What Money Can't (shouldn't) Buy: Part. 2B: Incentives, Fees & Fines
Perverse Incentives
When Gary Becker wrote in mid 1970s, that everything we do can be explained by assuming that we calculate costs and benefits, he referred to "shadow prices" -- the imaginary prices said to be implicit in the alternatives we face and the choices we make. For example, when a person decides to stay married rather than get a divorce, no prices are posted; rather, the person considers the implicit price of a breakup -- the financial rpice and the emotional price -- and decides the benefits aren't worth it.
Incentive schemes today go further. By putting an actual, explicit price on activities far removed from material pursuits, they take Becker's shadow prices out of the shadows and make them real. They enact his suggestion that all human relations are, ultimately, market relations.
Becker made a striking proposal along these lines, a market solution to the contentious debate over immigration policy: the U.S. should scrap its complex system of quotas, point systems, family preferences, and queues and simply sell the right to immigrate. Given the demand, Becker suggests setting the price of admission at $50,000 or higher. Immigrants willing to pay a large entrance fee. They would likely be young, skilled, ambitious, hardworking, and unlikely to make use of welfare or unemployment benefits. When Becker first proposed selling the right to immigrate in 1987, many considered the notion far-fetched. But to those steeped in economic thinking, it was a sensible, even obvious way of bringing market reasoning to bear on an otherwise thorny question: How should we decide which immigrants to admit?
Julian L. Simon, an economist, proposed a similar plan, suggested setting a yearly quota of immigrants to be admitted, and auctioning admission to the highest bidders until the quota was filled. Selling the right to immigrate is fair, because it discriminates according to the standard of a market-oriented society: ability and willingness to pay. To address the objection that his plan would allow only the wealthy to enter, Simon suggested allowing the winning bidders to borrow some of their entry free from the government and pay it back later with their income tax. If they were unable to repay, they could always be deported.
The idea of selling the right to immigrate was offensive to some, but the Becker-Simon proposal soon found its way into law. In 1990, Congress provided that foreigners who invested $500,000 in the U.S. could immigrate with their families, for two years, after which they could receive a permanent green card if the investment created at least ten jobs. The cash-for-green-card was the ultimate queue-jumping scheme, a fast track to citizenship. In 2011, two senators proposed a bill offering a similar cash incentive to boost the high-end housing market, which was still weak in the aftermath of the financial crisis. Any foreigner who bought a $500,000 house would receive a visa allowing the buyer, spouse, and minor children to live in the U.S. as long as they owned the property.
Becker even proposed charging admission to refugees fleeing persecution. The free market would make it easy to decide which refugees to accept -- those sufficiently motivated to pay the price: for obvious reason, political refugees and those persecuted in their own countries would be willing to pay a sizeable fee to gain admission to a free nation. So a fee system would automatically avoid time-consuming hearings about whether they are really in physical danger if they were forced to return home. Asking a refugee fleeing persecution to hand over $50,000 may strike you as callous, yet another instance of the economist's failure to distinguish between the willingness and the ability to pay. So consider another market proposal to solve the refugee problem, one that doesn't make the refugees pay out of pocket. Peter Schuck, a law professor, proposed the following:
Let an international body assign each country a yearly refugee quota, based on national wealth. Then let nations buy and sell these obligations among themselves. For example, if Japan is allocated twenty thousand refugees per year but doesn't want to take them, it could pay Russia, or Uganda to take them in. According to standard market logic, everyone benefits. Russia or Uganda gains a new source of national income, Japan meets its refugee obligations by outsourcing them, and more refugees are rescued than would otherwise find asylum.
There is something distasteful about a market in refugees, even if it leads to more refugees finding asylum. But what exactly is objectionable about it? It has something to do with the fact that a market in refugees changes our view of who refugees are and how they should be treated. It encourages the participants -- the buyers, the sellers, and also those whose asylum is being haggled over -- to think of refugees as burdens to be unloaded or as revenue sources, rather than as human beings in peril.
