy just happens to value one more than the other.

MS: Consider great athletes like LeBron James and Stephen Curry: they enjoy enormous rewards, but do they deserve to make 2,000 times more than a schoolteacher or a nurse?

There are two reasons to question that. 

One is that the talents and gifts that enable us to succeed are, in large part, a matter of luck. 

The other is social context. 

Had James and Curry lived during the Italian Renaissance, they might have been just as gifted athletically. 

But they wouldn’t have earned as much because Renaissance society cared more about fresco painting than basketball.

DA: Is the problem that they earn 2,000 times more than someone with different talents, or is it the way society equates their market value with greater worth and virtue? 

That connects to another powerful idea in The Tyranny of Merit: the concept of contributive justice.

MS: First, we need to distinguish between two aspects of justice. 

Debates about taxing high earners to help those who struggle concern income, wealth, and fairness; that’s distributive justice. 

But there’s also the question of social recognition – esteem, prestige, and respect – which is a matter of contributive justice.

We could imagine a society that achieved what most of us would regard as a fair distribution of income and wealth through more ambitious taxation and a stronger safety net. 

But even if the wealthy paid their taxes, they might still enjoy a kind of honor, prestige, and esteem that is out of proportion to the value of their contribution, especially when compared, say, to teachers or caregivers.

Contributive justice lies at the heart of the resentment fueling today’s populist backlash. 

At a time when enormous rewards and prestige go to those who manage money rather than those who produce tangible goods, many working people feel that their contributions are undervalued.

That hierarchy of honor undermines the dignity of work. 

Work is not only a way of making a living; it is also a way of contributing to the common good and earning social recognition and esteem for doing so. 

During the pandemic, we briefly recognized how deeply we depend on delivery and warehouse workers, grocery clerks, nurse assistants, and child-care workers. 

It could have been a moment for a public debate about how to realign pay and recognition with social contribution. 

Instead, we went back to business as usual.

Status and Status Quo

DA: The difficulty I have with both social status and contributive justice is that society determines them in a very organic way. 

So, if we decide that the current meritocratic equilibrium fails to confer appropriate status or dignity on a large segment of the population, how can we change that, especially when the market serves as such a powerful anchor? 

Even if that weren’t the case, how could anybody deliberately reshape something as organic as our sense of contributive justice?

MS: You’re right. 

With the market serving as an anchor, it’s easy to assume that what people earn reflects the value of their contribution, at least under competitive conditions. 

But even the most ardent laissez-faire economist would be hard-pressed to defend the idea that income is a reliable moral measure. 

If it were, we would have to say that a casino mogul contributes 5,000 times as much to society as a nurse or a schoolteacher.

Do we really believe that? 

Consider Breaking Bad. 

The protagonist, Walter White, began as a high school chemistry teacher, struggling to make ends meet and even washing cars after school. 

Then he became a meth cook and dealer, earning millions of dollars. 

Yet no one would claim that his contribution to society was greater as a meth cook. 

On reflection, we are capable of making qualitative moral judgments about the value of different kinds of work, even if we disagree about the details.

DA: I completely agree that the market is not a perfect anchor. 

But I worry that the alternative would simply be what intellectual elites value.

Let me give you an example that has long bothered me. 

Opera is often treated as high art and is heavily subsidized, even though it is largely consumed by the well-educated and the wealthy. 

Meanwhile, heavy metal, which came out of working-class pubs, is not. 

That is a judgment made by intellectual elites, and it translates into policy.

So, I’m always afraid that if we give intellectual elites too much power to decide, we’re going to end up with a lot of situations like this. 

You might like opera, but many people like heavy metal.

MS: Intellectual elites should not be the arbiters, certainly not the sole arbiters, of value. 

In a democracy, citizens should be. 

We talked about care workers being underpaid and underrecognized, but let’s also look at the other end.

Part of the political debate we should have is whether the outsize reward, recognition, and valorization accorded to those at the top of the financial industry are warranted. 

There has been a lot of deference to hedge fund managers and Wall Street, and more recently to tech entrepreneurs, not just in terms of money, but also in terms of prestige and influence over social and political decisions.

This is an area ripe for public deliberation, ideally prompted by concrete proposals. 

For example, one way to address the misallocation of social honor and esteem would be to change the rules.

We speak of the market as an anchor, but the market is made up of rules. 

Those rules could be different, and we would still have markets.

What rules should govern stock buybacks, for example? 

How should speculative financial transactions be regulated or taxed? 

If we believe in the dignity of work, can we justify taxing labor income at higher rates than capital gains and dividends? 

These are familiar policy debates that we typically frame in terms of distributive justice, but they also touch on contributive justice. 

If we organized the market in ways that prohibited some of the practices that enable outsize rewards, the successful might not appear so Olympian.

