Summary - Repugnance as a Constraint on Markets PDF

Preview

Summary

Article summary...

Description

Repugnance as a Constraint on Markets

Introduction  

     

Why can’t you eat cat or dog meat in California? Despite being home to people from places all over the world, including some in which such a meal would be appreciated, it is against the law. o The law was passed in 1998 by a 60-40 referendum vote Why? A sufficient number of Californians not only do not want to eat such meats themselves, but find it repugnant that you should want to This type of law is different from those that seek to protect consumers It is also different from laws prohibiting inhumane treatment of animals The law specifies human consumption As this law makes clear, some transactions are repugnant only in certain times and places A particular example in which repugnance is a constraint on a potentially beneficial market is that of kidney transplantation o People can survive with only one healthy kidney o It is against the law to buy or sell kidneys o This reflects a widespread repugnance that also makes it difficult to convince people of the benefits of a market o However, this does not mean market design cannot be implemented  In-kind exchange of kidneys (two incompatible donor pairs who are compatible with one another can make an in-kind exchange) has gained acceptance in the transplant community

Repugnant markets  



there are markets that were once repugnant that are no longer, and vice versa slavery is an example of a market once thought acceptable, now repugnant o reason being that we find ownership or near absolute servitude (indentured servitude) repugnant o this repugnance is so severe that we will not even allow someone to sell themselves into slavery or indentured servitude  indentured servitude was one of the ways Europeans secured passage to America Lending money for interest (usury) is another example of something that was once repugnant but no longer is o Max Weber argues that this change is nothing more than an adaptation to financial circumstances o Changes in this law have also affected other laws such as bankruptcy

In colonial America insolvent debtors could be imprisoned or sentenced to indentured servitude  As indentured servitude became more repugnant and debts less, this law changed Even when there are willing buyers and sellers in potential markets, aversion to these can constrain or prevent them o Aversion needn’t be as strong as repugnance, see also distasteful, inappropriate, unfair, etc. There are many ways in which repugnance can be seen o Mercenaries used to be seen as an appropriate way to deal with military conflicts o Since the rise of state armies this has shifted o Repugnance comes from the fact that mercenaries kill for pay rather than country or duty o The repugnance can be seen in the lesser protection mercenaries receive under the Geneva convention Some markets are constrained on the repugnance of the negative externalities o Prostitution and pornography can be repugnant due to the fact it is selling something seen as sacred by some o But also due to the effect it can have on the neighbourhoods in which it takes place e.g. unwilling observers o Furthermore, it may not always involve willing parties e.g. pimps and child abuse Bans on obscene content may also involve concerns about externalities o FCC regulations on certain words forbidden on T.V. and radio o Voluntary regulations on whether children can see certain movies o Repugnance can persist when externalities are minimal also  Post office banning of ‘Lady Chatterley’s Lover’ being posted through them The sale of drugs, alcohol, and gambling can also be complicated o When addiction is an issue there can be negative externalities through financial and criminal channels o Furthermore, addiction calls into question the willingness (in the normal sense) of parties to the transaction Questions over incentives for bad behaviour can also be asked o Insurable interest laws governing who can be the beneficiary of life insurance o Today, life insurance for small children still raises questions o Today, the insurance industry lobbies against Stranger (or investor) owned life insurance  Through Viatical settlements, third parties can buy the value of a life insurance policy from the elderly or dying, should they wish to realise the value of their life insurance before they die  Arguments against such arrangements usually revolve around repugnance over an entity that profits from death, as opposed to insurance companies which profit more the longer clients live Repugnance over life and death also exists in other forms o In July 2003, a US government funded prediction market for terrorist events was scrapped after much publicity o There was also concern about incentives, terrorists could easily play the market 

