One might acknowledge the degrading effect of a market in refugees and still conclude that the scheme does more good than harm. But what the example illustrates is that markets are not mere mechanisms. They embody certain norms. They presuppose -- and promote -- certain ways of valuing the goods being exchanged. Economists often assume that markets do not touch or taint the goods they regulate. but this is untrue. Market leave their mark on social norms. Often, market incentives erode or crowd out nonmarket incentives.
A study of some child-care centers in Israel shows how this can happen. The centers faced a familiar problem: parents sometimes came late to pick up their children. A teacher had to stay with the children until the tardy parents arrived. To solve this problem, the centers imposed a fine for late pickups. What do you suppose to happened? Late pickups actually increased.
Now if you assume that people respond to incentives, this is a puzzling result. You would expect the fine to reduce, not increase, the incidence of late pickups. So what happened? Introducing the monetary payment changed the norms. Before, parents who came late felt guilty; they were imposing an inconvenience on the teachers. Now parents considered a late pickup as a service for which they were willing to pay. They treated the fine as if it were a fee. Rather than imposing on the teacher, they were simply paying him or her work longer.
Fines vs fees
Fines register moral disapproval, whereas fees are simply prices that imply no moral judgment. When we impose a fine for littering, we're saying that littering is wrong. Tossing a beer can into the Grand Canyon not only imposes cleanup costs. It reflects a bad attitude that we as a society want to discourage.
Consider parking spaces reserved for use by the physically disabled. Suppose an able-bodied contractor for his convenience wants to park in that reserved parking for disabled to be near to his building site. He is willing to pay the large fine, considers it a cost of doing business. Although he pays the fine, don't we consider that he's doing something wrong? He treats the fine as if it were simply an expensive parking lot fee. But this misses its moral significance. In treating the fine as a fee, he fails to respect the needs of the physically disabled and the desire of the community to accommodate them by setting aside certain parking spaces.
When people treat fines as fees, they flout the norms that fines express. Often, society strikes back. Some affluent drivers consider speeding tickets the price they pay for driving as fast as they please. In Finland, the law leans hard against that way of thinking by basing fines on the income of the offender. In 2003, Jussi Salonoja, 27 year-old heir to a sausage business, was fined EUR170,000 for driving 80 km/hour in a 40 km/hour zone. Salonoja, one of the richest men in Finland, had an income of EUR7 million per year. The previous record for the most expensive speeding ticket was held by Anssi Vanjoki, an executive of Nokia. In 2002, he was fined EUR116,000 for speeding through Helsinki on his Harley-Davidson. A judge reduced the fine when Vanjoki showed that his income had dropped, due to a downturn in Nokia's profits.
What makes the Finnish speeding tickets fines rather than fees is not only the fact that they vary with income. It's the moral opprobrium that lies behind them -- the judgment that violating the speed limit is wrong. Progressive income taxes also vary with income, and yet they are not fines; their purpose is to raise revenue, not to penalize income-producing activity. Finalnd's $217,000 speeding ticket shows that society not only wants to cover the costs of risky behavior; it also wants the punishment to fit the crime -- and the bank balance of the perpetrator.
Notwithstanding the cavalier attitude of some fast-driving rich folk toward speed limits, the distinction between a fine and a fee is not easily effaced. In most places, being pulled over and issued a speeding ticket still carries a stigma. No one thinks the officer is simply collecting a toll, or presenting the offender with a bill for convenience of a faster commute.
In 2010, Eugene "Gino" DiSimone, an independent candidate for governor of Nevada, proposed an unusual way to raise money for the state budget: allow people to pay $25 per day to exceed the posted speed limit and drive ninety miles per hour on designated roads in Nevada. If you wanted the option of speeding form time to time, you would buy a transponder and dial into your account by cell phone whenever you needed to get somewhere fast. The $25 would be charged to your credit card, and you would be free to speed for the next 24-hours without being pulled over. If an officer with a radar gun detected you barreling down the highway, the transponder would signal that you were a paying customer, and no ticket would be issued. DiSimone estimated that his proposal would raise at least $1.3 billion a year for the state, without raising taxes. despite the tempting windfall to the state budget, the Nevada Highway Patrol said the plan would imperil public safety, and the candidate went down to defeat.
