10.17.2012

The Nobels and Repugnance

It's marriage week on FE, which is apt given Monday's economics Nobel* announcements. Both Lloyd Shapley and Alvin Roth contributed to market design for markets lacking price signals, e.g. in kidney transplants, medical school matriculation, and marriage (see, for example, Shapley's 1962 paper College Admissions and the Stability of Marriage).

Something common to these markets is a tendency for humans to think of prices in these context to be particularly repugnant ideas. Most of us flinch at the idea that one should be able to buy and sell organs, for example, a stance with which I largely agree given that it seems very hard to design mechanisms that would prevent abusive extraction (e.g., person A needs money and thus pressures their spouse into donating a kidney and claiming it's voluntary). But Shapley and Roth were exactly the kind of economists who took thorny mechanism design as a challenge. Which brings us to my favorite paper that's emerged from this Nobel corpus so far:
Repugnance as a Constraint on Markets 
Alvin Roth 
Why can’t you eat horse or dog meat in a restaurant in California, a state with a population that hails from all over the world, including some places where such meals are appreciated? The answer is that many Californians not only don’t wish to eat horses or dogs themselves, but find it repugnant that anyone else should do so, and they enacted this repugnance into California law by referendum in 1998. Section 598 of the California Penal Code states in part: “[H]orsemeat may not be offered for sale for human consumption. No restaurant, cafe, or other public eating place may offer horsemeat for human consumption.” The measure passed by a margin of 60 to 40 percent with over 4.6 million people voting for it (see http://vote98.ss.ca.gov/Returns/prop/00.htm).  
Notice that this law does not seek to protect the safety of consumers by governing the slaughter, sale, preparation, and labeling of animals used for food. It is different from laws prohibiting the inhumane treatment of animals, like rules on how farm animals can be raised or slaughtered, or laws prohibiting cockfights, or the recently established (and still contested) ban on selling foie gras in Chicago restaurants (Ruethling, 2006). It is not illegal in California to kill horses; the California law only outlaws such killing “if that person knows or should have known that any part of that horse will be used for human consumption.” The prohibited use is “human  consumption,” so it apparently remains legal in California to buy and sell pet food that contains horse meat (although the use of horse meat in pet food has declined in the face of the demand in Europe for U.S. horse meat for human consumption). 
The repugnance of eating horses is not limited to California. On September 72006, the U.S. House of Representatives passed by a vote of 351–40, and sent to the Senate, H.R. 503: “To . . . prohibit the shipping, transporting, moving, delivering, receiving, possessing, purchasing, selling, or donation of horses and other equines to be slaughtered for human consumption.” (That bill seems unlikely to pass into law, however.) Apparently, some kinds of transactions are repugnant in some times and places and not in others. This essay examines repugnance and its consequences for 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 can be a real constraint on markets and how they are designed, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency. In this essay, I’ll first consider a wide range of examples, including slavery and indentured servitude, lending money for interest, price-gouging after disasters, selling pollution permits and life insurance, and dwarf tossing.
Hat tip Andres Marroquin.

Update: the NY Times has a great Nobel winners' "reading list" here.

* what, did you want a disclaimer?

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