Problems of Capitalism

DA: That partly answers my next question: What’s wrong with markets and capitalism, and what are their limits?

Capitalism, by the way, is a word I hate, not just because it’s highly ideological, but because it creates the impression that there is just one kind of market economy. 

As you noted, there are many different ways of organizing markets and deciding which goods should be allocated through markets and which through other mechanisms, such as family, community, or social norms.

Those are important determinants, not only of economic inequality, but also of status and contributive inequality.

MS: Right. 

As the divide between winners and losers has widened, markets have expanded into areas such as health, education, personal relationships, law, and the media, where they crowd out important non-market values. 

This is the argument I made in my 2012 book What Money Can’t Buy: we have drifted from having a market economy to becoming a market society.

The difference is this: a market economy is a valuable and effective tool for organizing productive activity; a market society is one in which everything is for sale. 

So perhaps the question we should be asking is what money shouldn’t buy, rather than what money can’t buy.

Let me linger on finance for a moment. 

The role of finance in capitalism, correct me if I’m wrong, is to allocate capital to socially useful and productive activities, like investments in factories, hospitals, schools, roads, and airports. 

But much of today’s financial activity consists of speculative bets on the future value of existing assets, some of which were created for that exact purpose.

Now, some argue that this seemingly unproductive activity provides information and liquidity. 

But we devote an enormous share of GDP to these relatively slender goods. 

Adair Turner, who served as chair of the United Kingdom’s Financial Services Authority after the 2008 crash, once estimated that 85% of bank credit in advanced economies like the US and Britain is used to finance speculative rather than productive activities.

That suggests there’s a lot of room to tax and discourage non-productive and wasteful financial activities while protecting those who contribute to the real economy. 

What is your view?

DA: It’s a difficult subject because things aren’t completely open and shut. 

Most economists and political philosophers would agree that allocating capital to those who need it temporarily or enabling investment are productive activities. 

At the other extreme, some activities are clearly unproductive, such as spending billions of dollars on the fastest computers or GPUs to beat the market by a millisecond and capture arbitrage profits.

But there are gray areas in between. 

The 2008 financial crisis was closely linked to mortgage-backed securities, which became tools for speculation. 

At the time, many people thought that mortgage-backed securities were useful because they turned illiquid, risky investments into safer ones, directing more money toward home ownership and dispersing risk across institutions rather than concentrating it on a single balance sheet. 

Many financial instruments are double-edged swords: their effects depend on how they are used and regulated.

The broader lesson is that much of finance requires greater scrutiny and regulation, so that actors cannot reap the benefits of risky behavior while others bear the costs. 

But there isn’t a clear line separating productive activities from unproductive ones.

As financial instruments become more complex, the firms that create and market them gain enormous power. 

It is no coincidence that in the US, and increasingly in Europe, the sectors that generate enormous fortunes are finance and tech, two industries that enable large corporations to exercise an unprecedented level of control.

That dimension of finance does not fit neatly into the productive/unproductive distinction, but it is an important social aspect we have yet to confront.

MS: Before we leave the question of productive versus unproductive finance, consider the recent explosion of prediction markets. 

We can now bet on whether, two days from now, the temperature in Boston will exceed 0° Celsius. 

Or consider the proliferation of sports betting. Is that productive?

DA: I’m no fan of prediction markets, but so many other people are that I’m still trying to understand why. 

Many bets are not socially useful. 

If I walk into a casino with $1 million and bet on black or red at the roulette table, that’s clearly not productive. 

But when I do something similar with mortgage-backed securities, it’s not so clear. 

The reason is that pricing those securities serves a social function by determining how much capital flows into mortgages. 

Still, there is a betting element, which is why it’s a gray area.

MS: And naked credit default swaps?

DA: I think they were definitely abused. 

But you can see why pricing derivative assets could be useful in principle, because they deal explicitly with future risks. 

The financial philosophy that led to the celebration of derivatives was that if we can price these risks, people can allocate their money more rationally.

I don’t think that’s completely right, but I don’t think it’s completely wrong, either. 

That’s the gray area.

MS: You’re a moderate.

DA: Not at all. 

But that brings us to our next topic: inequality.

A Corrosive Force

DA: Obviously, inequality is both an economic problem and a philosophical one. 

How do you approach it, especially in terms of fairness and contribution?

MS: There are three kinds of inequality. 

The first is economic inequality. 

That’s objectionable insofar as it raises questions of fairness. 

To decide which income and wealth inequalities are justifiable, we have to debate distributive justice.

The second kind of inequality concerns political participation, as big money can crowd out citizens’ voices. 

With the campaign-finance system we have in the US, that is almost guaranteed to remain a persistent problem. 

And the third kind of inequality is inequality of recognition and esteem.