Subway Cheats and Video Rentals
If you ride the Paris Metro without paying the $2 fare, you can be fined up to $60. The fine is a penalty for cheating the system by evading the fare. Recently, however, a group of habitual fare dodgers came up with a clever way of converting the fine into a fee, and a modest one at that. They formed an insurance fund that will pay their fine if they get caught. Each member pays in about $8.50 a month to the fund ('mutuelle des fraudeurs), far less than the $74 it costs to buy a legitimate monthly pass. The members of the mutuelle movement say they are motivated not by money but by an ideological commitment to free public transportation. It's a way to resist together. There are things in France which are supposed to be free -- schools, health, so why not transportation? Although the fraudeurs are unlikely to prevail, their novel scheme converts a penalty for cheating into a monthly insurance premium, a price they are willing to pay to resist the system.
To decide whether a fine or a fee is appropriate, we have to figure out the purpose of the social institution in question and the norms that should govern it. The answer will vary depending on whether we're talking about showing up late at the day-care center, jumping the turnstile in the Paris subway, or... returning an overdue DVD to the local video store. In the early days of video stores, they treated late fees as fines. I thought by keeping the movie longer and paying for the extra days, I should be regarded as a better customer, not a worse one, but whenever I returned a video late, the person behind the counter had a certain attitude as if I'd done something morally wrong. Gradually, this norm has shifted. Video stores now seem to treat overdue charges as fees rather than fines.
China's One-Child Policy
Often, the moral stakes are higher. Consider this controversy over the sometimes blurry line between a fine and a fee: in China, the fine for violating the government's one-child policy is increasingly regarded by the affluent as a price for an extra child. The policy, put in place more than three decades ago to reduce China's population growth, limits most couples in urban areas to one child. (Rural families are allowed a second child if the first one is a girl). The fine varies from region to region but reaches $31,000 in major cities- a staggering figure for the average worker but easily affordable for wealthy entrepreneurs, sports stars, and celebrities. A news tells of a pregnant womand and her husband in Guangzhou who "strutted in " to their local birth control office, threw the money on the desk and said, here is 200,000 yuan, we need to take care our future baby, please do not come to disturb us.
Family-planning officials have sought to reassert the punitive aspect of the sanction by increasing fines for affluent offenders, denouncing celebrities who violate the policy and banning them from appearing on TV, and preventing business executives with extra kids from receiving government contracts. The fine is a piece of cake for the rich. The government had to hit them harder where it really hurt, at their fame, reputation, and standing in society, according to A Sociology Professor Zhai Zhenwu at Renmin University.
The authority regard the fine as a penalty and want to preserve the stigma associated with it. They don't want it to devolve into a fee. This is not mainly because they're worried about affluent parents having too many children: the number of wealthy offenders is relatively small. What's at stake is the norm underlying the policy. If the fine were merely a fee, the state would find itself in the awkward business of selling the right to have extra children to those able and willing to pay for it.
Tradable Procreation Permits
Oddly enough, some Western economists have called for a market-based approach to population control strikingly similar to the fee-based system the Chinese officials are trying to avoid. These economists have urged countries that need to limit their population to issue tradable procreation permits. In 1964, the economist Kenneth Boulding proposed a system of marketable procreation licenses as a way of dealing with overpopulation. Each woman would be issued a certificate entitling her to have a child. She would be free to use the certificate or sell it at the going rate. Boulding imagined a market in which people eager to have children would purchase certificates from "the poor, the nuns, the maiden aunts, and so on."
The plan would be less coercive than a system of fixed quotas, as in a one-child policy. It would also be economically more efficient, since it would get the goods (in this case, children) to the consumers most willing to pay for them. Recently, two Belgian economists revived Boulding's proposal. They pointed out that, since the rich would likely buy procreation licenses from the poor, the scheme would have the further advantage of reducing inequality by giving the poor a new source of income.
