24 May 2007Working Paper Summaries

Repugnance as a Constraint on Markets

by Alvin Roth

While some kinds of transactions are repugnant at certain times and places, they are considered perfectly acceptable in other situations. This essay examines a wide range of examples, including the buying and selling of kidneys for transplantation. Repugnance has important consequences for the transactions and markets we see. Key concepts include:

Distaste for certain kinds of transactions can be a real constraint on markets and how they are designed, every bit as real as the constraints imposed by technology or the requirements of incentives and efficiency.
Discussion is essential. Just as economists see very few tradeoffs as taboo, non-economists often decline to discuss tradeoffs at all, preferring to focus on the repugnance of transactions like organ sales.
The laws against buying or selling kidneys reflect a reasonably widespread repugnance, making it difficult for arguments that focus only on the gains from trade to make headway in changing these laws. But that does not mean that gains from exchange can't be realized.
Behavioral economics has been concerned mostly with how individuals make choices. But attitudes about repugnance shape whole markets, and therefore shape what choices people face, and so may be an important way that "behavioral" considerations affect the economy.

Author Abstract

This essay examines how repugnance sometimes constrains what transactions and markets we see. When my colleagues and I have helped design markets and allocation procedures, we have often found that distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency. I'll first consider a range of examples, from slavery and indentured servitude (which once were not as repugnant as they now are) to lending money for interest (which used to be widely repugnant and is now not), and from bans on eating horse meat in California to bans on dwarf tossing in France. An example of special interest will be the widespread laws against the buying and selling of organs for transplantation. The historical record suggests that while repugnance can change over time, it can persist for a very long time, although changes in institutions that reflect repugnance can occur relatively quickly when the underlying repugnance changes.