One of inequality’s most corrosive effects is that it has led us to live increasingly separate lives. 

The affluent and those of modest means rarely encounter one another; we live, work, shop, and play in separate places, and we send our kids to different schools. 

This is not good for democracy.

To address this kind of inequality, we need to build institutions that foster class mixing: not just governmental bodies but also public parks, municipal swimming pools, public libraries, schools, transportation, and sports facilities. 

These institutions not only provide essential services for people who could not otherwise afford them; they also help create a common life.

Democracy does not require perfect equality, but it does require that people from different social backgrounds and classes encounter one another in their everyday lives. 

This is how we learn to negotiate and live with our differences, and how we come to care for the common good.

DA: In a sense, what you are rightly criticizing involves two related but distinct developments. 

First, community has become less important for people. 

As markets provide more goods and services, we depend less on favors, communication, cooperation, and collective organization. 

Second, communities defined by ascriptive characteristics like income, education, and perhaps race have become more segregated. 

Postgraduates are far less likely to marry or befriend people with only a high school degree, and far more likely to socialize with others with similar backgrounds, interests, and education.

MS: Yes, community lies at the heart of many of the challenges we’ve been discussing. 

The sense of disempowerment that most Americans feel – that their voice doesn’t matter, that politicians don’t listen to them or care what they think – is one of the defining anxieties of our age. 

This goes back several decades and is closely connected to the feeling that the moral fabric of community is unraveling around us, from family to neighborhood to country. 

People’s sense of being unmoored, unsettled, and dislocated is reinforced by the idea that freedom is mainly about choosing consumer goods in line with our interests, desires, and preferences.

That consumerist idea of freedom has its allure, but it also crowds out a deeper civic conception of freedom: I’m truly free only if I have a meaningful say in shaping the forces that govern our collective life. 

But that kind of freedom requires active deliberation as citizens about the big questions that matter, and that kind of deliberation requires a sense that we share a common life, bound by communities with traditions, histories, shared projects, and aspirations, even if we disagree about what those traditions require of us now. 

A purely market-driven, consumerist conception of freedom lacks that.

Freedom and Community

DA: I agree with 90% of what you’re saying, but there’s 10% that I would like to probe a little bit more. 

I think you’re right that our sense of self-worth and self-actualization depends on community, because we are social animals. 

The only way to have a political voice is to be part of a community, and many of the social interactions that we value would not make sense if they were provided by the market.

But even if we accept all of that, there will inevitably be tensions between community and individual freedom in certain domains. 

To take an extreme example, some religious communities in the US and Europe limit their young members’ right to exit through social pressure or indoctrination. 

Communities with strong historical and cultural roots may also be openly or subtly hostile to behaviors they see as incompatible with their traditions, such as living openly as a gay person or as an atheist.

The hard part is balancing individual freedom with the demands of community without falling into the trap of extreme individualism. 

In my reading of several thinkers who rightly emphasize the role and importance of community, including you, I don’t see a satisfying resolution to this tension.

MS: There is no easy resolution, and you’re certainly right that community has a dark side. 

Community can be dangerous, and history offers plenty of examples of moral atrocities committed in the name of conformity to tradition, be it religious or ideological.

The question is how to fend off this danger. 

Nurturing healthy, pluralistic communities allows for competing interpretations about what tradition requires, and that fosters respect for pluralism and disagreement. 

Simply setting community aside and saying that beyond a certain point we’re on our own risks creating a moral void at the heart of public life. 

That void may seem to protect us from communities going off the rails. 

But it drains public life of larger moral meaning and shared identity.

In many ways, the liberal response to the danger you identify has often been to draw a clear distinction between what’s public and what’s private. 

To prevent disagreement, controversy, and possibly coercion, citizens are asked to leave their moral and religious views outside the public square. 

Freedom is then conceived as individual choice rather than participation in a shared civic project.

The danger is that public discourse becomes hollowed out, and the resulting moral void will invariably be filled by religious fundamentalism or hyper-nationalism. 

These become the default assertions of community and purpose that rush in to fill the space left by a naked public square emptied of larger meaning, solidarity, and shared purpose.

That is exactly what has led us to the current moment. 

The best protection against harsh, exclusionary, or nativist forms of community is not to draw too sharp a line between public and private, but to build and nurture communities of meaning while ensuring that they remain open to argument and disagreement.

DA: I agree with a lot of what you’re saying, but I would go one step further. 

The ideal you’re describing cannot be achieved unless, as part of this deliberative process, we recognize that many different community values are legitimate and will have to coexist. 

I don’t think we’ve done that very well in liberal societies. 

Liberal progressivism, in particular, has tried to erase certain community values because they conflict with its own. 

That, I think, is dangerous.

MS: One way that liberals and progressives have mistakenly distanced themselves from a language of community is through a wariness of patriotism. 