Some people oppose all restrictions on procreation, while others believe that reproductive rights can legitimately be restricted to avoid overpopulation. Set aside for the moment that disagreement of principle and imagine a soceity that was determined to implement mandatory population control.
Which policy would you find less objectionable: a fixed quota system that limits each couple to one child and fines those who exceed the limit, or a market-based system that issues each couple a tradable procreation voucher entitling the bearer to have one child?
From the standpoint of economic reasoning, the second policy is clearly preferable. The freedom to choose whether to use the voucher or sell it makes some people better off and no one worse off. Those who buy or sell vouchers gain (by making mutually advantageous trades) and those who don't enter the market are no worse off than they would be under the fixed quota system; they can still have one child.
And yet there is something troubling about a system in which people buy and sell the right to have kids. Part of what's troubling is the unfairness of such a system under conditions of inequality. We hesitate to make children a luxury good, affordable by the rich but not the poor. If having children is a central aspect of human flourishing, then it's unfair to condition access to this good on the ability to pay. Beyond the fairness objection is the question of bribery. At the heart of the market transaction is a morally disquieting activity: parents who want an extra child must induce or entice other prospective parents to sell of their right to have a child. Morally, it's not much different from buying a couple's only child after it has been born.
Economists might argue that a market in children, or in the right to have them, has the virtue of efficiency: it allocates kids to those who value them most highly, as measured by the ability to pay. But trafficking in the right to procreate promotes a mercenary attitude toward children that corrupts parenthood. Central to the norm of parental love is the idea that one's children are inalienable it is unthinkable to put them up for sale. So to buy a child, or the right to have one, from another prospective parent is to cast a shadow over parenthood as such. Wouldn't experience of loving your children be tainted if you acquired some of them by bribing other couples to remain childless? Might you be tempted, at least, to hide this fact from your children?
If so, there's reason to conclude that, whatever its advantages, a market in procreation permits would corrupt parenthood in ways that a fixed quota, however, odious, would not.
When Gary Becker wrote in mid 1970s, that everything we do can be explained by assuming that we calculate costs and benefits, he referred to "shadow prices" -- the imaginary prices said to be implicit in the alternatives we face and the choices we make. For example, when a person decides to stay married rather than get a divorce, no prices are posted; rather, the person considers the implicit price of a breakup -- the financial rpice and the emotional price -- and decides the benefits aren't worth it.
Incentive schemes today go further. By putting an actual, explicit price on activities far removed from material pursuits, they take Becker's shadow prices out of the shadows and make them real. They enact his suggestion that all human relations are, ultimately, market relations.
Becker made a striking proposal along these lines, a market solution to the contentious debate over immigration policy: the U.S. should scrap its complex system of quotas, point systems, family preferences, and queues and simply sell the right to immigrate. Given the demand, Becker suggests setting the price of admission at $50,000 or higher. Immigrants willing to pay a large entrance fee. They would likely be young, skilled, ambitious, hardworking, and unlikely to make use of welfare or unemployment benefits. When Becker first proposed selling the right to immigrate in 1987, many considered the notion far-fetched. But to those steeped in economic thinking, it was a sensible, even obvious way of bringing market reasoning to bear on an otherwise thorny question: How should we decide which immigrants to admit?
Julian L. Simon, an economist, proposed a similar plan, suggested setting a yearly quota of immigrants to be admitted, and auctioning admission to the highest bidders until the quota was filled. Selling the right to immigrate is fair, because it discriminates according to the standard of a market-oriented society: ability and willingness to pay. To address the objection that his plan would allow only the wealthy to enter, Simon suggested allowing the winning bidders to borrow some of their entry free from the government and pay it back later with their income tax. If they were unable to repay, they could always be deported.