To clarify ideas on repugnance, it can help to look at a case where seemingly nothing but that is the reason for market restrictions o Dwarf Tossing o Completely banned in many places  Outright bans suggest concern is different from occupational health and safety concerns, otherwise regulations could be put in place to ensure safety o Logic for ban based around the fact that such an activity would lower the individual’s human dignity, which is a public good, thus Dwarf Tossing is a public bad o A French dwarf appealed to the UN courts stating that it was his choice, and there was little other work for dwarves, as having a job is part of human dignity the sport does not degrade his dignity – he lost the case

Repugnance is hard to predict  





 



As shown above, repugnance, alone or in conjunction with other factors, can put serious constraints on markets Predicting repugnance is difficult, one reason being that apparently similar activities can be judged very differently o Wife carrying is similar to dwarf tossing in that it involves one person of diminutive stature being carried and moved by another (although dwarf tossing is much more severe) Another example comes from Larry Summers apology after suggesting that it would be more efficient to situate polluting industries in the less developed world o This was met with much controversy o However, this was after the 1990 clean air act was amended, which allowed firms to trade in pollution permits o This was an efficiency enhancing measure which attracted little public controversy, despite arguably having the same effect Similarly, there are laws preventing kickbacks given by suppliers to purchasing agents of companies o However, this is arguably no different to air miles awarded to workers who book flights on behalf of themselves using company funds, thus effectively acting as purchasing agents for their companies Furthermore, laws against price gouging exist, but Ticketmaster (at the time of writing, 2006) recently began auctioning tickets just before the time of the event Adoption is another example o Adoption of a child involves many costs, payment to the birth mother however is widely seen as repugnant, and is illegal o However, large unregulated markets have developed for surrogate mothers, sperm, and eggs It would seem that technologies of different time and type garner different reaction, it can also be that newer technologies are seen as more repugnant than older ones o GM crops that are the product of selective breeding are not seen as repugnant, however GM crops that are the result of laboratory gene modification are not nearly as accepted

Repugnance of money, and views toward compensating organ donors 

 



Some transactions are not repugnant as gifts or in-kind exchanges, but become repugnant once money is added o This category can be seen to include, usury, adoption payments, and perhaps prostitution o Loans, adoption, and love are regarded as good things, but for some the addition of money to the transaction changes that Concerns over monetization seem to fall into 3 categories Objectification o many people regard compensation for organ donation as turning a good deed, bad o governments strongly encourage organ donation but forbit monetary payments o Pope John Paul II  Pope regard donation of organs as a ‘particularly praiseworthy example’ or and action that build an ‘authentic culture of life’  He derided any attempt to commercialize donation as morally unacceptable as using the human body as an object violates the dignity of the person o Such concerns seem similar to those the UN used to uphold the dwarf tossing ban o There is a feeling that a public good, human dignity, is being infringed upon for private gain o It must be said that different religions can view matters differently  Emerging Jewish consensus on kidney donation is that under some circumstances it would be acceptable to accept and give compensation  Rabbi Shlomo Zalman Auerbach – someone who sells a kidney does a good deed ‘even if he would not have donated his kidney only to save life’  ‘it is the community that needs soul searching for allowing someone to reach such depth of despair that he must sell a kidney’  Islamic Republic of Iran allows live kidney donors to receive monetary payments Coercion o Money can be seen as coercive, allowing sale of kidneys may allow the poor to be exploited o Even in the absence of money, surgeons can be unwilling to perform operations if they believe that the donor is being coerced by family pressure etc.  Ghods and Savaj, 2006 – availability of paid unrelated kidney donors in Iran has reduced coercion of unpaid related donors o Limiting financial disincentives of live donation may prove effective in reducing repugnance  Providing a fixed package including insurance and compensation for lost earnings etc. a figure of $5000 was proposed as compensation  Such a proposed benefit would provide a disproportionate incentive among rich and poor  $5000 will provide a much smaller incentive to a CEO than someone on minimum wage