It’s a mistake to cede patriotism to the right, because then patriotism comes to be defined in hyper-nationalist, xenophobic, anti-immigrant terms.

DA: I completely agree. 

But viewed from a different angle, the only way to sustain diverse community values is to maintain a firm commitment to certain basic individual freedoms, so that communities don’t suppress them.

That is why the trade-off between community and freedom feels so subtle to me. 

The only way to allow communities to flourish in their diversity without becoming oppressive is to uphold a core set of individual freedoms within defined limits.

MS: Individual rights are certainly important, even indispensable. 

The question is whether the justification for those rights can be detached from substantive conceptions of the good life.

Consider freedom of speech. 

You might describe it as a classic example of how an individual right should trump community considerations. 

I would put it slightly differently. One reason free speech is so important is that it is essential to civic freedom – to the ability to disagree with the government, engage in political debate, and challenge majority views. 

So, my defense of freedom of speech as a fundamental right does not necessarily require setting aside concerns for community or the common good. 

Rather, the case for free speech is deeply connected to the civic understanding of freedom.

Automated Citizens?

DA: Let me now turn to the future of work and democracy. 

Work confers dignity, respect, and social value, and it often goes hand in hand with participation in the democratic process. 

But I think you would agree that advances in AI and the broader reorganization of the economy are putting all this in flux, perhaps in dangerous ways.

If AI displaces a significant share of jobs, then even distributive measures like universal basic income or giving people shares in tech companies would not necessarily restore contributive justice or revive civic life. 

And if AI companies increasingly control the public sphere, civic participation itself may be transformed. 

In that sense, democracy faces two related threats: one from the erosion of meaningful work, and another from the capture of the public domain.

MS: Daron, a lot of what I know about AI and the future of work I learned from you. 

What first drew me to your work were your earlier papers on the causes of widening inequality in the age of globalization and the extent to which it was driven by trade policy and technological change.

Underlying that debate was the claim, often made by defenders of neoliberal globalization, that trade policy is political but technology is inevitable.

What I learned from your work is that this is not necessarily true. 

The direction of technological innovation is not a fact of nature; it is subject to our choices and priorities. 

If those priorities are set by Silicon Valley venture capitalists, innovation will move toward automation. 

If innovation is shaped by different social aims, it could focus on enhancing labor, making workers more productive rather than replacing them.

DA: I still think that. 

But that doesn’t change the reality that, at the moment, AI is moving toward automation and empowering a few people to take over the public square. 

So where do we go from here? 

How do we respond? 

Perhaps through deliberation, but do we have the time?

MS: I share your concern. 

We are not effectively steering AI in a democratic direction. 

Once we understand that the direction of technological innovation is not a fact of nature any more than hyper-globalization was, it becomes a legitimate subject of democratic deliberation.

That debate is crucial to any effort to revive the project of self-government. 

Whether we can do it remains an open question, but we have to try. 

Much of today’s anxiety and anger arises from waning faith in the credibility of representative government, which seems incapable of serving the public good and unresponsive to ordinary citizens’ views and values.

The concentration of power in the economy, especially in the tech industry, is just as consequential. 

These firms wield immense political power, and they are shaping the direction of technology itself, with far-reaching implications for how we communicate, receive information, and engage with one another.

DA: Another aspect of disempowerment is the sense that technology is entirely out of our control and moving in a direction that will reshape our lives, eliminating work or changing its meaning.

MS: As democratic citizens, just as we need to debate what counts as a valuable contribution to the economy – rather than leaving that judgement to markets – we also need to reclaim from Silicon Valley venture capitalists the power to decide what technology is for. 

To do that, we must create forums and arenas for meaningful deliberation.

What gives me hope, and you may think it’s a frail hope, is that there is a hunger for a better kind of public discourse. 

There is a yearning for a morally robust and engaged public discourse, rather than the narrow managerial and angry discourse to which we have grown accustomed.

DA: I don’t think the hope is frail. 

This is, I think, the strongest case for economics and philosophy working together. 

I also believe that democracy – and the hunger for democracy – is more robust than many assume. 

What feels frail to me is the time frame: can we do this before the damage cannot be undone?

MS: That’s the biggest question for me as well. 

Looking at the dangers looming over the democratic project, it is hard to deny that the hour is late. 

Still, let’s begin.

Michael J. Sandel, the 2025 laureate of the Berggruen Prize for Philosophy and Culture, is Professor of Government at Harvard University.

Daron Acemoglu, a 2024 Nobel laureate in economics and Institute Professor of Economics at MIT, is a co-author (with James A. Robinson) of Why Nations Fail: The Origins of Power, Prosperity and Poverty (Profile, 2019) and a co-author (with Simon Johnson) of Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity (PublicAffairs, 2023).