testing intestine this is the english translation can you hear the english translation are you connected there we are i know that there are still people outside but unfortunately we have to start it is a traditional festival to start our meetings punctually at the scheduled time i have a collection of mails that were sent to journal to roll i mean you know that we plan our festival and we choose the title of the next edition immediately after the previous one has been concluded and unavoidably we always happen to land on a theme gentile has been working at so in june july as i have done every single year i sent my mail to shanti roll informing him that we would have been honored to have him as a speaker at our festival what happened in the past was that within five ten minutes i used to receive a very kind answer by sean stating i have heard so much about the festival i know it is a wonderful initiative i would like so much to participate but on that date next year i have to give a lecture and it was always a prestigious event the econometric society lecture for instance of which jen has been the president i have to receive an award at the academic politic in france or the academy of arts and science and gentile is one of the few foreign members so there was always something interfering but this year for a series of happy situations we have been able to have him here with us and in the meantime he's even been awarded the nobel prize for his studies on market rulings market regulation in situations characterized by monopolies so the reason why it is so important for us to have jaunty rule here with us at the festival resides in the fact that his research work can tell us a lot about what economists do we tend to think that the economies just make the apology of markets as a matter of fact all what gentile has done has always had the purpose of highlighting the imperfections of the markets he has documented that markets are imperfect and that's why he got his nobel prize for his studies on the power of monopolies on market power but there are many other market imperfections that he has highlighted and he's going to talk about one of these today we often hear about externalities welcome to role has focused on internalities that is those cases in which people make decisions and due to their symmetry of information these people are not fully aware of the long-term consequences of such decisions therefore they can self-damage they can damage themselves we've been debating the issue of organ transplantation for instance but there are many other examples i don't know whether you have heard about the voluntary ape this means that a person actually uses the future pension to get a credit immediately well people need to know that of course they can receive the money today but this means that in the future they will get a smaller pension so unless there is this awareness this is an internal internality issue other market imperfections are related to disequality to lack of attention towards social cohesion issues there's so many imperfections he has pointed out and investigating the imperfections of the markets journey role has always tried to propose solutions solutions that can correct the functioning of markets i mean when economists are criticized because they go on talking about the markets this is done in very abstract terms we say that market is not working let's do away with the market but i mean what can we replace the market with it is very easy to be appalled by the fact that things do not work properly but it is much more difficult to investigate the possible changes in terms of incentives and market structures that can actually represent a remedy to the failure and then there is another methodological lesson that jontyrol has given us that is conceiving the role of the economist as that of a person that shares his or her knowledge highlighting the pros and cons and the relevant trade-off that accompanies every single decision and choice rather than trying to sell an idea in other words his studies and the reason why his books like the industrial organizations books are books that have been studied by generations of economies well these books are encyclopedias you will never find a pamphlet signed by jean tyrol because he actually presents a problem with a systemic view of the problem showing all the different facets of the problem and his last book the common good is a thick book full of material full of ideas full of information requiring in-depth investigation and studies my baby there is an exception a situation in which gentile has taken a clear stance that was the campaign for the french elections and he was in favor of macron and against populism so most likely you have a very strong vision of the common good in this case when we invited gentile to this festival we asked him to talk about corporate social responsibility a topic has been investigated with being a booker who was also our guest some years ago here at the festival and we chose this topic because talking about this equality in health and the challenges of the national or the different healthcare systems there is the issue of sustainability involving the private sector having companies provided health care services taking over the social responsibility towards their employees may be something to the advantage of the accounts of the social or welfare state and our national health care systems so as you will hear gentile has taken on this invitation i don't want to spoil his presentation so i'm not going to tell you anything but he has used this typical approach which is that of approaching the problem including all the possible motivations why companies do focus today on csr he will talk about philosophy the relationship between philosophers and economists so let's listen to his lecture with a lot of attention i know that you're going to have many many questions and nevertheless keep your questions for the end because we will have a q a session thank you don't you have the floor well thank you tito for those very kind words and i must say it's very important in those times of populism that people the wide audience appropriate economics knowledge um to fight populism and to understand what the stakes are in economics like in other social sciences 15 years ago la voce was created and was very successful and 12 years ago this fabulous festival in trento was was created as well and they react for the common good exactly trying to share with the