13 Feb 2006  Research & Ideas

The Hidden Market for Babies

Surrogates. Fertility clinics. Egg donors. Adoption. It's time to recognize (and perhaps regulate) the huge market being created by reproductive technologies, says HBS professor Debora L. Spar. She discusses her new book, The Baby Business.


"It is difficult to conceive of a child as commerce," writes Harvard Business School professor Debora L. Spar in her new book, The Baby Business: How Money, Science, and Politics Drive the Commerce of Conception. In fact, baby selling is prohibited across the world. But each day infants and children are sold via fertility clinics, sperm banks, women selling their eggs, surrogates, and adoption services.

We don't couch these transactions in terms of profit-making businesses. Orphans aren't sold—they are "matched" to adoptive parents, Spar says. Yet "advances in reproductive medicine have indeed created a market for babies, a market in which parents choose traits, clinics woo clients, and specialized providers earn millions of dollars a year. In this market, moreover, commerce often runs without many rules."

Spar doesn't argue that this market is good or bad, just simply that it exists, and that society needs to understand how it works. Ultimately, she concludes, government has a regulatory role to play in the baby trade.

We asked Spar to discuss her research.

Manda Salls: Why did you want to write this book?

Debora L. Spar: Four years ago, I published a book called Ruling the Waves. It was an examination of the Internet, and looked in particular at the politics that surrounded this technology. Unlike most other books about the Net, I tried to examine it in historical perspective, tracing out a whole line of other technologies (the compass, the telegraph, the radio, and so forth) that had been every bit as radical in their time as the Internet had become in ours. I argued that all of these technologies had gone through cycles of commercial expansion and political response and that, in the end, most participants in what had seemed like a "brave new world" had actually wanted governments to come in and regulate the market that technology had created.

For about a year after the book's publication, I gave speeches about it. And inevitably, someone would ask what the next cycle was going to be; in other words, what would be the next technology that would unleash this cycle of market creation, market exuberance, and then, eventually, demands for regulation. After giving this question a great deal of thought, I became convinced that the next great cycle of technology would be in the area of biotechnology, and particularly in those areas of biotechnology that dealt with the basics of human reproduction. So I started to look into this field, and quickly realized just how radical the technology was and how vibrant commercial activity had already become.

At the same time, coincidentally, my husband and I were also in the process of thinking about possibly adopting a third child (we already had two through old-fashioned means). And as I was doing personal research into adoption, it struck me one day that adoption was really just the flip side of reproductive technology: Both had become ways for acquiring children through what were essentially market means.

Because no one likes to think of children as existing in a market, we have been very wary of discussing cost.

Q: Can you briefly outline the types of industries you see as part of the baby business?

A: Sure. The market basically breaks down into a series of discrete industries. First, there's in vitro fertilization, probably the most obvious piece. This is a service industry, like medicine in general, which caters to infertile couples. Then there are what I call the component industries, which provide the missing "pieces" in some cases of infertility: eggs, sperm, and wombs. Sometimes, these components are sold along with IVF treatment—when a couple purchases eggs, for example, they are subsequently used for an IVF procedure—but they are often provided by individual brokers. Then there are the pharmaceutical firms that provide fertility drugs, a key and very expensive piece of the market. And then there is adoption, which basically exists completely separately from the world of high-technology baby making.

Each of these market segments has also spawned a small cottage industry of consultants, lawyers, brokers, and advisors.

Q: How has the industry as a whole flown under the radar for so long? Do you think companies are taking advantage of the fact that the public is uncomfortable (or unwilling) to confront this industry?

A: I think that's exactly right. People who "shop" in this market are obviously engaging in a hugely personal, hugely emotional transaction. They don't want to see their family life as the stuff of markets. And they definitely don't want outsiders looking over their shoulders. And so they are highly unlikely to push for regulation, even if regulation would actually be in their own best interests. Meanwhile, those who are outside the market generally don't even know what's going on.

Q: Are you worried that regulation could stifle innovation in reproductive medicines?

A: Actually, I'm more worried about regulation in the stem cell market right now. It's ironic that we have exceedingly tight regulation—prohibition, in fact—for federally funded research into an area of great promise while, at the same time, we have no regulation at all in the field of reproduction.

Clearly, I wouldn't want to see tight constraints put on reproductive science. But I think that a basic framework of regulation would actually increase innovation since it would tend to increase transparency in this field, and provide potential researchers with the data they need. Regulation could also increase access to reproductive services, which would in turn drive demand for services like IVF, which are currently largely limited to those who can pay.

Right now, it's simply too hard for would-be parents to get accurate and reliable information.

Q: What about the market for babies who have already been born? In your book you bring up Guatemala and Vietnam as countries that have a thriving but questionable market for babies. What are some key ways to improve the adoption market?

A: Compared to high-tech reproduction, the field of adoption is already fairly well regulated. But there are lots of things we could do to make the market work better, and to ensure that children are placed in safe, appropriate homes. For example, more generous tax credits could substantially reduce the cost of adopting available children, and would make adoption more feasible for lower-income families. Our State Department could work more closely with "home" countries, to ensure that they have good procedures for placing children and good means of detecting any illegal baby selling. Most importantly, we could work much harder to ensure that home studies are completed—accurately and in depth—by reputable adoption agencies.

