Should some transactions – even between two willing parties – be forbidden?
The other day, I came across a picture from the US, showing a small sign attached to a tree announcing that someone was willing to buy diabetic test strips for cash. The sign suggests there is unmet demand for such products, and invites people who can meet that demand to do so, thus facilitating a market. But some people think this is wrong. Do they have a point?
Diabetic test strips are disposable pieces of plastic used by people with type 1 diabetes to test their blood glucose level, typically four or five times a day. Individuals with health insurance receive these free of charge, but uninsured people will need to buy them at a cost of around $0.50 each (prices in the UK and Europe are equivalent at around 40p and 45 eurocents).
This may sound like a relatively small amount, but the daily cost of $2-$2.50 is considerable for someone on a small budget without insurance. At the same time, for someone on a small budget, but with health insurance (perhaps through their employer), the opportunity to gain extra income by selling some of their strips might be appealing.
Repugnant markets and transactions
Hey presto: we have supply and we have demand, so we have a market. But it is what is called a repugnant market.
Some people think it is objectionable that individuals buy and sell this kind of medical supplies, just like they think trading in organs is objectionable, or indeed trading in horse meat for human consumption.
Repugnant markets, or more widely, repugnant transactions (they do not have to take place in an actual market) are a fascinating, complex phenomenon that Nobel laureate and economist Alvin Roth has been studying for many years.
He is perhaps best known for his work around designing matching ‘markets’ for kidneys. Many people who need a kidney transplant have a spouse or a close relative who would be more than willing to give up one of theirs, but who cannot because they have incompatible blood types. Roth was instrumental in the creation of a kidney exchange, in which one non-compatible donor-recipient could be matched with another non-compatible pair, so that the donor of the one pair could donate their kidney to the recipient of the other pair, and vice versa (with chains of multiple pairs as necessary). Such an exchange was necessary because it was impossible to create an ordinary market: trading kidneys is repugnant and indeed illegal just about everywhere (except in Iran).
The very existence of such a thing as a repugnant transaction is intriguing. Why should anyone object to a free exchange between two willing parties of sound mind, if this does not inflict harm on anyone not involved – let alone find it so repugnant that it ought to be forbidden? If I have something to sell that you want to buy, and nobody outside the two of us is affected, why should this be anyone else’s business?
The complexity of repugnance regarding transactions has at least two major components. One is that it is not an invariable characteristic, but one that can vary along space and time. Slavery was once commonplace, but repugnant (and illegal now). Lending money for interest used to be repugnant (and still is under Islamic law), but is now widely practised.
The other one is that repugnance has multiple facets: it can be rooted in taste, morality, utilitarian concerns, public health, animal welfare, religion, ideology and more – often in combination. Eating horse meat is taboo in many countries, and its sale is banned in several US states, and elsewhere the consumption of pork and beef is against the tenets of some religions. Many countries prohibit, or at least regulate, prostitution, and the same applies to the sale of drugs or alcohol and to gambling, typically for reasons of morality, public safety or public health.
A reasonable trade-off?
Repugnance, in all cases, can constrain what people may buy or sell. And, like trading, that in itself implies a trade-off: prohibiting a transaction because it is deemed repugnant is welfare-reducing for both prospective parties. It is, as economists would call it, inefficient. Is that always a reasonable trade-off? Is the world a better place without these transactions?
While there is no clear-cut answer to this question, we may try to apply some broad principles when evaluating a repugnant transaction, and establish perhaps a spectrum on which they can be placed.
At one end, we may put the trade in horsemeat for human consumption. Perhaps it is objectionable for reasons of animal welfare, but that would hold little water if at the same time selling beef, pork, and lamb is fine, or it is OK to slaughter horses to produce dog food. Sure, horse lovers may find the idea of eating horsemeat distasteful, but is it really any of their business that someone else enjoys a juicy horse steak or a few slices of paardenrookvlees? It seems, in general, hard to argue that the yuck factor for a certain subset of a population outweighs the economic benefit to the participants in the supply chain for a certain good (or service), and the enjoyment of its buyers, if such transactions are not causing harm (or at least no more harm than equivalent transactions).
At the other end, we would find… well what would we find? If we exclude any transactions that are not between willing participants, or that would cause harm to third parties, criminal activities like human trafficking or contract killing are immediately out of scope. Drugs? Arguably, there is a public health concern, but that same concern does not seem to hinder the market in alcohol, so the case would be weak. Antisocial behaviour in most guises generally harms others, so that is out of consideration too.
One interesting candidate is mentioned in a paper by Al Roth: dwarf tossing. Attempts to ban it in France reached the supreme court, which in October 1995 declared it to “violate human dignity”. This verdict was supported by the United Nations’ Human Rights committee, which “essentially concluded that dwarf tossing was so repugnant that it imposed a negative externality by diminishing human dignity, a public good,” Roth writes. The repugnance is in the immaterial harm to an immaterial public good.
Where does that leave people buying and selling diabetic blood test strips? It’s hard to see how it would fall in the same category as dwarf tossing. Perhaps the reason why some object to these transactions is that it is an affront that people are so poor that they need to sell their own essential medical supplies, or that they cannot afford to buy them. But banning the practice would not rectify that problem, while it would harm both the seller (who has better use for the money they get in return) and the buyer of the items (who cannot afford them at the full price).
And the dwarf tossing verdict of the French Conseil d’État and the UNHR committee regarding human dignity might provide a further insight. A recent small-scale study by a local London charitable organization supporting families in need with food parcels found that people prefer the cash equivalent (£36, €42, $48) over a weekly food parcel: it provides more choice, less waste, and better opportunities for budgeting. More importantly, it eliminates the undignified process of visiting a food bank with its queues and penetrating questions to make sure you are entitled. Instead, it treats the recipients as mature, emancipated individuals capable of making their own decisions. Is the freedom of people to buy and sell what they want, whether it is diabetic test strips, kidneys, or whatever, not just as much a matter of human dignity?
Perhaps a hidden category of really repugnant situations worthy of scrutiny lies in the paternalistic rules and policies that constrain and restrict people’s liberty to act in their own interest as they see fit.