wide audience actually this knowledge of economics which is so dear to us i think potito deserves a round of applause on our side thank you thank you so much thank you thank you thank you because of course it was the same person behind the two so today thank you for being here tonight and i would like to talk a little bit about corporate social responsibility and more reasoning and try to say what we economists have to uh to say about this thing if you think about the last two centuries of social construct as organization of our society was built on two pillars the first pillar was creation of value and the idea that consumers and and corporations would pursue their self-interest that was adam's miss invisible and but then of course you you know the markets have failures tito explained that very well and of course we have to correct market failures and that's what the state is about to correct for externalities like pollution you explain internal internalities better than i could but you know try you know it might be the case that savings are insufficient uh that we consume too much drugs or too much alcohol and so on and so forth we have to correct for market power and of course anti-trust and regulation of natural monopolies is about that we have to ensure that asymmetries of information do not create too much damage um that's why we have consumer protection that's why we have regulation of financial intermediaries and of course one of the biggest market failure as well is inequality and breakdown of solidarity about health because this year of course festival is dedicated to health the fact that there is no reason why in a market economy you will have the right distribution of income or whether people will get the right health insurance and the idea of of this construction with on those two pillars basically uh the market which ensures efficiency but at the same time you want the state to correct my head failure is that you give the right incentive to economic agents to pursue the common good and there is a complementarity between market and the state now there is a third pillar of course because the state itself fails so there are lots of uh state failures as well and and basically social risk did i skip a slide no uh there is third pillar which is a socially responsible investment and it's a very democratic decentralized approach um which build on individual social responsibilities the fact that we are willing to um to lose a little bit of income in the in order to pursue good causes so as consumer we are going to consume fair trade products as investors we may invest in green funds or social responsible investments we may actually forego some of the salary to work for ngo because we are proud to work for an ngo and same thing for the firms and we'll have to discuss that in more detail well you know the firms are socially responsible if they care about employees about the environment ethics the community and even the investors themselves now if there's a long tradition of of both actually uh you know the quakers actually refused to trade in weapons weapons and slavery or you know 19th century in many countries christian employers actually provided a number of public goods for their workers now big question we're going to ask is responsibility responsible behavior at odds with our natural consequence of market economies and my answer is it's just a natural consequence of market economies somehow socially responsible behavior as i said is linked with government failure of some kind it may be the case that the government is captured by lobbies it may be the case that the government panders to electorate because the government you know they want to be elected or elected and therefore is not going to do the right thing if the electorate doesn't have the right information um it may be the case of course that there are multiple jurisdiction we have 200 countries in the world at least and that means that you know one country cannot do everything you cannot control what's going on abroad and that's very important of course as we see for climate change are for fiscal harmonization or child labor or many other things and finally the state cannot control everything you know minor nuisances for example or respect to others must actually be disciplined through social norms you cannot have you cannot have a police mind a policeman behind each of us all the time now so the first part of my talk is going to be about corporate social responsibility and we are going to start defining corporate social responsibility because it's a catch-all phrase um very different concept and and the thing we're going to ask is is this a sacrifice of profit or is there a business case for corporate social responsibility and i'm going to go through three visions um which i developed with colombian abu as you said and i will talk more interestingly maybe about challenges for csr so the first vision is win-win okay which is often emphasized for example by sovereign welfare is that actually you you try to fight short-termism okay um for example you you don't break uh implicit contract with workers so you know if you can keep the workers because you momentarily have some trouble but they will be useful in the future then you you might actually incur a little bit loss of money in order to keep your implicit contract with your employees you don't take risk um with environmental matters because there might be a big catastrophe an old spill or something like that and then there will be big liabilities or or lawsuits you provide clawbacks for executive compensation with the idea that your managers are going to take a longer term perspective now how does it why is it linked with corporate social responsibility it's linked because the offensive shot on behaviors also create some damage some damage for the environment like in an oil spill for example or it could be a damage on the workers who lose their job it could be a damage for the taxpayer when a bank is billed out by government it can be various things but of course there there is some some case for activism so if you are socially responsible form for example you might want to intervene in the management of the company so as to make it longer term now there's nothing wrong with that and actually it's what economists have always called in terms of profit maximization which is the right concept of profit is not a short-term profit it's a long-term profit it's an old concept in economics of course