Q: Moves toward regulation on all of these fronts will likely force a lot of public debate. What are some frameworks you would recommend as we begin these discussions?

A: I would recommend beginning with just a handful of basic frameworks—lenses, really—for figuring out how we want to approach this fast-growing area.

First is simply information. We should think about the kind of information that is most important to us (health data, for example, or cost data or comparative studies of clinical success rates or adoption placements) and then provide these data through public sources. Right now, it's simply too hard for would-be parents to get accurate and reliable information.

The second is cost. Because no one likes to think of children as existing in a market, we have been very wary of discussing cost. But it costs money to acquire a child through non-traditional means. So we need to be very upfront in discussing what these costs are, and which pieces of them should be borne by society, rather than by the parents themselves.

A third framework would relate to equity. As a society, we need to think about what fairness means in this realm. Is the ability to reproduce a basic human right? Is it part of medical care? And does it extend to all people, regardless of their age, sexual preference, and health condition? Once we get even a rough consensus around this issue (even if that consensus is forged at a state, rather than a national level) we can begin to craft policies that make sense.

Finally, tough as it may be, I think that we also need to think about appropriate limits to parental choice. Where should we draw the line on what kinds of children people can create, and what kinds of technology they can employ? We've already said no to reproductive cloning. There may well be other prohibitions that we also want to consider.

Q: What other research are you working on?

A: I'm working on several cases right now, most of which deal with the pharmaceutical industry and the ways in which pharmaceutical firms manage through the political dilemmas that often confront them.

I'm also beginning to explore a new project on stem cell science. This is a fascinating new area of scientific inquiry, but also one that has been mired thus far in political controversy. I want to look at how different countries are dealing with this science and what kinds of regulatory regimes they are establishing around it. And I eventually want to figure out what kinds of business models will bring stem cell technologies out of the laboratory and into the market.

Baby-Makers: The Birth of Commercial Surrogacy

by Debora L. Spar

At its core, traditional surrogacy is a low tech operation. All it entails, as the Biblical wives understood, is a woman willing (or coerced) to have sex with another woman's husband and then willing (or coerced) to let this other woman raise the resulting child. In purely practical terms, the only problem stems from the lack of willingness in the absence of coercion. Given that pregnancy and childbirth impose significant costs and sometimes even physical danger, why would any woman undertake the risks of conception without the benefits of a child?

In Biblical times, the incentive was coercion: Bilhah was Rachel's maid, after all, and presumably had no choice. In other cases, altruism may provide sufficient reward, with friends or sisters producing offspring for those who cannot. But generally, we should expect markets to fail in the area of surrogacy. For without either incentive or coercion, the supply of surrogate mothers is unlikely to equal their demand.

Theoretically at least, the missing piece of this puzzle is money. If women could be paid to serve as surrogates, then financial compensation could presumably replace coercion as a workable incentive. Market failure could be surmounted by using the basic lever of commerce—money—to increase the supply of potential surrogates. And surrogacy could become a fee for domestic service arrangement, much like infant care or housecleaning. Historically, though, the intimate nature of surrogacy's task has rendered such arrangements impractical. Few women have wanted to be paid for what was essentially sex plus pregnancy and a baby. Few men (or their wives) have wanted to contract for such services. Thus not even money has traditionally been able to create a market for surrogacy.

In the latter decades of the twentieth century, though, surrogacy underwent a significant revival. Part of the impetus for this resurrection came from technology; part from commercial enterprise; and part from shifting moral norms. Together they created a vibrant, albeit controversial, market for motherhood.

The first piece of this market was artificial insemination (AI) that was perfected and brought to market in the 1980s. Commercially AI was a very big deal for all forms of assisted reproduction. The sperm banks were the first blatantly for profit entities in the world of infertility (aside from the elixirs and vibrating beds); they were the first to cross the boundaries of marriage in pursuit of a child and to offer components that came from a stranger.

For surrogacy, however, the implications of AI were particularly profound. In the past, the only way for surrogate mothers to produce children was to engage in sexual relations with the prospective father—a messy business under any circumstance and one that held little appeal for the wives of the husbands involved. With AI, however, conception was removed from sex, making it possible for a man to impregnate a surrogate without even necessarily meeting her. This physical distancing made surrogacy a considerably more attractive option. Combined with the ever increasing numbers of sperm banks, AI also made surrogacy more feasible, allowing infertile couples to procure both sperm and eggs from outside, unrelated sources. In economic terms, then, the emergence of commercial AI enhanced both the demand for and the supply of surrogate mothers.1 And once demand and supply were in place, the market followed readily.

Excerpted by permission of Harvard Business School Press from The Baby Business: How Money, Science, and Politics Drive the Commerce of Conception. Copyright 2006 Harvard Business School Publishing Corporation. All rights reserved.


1. For a more formal treatment of supply and demand functions in this market, see Gillian Hewitson, "The Market for Surrogate Mother Contracts," The Economic Record, 73 no. 222 (September 1997) 212-224.

About the author

Manda Salls is a content developer at Harvard Business School's Baker Library.