Written by John C. Goodman
Markets are powerful institutions. They allow people to interact with one another and achieve things they could not achieve acting on their own. They allocate resources in ways that no single individual or government bureaucrat could even begin to duplicate. They lower the social costs of meeting human wants and needs far better than any other institution known to man. Market outcomes may on occasion be improved by judicious government regulation. But it is almost never worthwhile to suppress the market entirely in almost any field of human endeavor.
I find that most people who are disdainful of commerce and who think that exchange in the marketplace somehow diminishes and sullies the human spirit are people who invariably do not understand basic economics.
What brings this to mind are posts by Gary Becker and Richard Posner on the number of things we cannot buy and sell, including adopted children and human organs. Their posts are in response to a number of recent commentaries in favor of outlawing markets in large parts of social interaction, including Michael Sandel in What Money Can’t Buy: The Moral Limits of Markets. (See the Cato review in Regulation.)
As it turns out, health care is one of the fields in which some people would like to outlaw the market altogether. Education is another. Staffing military personnel is a third area.
Money can’t buy it.
Let’s take adopted children. It’s my understanding that we have a de facto market here, even though no one wants to call it that. We pretend that children are not actually being purchased by labeling payments to the natural mother “reimbursement” for medical care and other expenses. It just so happens that those reimbursements tend to be uniform — reflecting what is in reality a market clearing price: currently about $20,000.
The advantages of a market for adopted children are pretty much the same as the advantages of the market for any other good or service. Children will be adopted by those who are willing to make the biggest sacrifice to get them, at least as measured in terms of money. And the mothers who give their children up for adoption will receive the highest reward society is willing to offer.
Do people feel better going through the pretense that this is not really a market? What would be so wrong with not only acknowledging that a market actually exists but encouraging it to be more transparent and efficient?
Once children get a bit older, the transaction goes in the other direction: government actually pays parents to adopt — including a refundable federal tax credit of $13,360 (in 2011). In California, there are also monthly assistance payments as high as $1,500 or more a month plus Medicaid coverage. This too seems to me to be a worthwhile transaction. The costs of a government run orphanage would be much higher.
No such market exists for organs, however. At least not in the United States. And that’s too bad. As Becker writes:
[A]bout 4,000 individuals die each year while in the queue to get a kidney. Kidney exchanges, introduced in 2005, and other efforts to greatly reduce the waiting time have produced little overall benefit. In fact, the average waiting time rose from 4 years in 2005 to the 6 years wait at present.
Allowing kidneys to be purchased for transplant use would reduce the typical wait for a kidney to no more than a few months, and would eliminate all the deaths because of the time consuming queue to get a kidney. Since in the U.S. and many other countries, governments largely finance transplants, access to transplants under a system when they can be purchased would not greatly depend on a person’s income. In light of these considerations, I do not understand how anyone who is knowledgeable of the great cost imposed by the present system on the many individuals who need kidneys could oppose allowing kidneys to be purchased and sold, even after taking full account of “repugnance” and the other alleged costs of allowing a market in kidneys…
Elsewhere, Becker has estimated that the market clearing price (the price that would eliminate shortages) is about $15,000 for kidneys and about $32,000 for livers.
Some people on the left have an aversion to money, as reflected a lengthy list of goods and services they don’t think should be exchanged for money. Some people on the right have an aversion to unconventional sex and recreational drugs.
You might think that these two groups of people are very different. Certainly there is a difference in the activities that they abhor. Beyond that, they have something in common: a visceral desire to outlaw activities that disgust them.
I would only note that the term “moral” is often a thinly disguised attempt to erect a cloak of ethical justification around what people really want to do: outlaw behavior they don’t like.
John C. Goodman is President of the National Center for Policy Analysis, Research Fellow at the Independent Institute, and author of the bookPriceless: Curing the Healthcare Crisis. The Wall Street Journal and the National Journal, among other media, have called him the “Father of Health Savings Accounts.” Dr. Goodman’s health policy blog is the premier right-of-center health care blog on the Internet. It is the only place where pro-free enterprise, private sector solutions tohealth care problems are routinely examined and debated by top health policy experts across the ideological