The idea of selling the right to immigrate was offensive to some, but the Becker-Simon proposal soon found its way into law. In 1990, Congress provided that foreigners who invested $500,000 in the U.S. could immigrate with their families, for two years, after which they could receive a permanent green card if the investment created at least ten jobs. The cash-for-green-card was the ultimate queue-jumping scheme, a fast track to citizenship. In 2011, two senators proposed a bill offering a similar cash incentive to boost the high-end housing market, which was still weak in the aftermath of the financial crisis. Any foreigner who bought a $500,000 house would receive a visa allowing the buyer, spouse, and minor children to live in the U.S. as long as they owned the property.
Becker even proposed charging admission to refugees fleeing persecution. The free market would make it easy to decide which refugees to accept -- those sufficiently motivated to pay the price: for obvious reason, political refugees and those persecuted in their own countries would be willing to pay a sizeable fee to gain admission to a free nation. So a fee system would automatically avoid time-consuming hearings about whether they are really in physical danger if they were forced to return home. Asking a refugee fleeing persecution to hand over $50,000 may strike you as callous, yet another instance of the economist's failure to distinguish between the willingness and the ability to pay. So consider another market proposal to solve the refugee problem, one that doesn't make the refugees pay out of pocket. Peter Schuck, a law professor, proposed the following:
Let an international body assign each country a yearly refugee quota, based on national wealth. Then let nations buy and sell these obligations among themselves. For example, if Japan is allocated twenty thousand refugees per year but doesn't want to take them, it could pay Russia, or Uganda to take them in. According to standard market logic, everyone benefits. Russia or Uganda gains a new source of national income, Japan meets its refugee obligations by outsourcing them, and more refugees are rescued than would otherwise find asylum.
There is something distasteful about a market in refugees, even if it leads to more refugees finding asylum. But what exactly is objectionable about it? It has something to do with the fact that a market in refugees changes our view of who refugees are and how they should be treated. It encourages the participants -- the buyers, the sellers, and also those whose asylum is being haggled over -- to think of refugees as burdens to be unloaded or as revenue sources, rather than as human beings in peril.
One might acknowledge the degrading effect of a market in refugees and still conclude that the scheme does more good than harm. But what the example illustrates is that markets are not mere mechanisms. They embody certain norms. They presuppose -- and promote -- certain ways of valuing the goods being exchanged. Economists often assume that markets do not touch or taint the goods they regulate. but this is untrue. Market leave their mark on social norms. Often, market incentives erode or crowd out nonmarket incentives.
A study of some child-care centers in Israel shows how this can happen. The centers faced a familiar problem: parents sometimes came late to pick up their children. A teacher had to stay with the children until the tardy parents arrived. To solve this problem, the centers imposed a fine for late pickups. What do you suppose to happened? Late pickups actually increased.
Now if you assume that people respond to incentives, this is a puzzling result. You would expect the fine to reduce, not increase, the incidence of late pickups. So what happened? Introducing the monetary payment changed the norms. Before, parents who came late felt guilty; they were imposing an inconvenience on the teachers. Now parents considered a late pickup as a service for which they were willing to pay. They treated the fine as if it were a fee. Rather than imposing on the teacher, they were simply paying him or her work longer.
Fines vs fees
Fines register moral disapproval, whereas fees are simply prices that imply no moral judgment. When we impose a fine for littering, we're saying that littering is wrong. Tossing a beer can into the Grand Canyon not only imposes cleanup costs. It reflects a bad attitude that we as a society want to discourage.
Consider parking spaces reserved for use by the physically disabled. Suppose an able-bodied contractor for his convenience wants to park in that reserved parking for disabled to be near to his building site. He is willing to pay the large fine, considers it a cost of doing business. Although he pays the fine, don't we consider that he's doing something wrong? He treats the fine as if it were simply an expensive parking lot fee. But this misses its moral significance. In treating the fine as a fee, he fails to respect the needs of the physically disabled and the desire of the community to accommodate them by setting aside certain parking spaces.