Slippery Slope o Concerns that allowing money in kidney donations may lead to similar changes in more repugnant circumstances  Kidneys entering into contracts as collateral, to repay debts, etc. o Payments for deceased donation also fall into this category, the fear is that the slippery slope will lead to payments for live donations o Accounts of black market organ sales also lead to concerns that legal ones would be similar  Schepper-Hughes, 2003 – the circulation of kidneys follows the established routes of capital… from poorer to more affluent bodies A further concern is that money markets might crowd out altruistic donations, in fact reducing the supply of transplantable kidneys

Other sources of repugnance towards paying for live donor kidneys 



Hippocratic tradition of ‘first, do no harm’ o Taking organs from healthy individuals goes against this o A surgeon already wary of taking kidneys from altruistic givers may find the distaste too much to overcome if the donation is commercially motivated US public is not generally supportive of incentive for deceased donation, but is supported of limited incentives for live donation o Ethnic minorities are generally more supportive of live donation than Whites o Those on low income may be more supportive of financial incentives also

Some historical perspective 



Consider the case of cadavers for medical research o In 1824, the main source of cadavers for medical research was through an illegal black market of ‘resurrection men’ o Government policy of only allowing the bodies of executed murderers to be used for research tended to keep up the prejudice against dissection The situation has since changed o In Britain, the anatomy act of 1832 expanded the sources of cadavers o There are now today regulated markets

Constraints on market design  

Even when short of repugnance, emotional responses can constrain market design In labor markets monetary payments are the opposite of repugnant o Questions about what kinds of negotiations are appropriate do however exist o Markets for entry level professionals have suffered from hiring times moving further and further from the start date of the job – exploding offers – the effect is that employees are not allowed the opportunity to consider other offers  Creating clearinghouses can sometimes correct for this market failure

These clearinghouses come with the implication than an individual may start their career by accepting a job and immediately declining to take another, this could be deemed unprofessional o The offering of exploding offers was deemed inappropriate and anti-competitive o However, the market would be improved by the opportunity of workers to decline offers  Such exploding offers would be declined frequently enough as to become unprofitable o Relevance to current debate is focussed on the propriety of how offers should be made, accepted, or rejected In-kind exchange does not rouse as much repugnance as a money markets o In-kind exchange only helps those who already have a willing donor, so is not a solution to a general shortage in kidneys o If, however, such a system was organised on a national scale, it might be that 1000s more transplants could be conducted each year o



Economists’ voices in the debates about organ sales, and reaction to them 

  

Objectification o In labor markets the poor generally take more dangerous and less pleasant jobs, yet we do not think that this diminishes their humanity Coercion o Voluntary transactions, if truly voluntary, increase welfare Slippery slope o Markets can be regulated Role of repugnance on its own is often regarded as a side issue o Radcliffe-Richards et al, 1998 – weakness of familiar arguments (against kidney sales) suggest that deep feelings of repugnance are the real driving force behind prohibition o Feelings of repugnance among the rich and the healthy… cannot justify removing the only hope of the destitute and dying

Conclusions  



Repugnance can be a real constraint on markets o Repugnance can however change over time, but can also be persistent Repugnance can also be used strategically o Insurance companies opposing viatical settlements o Repugnance can also be used to garner allies for whom economic arguments do not work o The repugnance that people feel does however mean that economists must take it into account Many believe we should wait for technological change o Xenotransplants

Technology however can take a long time to progress, and there is no guarantee that the barriers will ever be overcome o Repugnance can be similar to tech barriers in this sense In debate one must be aware of repugnance o Economic arguments will not work on all o It can also be used to separate ideas that are empirical – crowding out of altruistic giving – from those that are not empirical Economists may not take repugnance with sufficient seriousness, on the other hand, opponents of such transactions often fail to tackle the costs of kidney shortages etc. o Taboo trade-offs – economists rarely find trade-offs as taboo; non-economists rarely discuss trade-offs at all o Pope John Paul II’s comments can be interpreted as saying that it is preferable to bear the current costs Behavioural economics has largely focussed with how people make choices o However, the effect that repugnance can have on the economy is to inform the existence whole markets o Thus, they impact what choices are available to people o This may be one of the biggest ways that behavioural considerations affect the economy o





...