in reality we see a lot of short-term behavior which are driven in part by the wrong incentives but basically this concept of win-win you can think of it as being an international profit maximization second vision of corporate social responsibility the firm is a channel for the explanation of citizen value so the idea is that as a stakeholder you might be willing to sacrifice some money or some profit in order to further social goals but you cannot do it yourself i mean you can do it yourself through charity but you also will like the firms would you deal with to be nicer and you are willing to pay at least a bit for that so for example as an investor you are willing to lose a little bit of your yield on your investment if you invest in socially responsible firms as an employee you are willing to work for ngo even if your salary is a bit lower or as a customer you are willing to basically pay a little bit more for your coffee if your coffee is fair trade again this important thing to notice is that it's completely consistent with profit maximization because what happens in practice is that actually the firms have you pay for it so you're going to pay your coffee a little bit more right it's going to be a bit more expensive and in a sense what they do is that they do charity on your behalf the firms do charity on your behalf they can hire workers at a lower wage they can basically raise funds at a lower cost of capital and they can sell their product a little bit more expensive and there's evidence which is consistent with that like higher return on sin stocks and especially the greater prevalence of csr among firms which are large highly visible they produce final goods so they actually interact with customers they're criticized scrutinized by ngos and are profitable so that's all consistent with this view and also that's consistent of course with the view of greenwashing and one of the problems with csi is that sometimes it becomes green washing and of course we want firms to be serious about their behavior uh their pro-social behavior so the third person the third the third question is i'm still learning i'm still learning how to use this uh the third possibility is point philanthropy so there it's not profit maximization anymore it's basically you sacrifice profit to do to do good and that has drawn criticism from economies on the right side right side on the left side so milton friedman actually said you should not do charity with others man i should do charity with your own money and robert rash actually was very upset that actually charity would be done by pride institution as opposed to the state sometimes it may be hard to tell apart from vision 2 which is delegated free entropy because of course if you do charity also get a better public image and of course you may also cash in a little bit on that so let me talk about the challenges with those views the first challenge which is obvious is free riding which is we're all willing to help with the environment and to help with development and so on but the question is you know if we pay 10 percent more for our coffee that's fine but if we pay twice as much are we still going to buy this fair trade coffee so free riding is there and it may become bigger for example in in in terms of investment when more people get involved in socially responsible investment right now given that socially responsible investment is still small you just can pick the firms which are greener for example and you don't lose on return by and large you don't lose very much but you know as this thing becomes more more prevalent then that may change over time but this is not what i want to emphasize i want to advise on further information prime one obvious thing with information is measurement you know how do you measure the quality of social responsibility of a firm so you need the rating agencies and now we have a number of raging agencies which do exactly that but then there is a question of how they report they're finding so there's the issue of aggravation so for example imagine that i'm electricity company i produce with coal it's cheap but it produces a lot it emits so2 co2 knocks and so on and i compensate i keep workers and i i built a school for the community and also so how do you how do you aggregate those different dimensions or we see lots of companies which engage in fair trade and this at the same time if it corporate tax in a legal way but they use loopholes to be with the corporate tax do you want to use a relative performance evaluation or an absolute performance so for example you might you might be a core producer by the same time you try to you put you put some efforts in in order to improve and and pollute less so you want a relative variation or an absolute evaluation and then there is a question of criteria which is very important because corporate social responsibility as i said is a decentralized solution and basically narrates all the costs and benefits of the democratic process it's a very democratic approach it's not a centralized state-driven approach so the rating agencies and the ceos themselves are likely to pander to their customers believe so and also to politicians who who have regulatory power so they're going to exploit cognitive bias in in this book that tito mentioned the economics of the common good for the common good um i try to show our you know our views about the and science in general are distorted by motivated beliefs and also by the confusion between you know the ignorance of the neglect of indirect effects we just look at first impression the direct effects and there are many examples where you have to ask yourself will the voters in this case they will be the people who actually behave responsibly will they understand what is at stake so michael kramer is at this uh at this festival and he has developed this paper or with this well-known example of his imagine that an ngo confiscate ivory and the question for the ngo is whether to sell the ivory or to basically destroy it and most people will say oh that's obvious small easy and efgo should destroy the ivory however it's not that obvious because of course if you sell the ivory first you will have more income for your activities but also you will reduce the price of ivory and if you reduce over the price of ivory you reduce the incentive of poachers to to basically get more ivory so it's a good now they their counter arguments of course which is that if a respectable uh if a