In praise of ticket scalping, horse eating and trading in human organs

Bookmark and Share Governance & Service Provision | Chris Berg
The Sunday Age 4th November, 2012

Should we be able to buy horse meat at restaurants or for home cooking? It is not as if horses are a protected species. We already export them for human consumption. Australian food markets sell goat, kangaroo, camel, buffalo, crocodile, even wallaby and alpaca. Why not horse?

Yet when a Perth butcher and a Melbourne chef tried to introduce horse meat two years ago, they were met with a storm of protest, and had to withdraw it from sale.

If horse meat seems a bit banal, then what about pets? How would you feel if somebody slaughtered their family dog and sold the meat? Disgust? More likely repugnance.

These odd questions are among the valuable contributions to humanity by the 2012 co-winner of the economics Nobel Prize, Alvin E. Roth.

Roth won for devising a system where donor organs are matched with patients. There is a global shortage of organ donors. One Australian dies every week waiting for a transplant. A strategy to help deserves all the recognition it gets.

So where does repugnance come in? We already have a great way to harmonise organ supply and organ demand - markets. If donors were able to charge for their kidneys, there would be more kidneys available. People respond to incentives. And a legal, regulated, safe market for organs would be better than today's dangerous illegal market. Yet it is unlawful to compensate someone for donating a kidney. We are relying on altruism to meet our transplant demand.

Roth devised an algorithm to efficiently allocate what little organ supply there is with some of those who need transplants - given that legislators have decided it is immoral for people to trade organs for money.

The Nobel committee described this anti-market bias as ''ethical grounds''. Some ethics. By limiting the amount of organs available, those ethical grounds are killing people.

Roth published an influential paper in 2007, Repugnance as a Constraint on Markets, in the Journal of Economic Perspectives. We find all sorts of things repugnant. And we do so instinctively, not rationally.

Take gambling. Many find sports betting obnoxious, as if it undermines the purity of sport. Calling for a ban on internet betting, Nick Xenophon once complained cricket had been ''reduced to just another event to have a punt on''. Likewise, some political professionals believe that gambling on an election is highly distasteful.

When, in 2003, a team of Pentagon economists tried to set up prediction markets - that is, using betting to predict the likelihood of future events - for terrorist attacks, they were pounced upon. One congressman described the program as trading in death. ''There is something very sick about it,'' said Senator Barbara Boxer.

Just ''something''. Sure, betting on future terrorist attack probabilities is unorthodox. But it might have worked. The purpose was to predict attacks and stop them. Yet for those politicians, it felt wrong. The program was quickly shut down.

What we think is repugnant is determined by our culture. Historically, lending money at interest has been unacceptable. This makes some strange sense. Lenders who charge for the privilege of borrowing money seem a bit heartless - it is not like idle money is being used. And why should people get rich just for sitting around?

Ticket scalping is another repugnant market. It somehow seems unfair to pay more than the cover price for concerts. But a basic lesson of economics is that markets allocate goods to those who value them the most (that is, those who are most willing to pay). Scalping is a good thing.

Ticket scalping also shows how special interests can use repugnance as cover for their own private gain. Ticket sellers want governments to stamp out the secondary ticket trade. They don't like the competition.

Yet anti-scalping laws make it harder to get tickets to popular events, not easier. Just like outlawing the organ market makes it harder for sick people to get transplants. Or banning horse meat restricts the availability of tasty horse meat.

It is fine for individuals to object to certain practices. If you don't want to be compensated for your organ donation, you don't have to charge. And nobody is forcing you to bet on future terrorism.

But it is a real problem when feelings obtain the force of law. That gut reaction - ''there is something very sick about it'' - can sometimes cause real harm.