Can’t a Capitalist Be Moral?
At the University of Chicago’s Booth School of Business, where I teach, students don’t just register for classes — they bid for them. True to market principles, Chicago Booth organized this system to maximize student satisfaction. By creating a market in which students compete for the opportunity to take classes with the professors they like best, Chicago Booth ensures the class assignments that maximize students’ desires.
To function properly, this market, like all markets, requires not only official rules but social norms as well. For evidence of the importance of social norms, consider a problem we encountered with the bidding system. The system gives each student a fixed number of bidding points at the beginning of his two-year program. Students can then use these points to bid for the courses they like. The “cost” of a given course is set by the number of students bidding for it and how many points they bid: less popular courses go for zero points, while more popular ones require students to dip into their precious points. When the demand for a course exceeds the supply, only the students who made the highest bids get to take the class. Each quarter features three rounds of bidding; after each round, students who win spots in a class can, if they like, give those spots to other students in exchange for points.
Years ago, students discovered a loophole in the system. The first round of bidding for the fall quarter took place before the first-year students showed up on campus — we wanted to give second-year students time to plan. As long as first-year students were bidding for first-year courses and second-year students for second-year courses, no problem arose. But second-year students soon realized that they could bid for popular first-year courses before the first-year students arrived and then “sell” them back at higher prices. This increased their number of points, which they could use to bid for other courses.