Surveying Repugnant Markets

Markets conjure several things. They allure a numerous. There exist many types of markets. One talks of stock markets- the market for ownership; there are commodity markets at B2B levels, B2C levels- commodity exchanges, food markets, retail outlets, wholesale outlets; there are markets for financial capital- debt and equity markets; there are markets for goods and services and more. To economists of classical and neo-classical school, markets perform the role of allocation and distribution fo goods and services best. To them, Pareto efficiency is something best achieved through market mechanisms and not through central planning.

Yet there are markets which people find it nauseating or repulsive to see they exist. In fact, the very idea of certain goods being exchanged in a market model is something that would be contrary to the norms established in the cultural context. In some geographies and societies, some of these markets might find favor yet in many others there are seem something not desirous of market transactions. Al Roth, the pioneer of market design called these markets existing contrary to socio-cultural norms as repugnant markets. These markets might be legal, grey or outright illegal.  These markets are worth exploring in detail.

Let us take an example of prostitution. The very fact that women or for that matter men sell their bodies for consideration is considered repugnant. Of course, prostitution is legal in countries like Netherlands yet it doesn’t mean it is not repugnant. Interestingly, at the core of it is a human body and each individual owns their body. Thus this logic implies humans are free to exercise their choices with respect to using their body for whatever purposes they feel like. Therefore, if any human voluntarily wants to trade for sex with any other consenting adults, it should be alright from a pure economics and markets perspective. Yet the society has viewed sex as bilateral monopoly between husband and wife. Incidentally, social acceptance of divorce is fairly recent phenomenon in many parts of the world.  Human society in the context of framed and followed cultural norms cannot visualize sexual life existing outside the context of marriage. Thus there is an increased pressure to prohibit prostitution. Yet as advocates of prostitution contend, the approach is paternalistic.

The repugnance is not confined to prostitution. Human slave markets are even more repugnant. In the American context, it was the white slave traders who would buy slaves from the African coast and sell them in the American markets. In fact for many centuries, prisoners of war were considered kosher for being sold in the human labor market for slaves across Europe and Arabia. In the Arabic world post rise of Islam, Kafirs defeated in battles would be sold and accepted as something right and desirable in the slave markets from Maghreb to Afghanistan. To many, it is only in recent times perhaps Victorian and post Victorian era that slave markets emerged repugnant. Yet human trafficking continues to exist. The solution to it would be easing norms for global mobility of labor with tools that eliminate information asymmetry between the buyer and seller.

Some markets might not be per se repugnant but might acquire the characteristics of the same in the socio-cultural context. Cow meat would be repugnant in India while horse meat is considered the same in the US. Similarly, certain food products might be repulsive and not desirous to be engaged in market transactions in some parts of the world. There are many societies where nudism would be repulsive yet in some cultural contexts, nudism might not be so. Nudism for money is something that flourishes irrespective of the stigma similar to prostitution.

There are market which evolves through matching buyers and sellers. These are termed as matching markets. Matching markets per se are not repulsive. Classic examples of matching markets range from job markets, apprentice markets, education markets, marriage markets etc. Yet in some instances, there would be repulsion to see certain transactions taking place in the market mechanism. Some people exchange blood for money. Blood donation is seen as altruistic in the cultural norms and cannot be countenanced as something transacted in the market. Yet to many in need for money, there exists perhaps grey or even illegal a market for blood donation. The organ markets are the next stage in the same. Kidney transplants through donations from strangers in exchange of consideration are legal in some countries while illegal in certain others. Again, organ donation is considered as an act of altruism on part of a stranger who gives his or her bit of life to save, sustain and enrich yours. Monetary transactions are seen as contrary to the image that conjures up from the organ donation.  However, given the need for organs and organ donations, there exists a necessity to evolve formal markets or non markets for the same. Al Roth’s contribution to economic theory has been design of markets for organ donation. Despite illegality, the market flourishes in number of regions. Commercial surrogacy is another manifestation of matching repugnant markets. Its legality or otherwise is dependent on regions, yet there is something viewed contrary to social norms. Bearing a child for another couple who might have genuine reasons for seeking an external womb is something that is not even perceived altruistic. Human freedom to do whatever they desire with their body conflicts with the societal tendencies for defining what is right or otherwise.

As one surveys the repugnant markets, they are often quite large, quite niche and cater to certain unique problems.  There are idiosyncratic demands many an occasion arisen of extreme necessity and at given price points, there exists a locus of supply. Markets match the two. Given the objectives of the markets, there arises a conflict with the norms framed by the society. There is a stigma to players in these markets. Nonetheless, the societal fulfillment of demand –supply mismatch has to occur either in monetary or non monetary context. The challenge for the economists is build market models, monetary or non monetary to design solutions to these frictions.