respectable organization starts selling may be bad organizations in terms of image that may mean that trading ivory is respectable and i'm not saying i'm not giving the answer but i'm saying you know it is a difficult difficult issue but if you could sell it secretly then i'm quite sure it will be a good thing to sell it right if nobody knew and you just sell it on the market secretly that would be a good thing because you'll get more money from the ngo and you reduce the price of ivory and then you will basically reduce poaching but i could go go on and on i mean for those of you are interested in climate change clean development making them look like a wonderful mechanism and then when you start thinking about it then that creates other primes because if you think about the indirect effects they are not as good at the direct effect you could say the same for unemployment policies and for many other things and of course framing is very important so for example if you ask a question to people about offshoring and you can frame it as helping poor country develop or as minimizing labor costs and find people in the domestic country you'll get very different answer if you do that so this is a difficult issue and our understanding is of course going to be one limit of of course social responsibility or at least we need to to train people so that they understand the issues that brings me to the second topic of this of this speech which is markets and morality so in terms of markets and morality as you all know most economics spend their professional life analyzing market failures and i'm not the only one of course i got the price nobel prize for regulation but i think many economists more journey actually spend their life looking at when markets fail and there are many so many examples of that that we have a lot of work to do and our job for all of us but but still we see it's fair to say that we see markets as essential and this is not new and you know at the time where communism was so prevalent among so popular among intellectual i think economists not all of them actually resisted this view and say watch out you're going to create trouble if you believe in a new man you forget completely about incentives and that is likely to lead to totalizing totalitarianism because of course you won't get what you expected and then you'll have to impose and then you'll start creating problems with incentive creating problems with uh purchasing power creating problems with freedom with the environment with etc etc um so it's fair to say that on the whole even so we spend our life talking about regulation and caveats we are kind of pro markets um and our societies in a sense are pro-market because almost every society now in the world except north korea is a market economy by and large but it's fair to say also that social scientists part of civil societies and most regions actually differ of a different view of society and a different view of economics they will argue that economists fail to draw a clear line between what has a price and what has a dignity to use account or between the profane and the sacred to use durkheim's work and they also argue that markets are stress a threat to social cohesion there are different views sociologists religions and philosophers as well philosophers have written many books i i just have two a on the screen but there are many other books that you can read which are all very interesting and they have similar titles so for example michael sandal books which was a worldwide success of a bestseller it's called what a market can buy and debra sat's book de brassats is a philosopher at stanford michael sander is at harvard as his book which is very interesting on why something should not be for sale very different views by the way but clearly this is a big topic for philosophers and it should be a big topic for economists as well so we need we need to understand more those objections and try to understand what may be wrong with economics and what may be right as well so let me be able a bit provocative and talk about the market for virtuous in indignation um which is on both sides of the political spectrum by the way you see that on the right side on the left side of the political spectrum and the very negative sentiments in some countries toward economics with this view that we don't we economists don't take into account enough um nauseous and repugnant markets and complain and they they have complaints about economists felt on chong uh a vision of the world is not the right one so a good example of that is michael sandel and i'm going to quote for him he will set a wide range of goods and services including babies for adoption surrogate motherhood sexuality drugs military service votes and organ transplantations are not to be commoditized through markets no more than friendship admission to edit universities all nobel prizes are to be bought or genes or and other forms of life to be patented so this this view that markets or at least a number of markets are actually very bad and economists failed to see that i was also and to be frank and to be a bit upset when i saw the ladder to see the the encyclical um 2015 uh vision of climate change which had a lot of good elements in it but but the pope and this is a sentence which i i found very damaging the environment cannot be safeguarded or promoted by market forces when we know that for all pollutants the way we actually succeeded in getting rid of pollution was either a tax or a market but in the case of price so a market approach an economic approach as it's called so we know that all the successful ways you know fights against pollution actually were market oriented so we have to be very careful with that um there is a different vision of the world with respect to market clearing very often people outside economics actually care more for rationing than for market clearing so for a location made by lotteries based on age or some kind of species some kind of attribute non-elected boards or first-come first-served basis or lotteries i mean there was even a proposal last year in france of having uh selection at university don not not on merit but based on a lottery um because as you know in france everybody has a right to go to universities with lots of bad consequences in terms of selecting the right people the right students in the right right fields and the right universities and doing the selection in a very obnoxious way through failure and basically uh one of the things that non-economies don't like for example is peak low pricing or search pricing and so on and so forth there is also this vision that economist economics is about markets and markets and now butler and of course you know there is nothing uh this is completely wrong of course we don't believe that economics is about lucifer we believe in markets but we believe in the regulation of markets and you know it's not it's not the same as this affair they see more serious issues about the equation between economists and selfish calculating individuals we emphasize that people react to incentives people i mean firms individuals politicians those can be financial incentives care concerns status concerns and the like so we see we describe people as being basically machines reacting to to incentives and one criticism on which we need more research is that economics could be performative so it might change your vision of the world and it might create its own reality it's true that we always consider trade-offs we may be losing perspective in that way of course we economists know and again this is a festival about but health we know it's very difficult to talk about economics in the health in the health care matters because immediately you are going to talk about choice any hospital by the way is making choice and as a value of life an implicit value of life you have to buy equipment you have to put one more doctor here and one less doctor there and in a sense any time you make a decision you always make a decision about the value of life we are self and of course we will never want to believe that but we make we put a value of life on our children you know if we take our children to an exotic and exotic holiday or if we buy a car which is sturdy or not sturdy a sports car versus you know very strong car um we make we make a choice on the value of our children we don't want to admit that even to ourselves not of course not to others but that that's reality but of course we know that in the realm of uh life and safety choices it's very hard for an economist to talk about the value of life um but it may be still that there's something wrong about us that actually we are more selfish on other people because we transform our vision of the world we have learned from adam smith that actually selfishness can give you an harmonious society you know efficient society of course given all the market failures i gave you you know we don't quite believe in it but it's it's an important thing another difference i guess between economists and others is a very strong emphasis on utilitarianism and consequentialism we emphasize consequences or potential consequences of acts in the tradition of bentham and mill and we have pretty little appetite for derontology and duty-based approaches like accounts for example and there are things that shock us i mean you remember kant's liar example and the modern form is you know if a nazi knocks at your door and you're hiding a jewish child and the nazi asks you whether you have a child at home and a jewish child and you can't will say you shouldn't lie because you have this imperative of not lying you should govern your life uh through the absence of life for example and of course that's not something that economists are comfortable with we we sing in terms of consequences and i'll come back to that it's very important but it's going to of course condition our willingness to envision trade-offs so philosophers have been playing for decades with a trolley dilemma there are many versions of that uh including medical versions you know does a doctor sacrifice one healthy person to get organs to save five other people or the standard trolley dynamite you push someone in front of a trolley and that way you save five people down the road i mean as an economist i must say i it's a no-brainer to me if you are behind the veil of ignorance you have you know five times more chance to be one of those people who are going to be to be killed and then being the person who you are going to kill by pushing by being pushed by pushing him or her under the trolley but most people actually refuse this kind of trade-off they refuse to answer this question or they say i will never kill some kind of derontological approach to it but we have to face that and actually have colleagues into those who psychologists who work on the driverless car so now when you face a situation where either you crash yourself in a wall or you kill flash pedestrian what do you do well it's it goes very fast you just don't quite know what to do and you make a choice whatever it is but in a few years it will be a software and that will have been decided a long time in advance in a very cold environment do i sacrifice a driver or do i kill the five pedestrian and you know those psychologists start asking the question you know what is the attitude of people to what that do they want regulation do they want this and that so we have to talk about those companies and we have to talk about how we deal with such things but of course we feel they are at ease with with doing this finally let me talk about the economist difficult communication um and that's the difficulties are sometimes shared with other sciences today in the age of populism there is a particular distress of experts and of course economists can be blamed to and are blame and sometimes you know for good reason but still there's this white distress of experts so if you're in any field which has actually some interaction with a wider audience like medicine or biotech or climate climate science or economics then you are in particular trouble another difficulty of course is that we are scientists so we are researchers and we always look at the pro and the con you know the argument and the counter argument and we you know in terms of the media communication we are not very at ease because you know the browser the audience the wide audience and also the politician they want a clear answer here is the answer and of course you as a scientist say look i think this is the right policy but i have to warn you there might be some side effect there and this doesn't fly i mean in a sense you know you're more successful when you're on tv if you have a very clear message and you have no doubt about this message now i still think we should have messages because i you we have to play some role in public policy so you we must say you know given our knowledge at this point of time here is what i think is the best solution but you know scientists we also must have our doubts um but also there are things which are specific to economics i would say or human and social sciences one of them is that we are better off by news and of course people like to shoot the messenger in a sense economic analysis is going to expose our deep values deep values because we and everybody in society would like to think we are we live in a better world it's very reassuring in terms of her vision of society so we want to to think about uh mankind and we want to think that people are altruistic they behave with empathy and we want to believe in green growth we want to believe that you know the environmental prime is going to be solved without any cost technological progress is going to to to come exogenously or we want to think that the you know the increase in in national debt for example is not going to jeopardize a social welfare state so we want to basically believe in a bright future and of course that's going to uh conflict with some of the evidence and when when economists say you know we are not doing enough for climate change basically everybody else is upset um most people are upset that no because you say no you have to have a price of carbon which is not five euros per ton it should be 50 euros and then everybody's upset in the moral domain it's also very important to say well we need incentives and of course when economists say we need incentives to some some crimes like climate change or others we or when we say politicians need incentives as well or better incentives then we are saying in a sense you know they are not completely benevolent we are not completely benevolent we all react to incentives and of course that's a vision of society which is not uh this vision of society we would like to have another difficulty for economists of course as i mentioned is that we we see direct effects we don't see the indirect effect it's very important for policies like labor market protection of course that's something tito has worked a lot on um or rent control or et cetera we always see the direct beneficiary of the policy we never see the indirect effect down the road so people who won't find an apartment to re rent in the future because there is a scarcity of apartments or people won't find a job they will only find short-term jobs they will be unemployed because the firms are not creating permanent jobs anymore so we economists are accused actually of lacking capacity for the direct beneficiary of the policy but what we do is actually also trying to force ourselves about the indirect victims it's very different from medicine for example where for most for most things except vaccination which i understand is a big topic seeing in the street of trento but you know for vacci for most things the direct and the indirect beneficiary victim are the same person but of course there is another thing i want to emphasize that economists are not very good at predicting and that's very important to understand i think economists are much better at designing policies that are going to reduce the risk of of a sovereign crisis or a banking crisis than at predicting a sovereign crisis or banking crisis for various reasons first or series are imperfect second reason is that often we don't have the data good data to be able to predict even when our theories are good and the third reason is more specific to human and social sciences so we have behaviors which are not fully irrational there is uh you know individual behaviors that that we are trying to understand what they are but you know they are not fully rational sometimes but also you have self-fulfilling phenomena so if you think about an asset bubble or background or suffering ren is going to be subject to strategic uncertainty and therefore it's going to be hard to predict so i think we ask too much from economists in terms of prediction and whether what they are much better at is we trying to design policies which is going to reduce the risk of having such crisis it's not very different from being a doctor or being a seismologist so if you ask your doctor you know your am i at risk of heart attack you know the doctor will say you okay you are at risk and you should do this and that but the doctor will be unable to predict whether you will have a heart attack in two days or in 20 years or ever and same thing for a seismologist won't be able to predict the date of the earthquake so let me switch to modern economics and market so the question is why is that that the trade between two consulting adults um will be bad for society and that's a basic question we have to ask and that's at the heart of the philosophers and and others criticism of economics and the answer is one answer the first answer and simple answer is market failures so the first and i'm going back to tito we we explained that very well the first issue is externality just like there is pollution if you think about for example babies for adoption a market for babies are for adoption there's a seller and a buyer and but there is a third party which is not part who is not part of the transaction that the baby herself for himself who of course is going to suffer a big anxiety if that's not the right parent um child labor market for diamonds and civil wars or market for votes we know that such markets create a lot of excities and they have to be regulated so it's just a market failure of some kind another type of excite is image anxiety so if you think about dwarf tossing there is there is a very interesting case so you toss you know for those of you who don't know do after singing i haven't seen the right movies or the right books uh it's this silly practice of taking a little person and trying to throw away the little person as fast as possible um now the it's not dangerous you know the process as hell met as has all kinds of things that make it non-dangerous and there was a case like a bit over 20 years ago in france actually which went to the supreme court in which a little person there was there was some event like that which was planned and was forbidden by the authorities local authorities and the little person actually sued this is my job why do you prevent me from from doing that and then in the end the upper court says no you should not do that now the question is why because there are people who are willing to pay to see that and the little person actually was very winning actually sued for the right to do his job and i think the court reason in the right way which is it's not about this particular little person it's about the other little person whose image would be decorated by this i mean we don't have to understand why actually people enjoy that that's a that's a different matter but even if if you take it for granted that people enjoy that um the idea is that there's an exciting on on third parties which are the other dwarfs and same thing for prostitution you know one of the argument against prostitution and again you could say it's between consulting consulting adults is that you know it's throws it throws a bad image especially on women and that's something which which is bad i'll come back to that but that's very important okay so we also know that the markets are imperfect so is market power so you know in terms of repugnant market application they could it can be price gouging so for example if there is some kind of you know uh hurricane katrina coming there is some kind of flood coming and then the taxi driver asks you for five thousand dollars to to take you out of the city we feel a bit uncomfortable we feel uncomfortable about contracts written under the rest and there are all kinds of information things that we we want to to discuss um so in in the case of organ donation so michael kramer is in trento and you have probably listened to him there's this issue that people may not understand um the long-term consequences of their of their act and then if they are i kind of hyperbolic so if they tend to privilege a presence too much relative to the future then they might actually for a few hundred dollars and give their kidney and then suffer the consequence of course you have to inform people about the consequences of those acts something which is not always well understood by non-economist is the issue of signaling and the value of information so just to come back to michael sanders saying of course you cannot pay for friendship because if you pay for friendship you don't know whether it's friendship after all right there's no way if you pay for the nobel prize and the certification is not that great and so on and so forth if you pay for the right to enter harvard of course what is the value of a diploma of harvard i mean it signals that your parents are are rich so it doesn't signal that you're variable so asymmetric information means that it's very difficult to market for certain things and of course there is the issue of an inequality which is of course very big which has consequences and that's another case where markets fail easily so for example one of the big danger in the near future and we'll need regulation some type of regulation we already have actually to fight reselection in the market for health insurance because with digital economy basically facebook and google know everything about you and this you know a lot about your health but with genetics is going to be even worse so so if you are going to be in good health you will get a very low price for insurance wonderful but of course the course of that is that those who have been bad else i will not get any insurance or at least not insurance at a reasonable price there is inequality and inequalities of course important with very different attitudes i mean sometimes we call tolerate inequality better hospital better schools safer car for the rich but sometimes we don't want it so for example if we want to allocate water when it's limited or life bought on the titanic we we don't think that people should be paying for it even if actually because there will be an equality actually it's an interesting question whether we will tolerate people to pay for a lifeboat in advance you know when the titanic leaves england whether you accept people paying for the scarcity of lifeboats and people paying for those live boats um even if they have the same income on the same wealth that would be an interesting question but in any case uh you know the the aversion to inequality and the fact that we don't want to see where we live in an inequality society actually pushes us to actually also have some attitude towards those repugnant markets so a typical policy towards prostitution is actually to push it aside so that we don't see it right you know and organ sales of course resists this issue i mean there is a reason for why we might not want organ sales but one reason for why we don't want organ sales is actually not such a good reason which is that we don't want to see how unequal or society's is are because of course people who sell their organs their kidneys or the people who prostitute themselves they tend to be poor people destitute people and you say how can how come you can sell your kidney for 300 you know it sounds it shows a lot about our society and that's something we don't want to see market failures i think tito explained very well internalities which is a failure of pursuing one's self-interest of course it's uh motivation for a lot of policies uh public policies so cooling off periods so you for some purchase you have one week to wait you can basically cancel the purchase all kind of policies with respect to drugs addition gambling uh are forcing you to sales basically the idea is that you we all have self-control primes and we emphasize the present much more than the future even in our own interests so it you're forced actually to save more or to drink less or to gamble less and so on and of course there are voluntary repentant market application like voluntary slavery so just ask you have you ever asked yourself are you against voluntary slavery so if you ask you to raise your hands i'm not you know are you in favor of voluntary slavery i'm quite sure that i'm not going to see a single hand in the room but you have to ask yourself why it's actually interesting to know why we are all against involuntary slavery yeah but what about voluntary survey you know someone becomes a slave for the other it's a contract it has been thought about and the the terms are clear it's entirely voluntary those are consult consenting consenting adults and i think the answer is basically this internality that people might want for a short-term gain actually to sell their long-term welfare but you know we have to think about why actually we are against it and i think a little bit is true of the same is true for organ sales and sometimes we have a mixture of internalities and externalities so if you think about doping in sports for example then if you