When people treat fines as fees, they flout the norms that fines express. Often, society strikes back. Some affluent drivers consider speeding tickets the price they pay for driving as fast as they please. In Finland, the law leans hard against that way of thinking by basing fines on the income of the offender. In 2003, Jussi Salonoja, 27 year-old heir to a sausage business, was fined EUR170,000 for driving 80 km/hour in a 40 km/hour zone. Salonoja, one of the richest men in Finland, had an income of EUR7 million per year. The previous record for the most expensive speeding ticket was held by Anssi Vanjoki, an executive of Nokia. In 2002, he was fined EUR116,000 for speeding through Helsinki on his Harley-Davidson. A judge reduced the fine when Vanjoki showed that his income had dropped, due to a downturn in Nokia's profits.
What makes the Finnish speeding tickets fines rather than fees is not only the fact that they vary with income. It's the moral opprobrium that lies behind them -- the judgment that violating the speed limit is wrong. Progressive income taxes also vary with income, and yet they are not fines; their purpose is to raise revenue, not to penalize income-producing activity. Finalnd's $217,000 speeding ticket shows that society not only wants to cover the costs of risky behavior; it also wants the punishment to fit the crime -- and the bank balance of the perpetrator.
Notwithstanding the cavalier attitude of some fast-driving rich folk toward speed limits, the distinction between a fine and a fee is not easily effaced. In most places, being pulled over and issued a speeding ticket still carries a stigma. No one thinks the officer is simply collecting a toll, or presenting the offender with a bill for convenience of a faster commute.
In 2010, Eugene "Gino" DiSimone, an independent candidate for governor of Nevada, proposed an unusual way to raise money for the state budget: allow people to pay $25 per day to exceed the posted speed limit and drive ninety miles per hour on designated roads in Nevada. If you wanted the option of speeding form time to time, you would buy a transponder and dial into your account by cell phone whenever you needed to get somewhere fast. The $25 would be charged to your credit card, and you would be free to speed for the next 24-hours without being pulled over. If an officer with a radar gun detected you barreling down the highway, the transponder would signal that you were a paying customer, and no ticket would be issued. DiSimone estimated that his proposal would raise at least $1.3 billion a year for the state, without raising taxes. despite the tempting windfall to the state budget, the Nevada Highway Patrol said the plan would imperil public safety, and the candidate went down to defeat.
Subway Cheats and Video Rentals
If you ride the Paris Metro without paying the $2 fare, you can be fined up to $60. The fine is a penalty for cheating the system by evading the fare. Recently, however, a group of habitual fare dodgers came up with a clever way of converting the fine into a fee, and a modest one at that. They formed an insurance fund that will pay their fine if they get caught. Each member pays in about $8.50 a month to the fund ('mutuelle des fraudeurs), far less than the $74 it costs to buy a legitimate monthly pass. The members of the mutuelle movement say they are motivated not by money but by an ideological commitment to free public transportation. It's a way to resist together. There are things in France which are supposed to be free -- schools, health, so why not transportation? Although the fraudeurs are unlikely to prevail, their novel scheme converts a penalty for cheating into a monthly insurance premium, a price they are willing to pay to resist the system.
To decide whether a fine or a fee is appropriate, we have to figure out the purpose of the social institution in question and the norms that should govern it. The answer will vary depending on whether we're talking about showing up late at the day-care center, jumping the turnstile in the Paris subway, or... returning an overdue DVD to the local video store. In the early days of video stores, they treated late fees as fines. I thought by keeping the movie longer and paying for the extra days, I should be regarded as a better customer, not a worse one, but whenever I returned a video late, the person behind the counter had a certain attitude as if I'd done something morally wrong. Gradually, this norm has shifted. Video stores now seem to treat overdue charges as fees rather than fines.
China's One-Child Policy
Often, the moral stakes are higher. Consider this controversy over the sometimes blurry line between a fine and a fee: in China, the fine for violating the government's one-child policy is increasingly regarded by the affluent as a price for an extra child. The policy, put in place more than three decades ago to reduce China's population growth, limits most couples in urban areas to one child. (Rural families are allowed a second child if the first one is a girl). The fine varies from region to region but reaches $31,000 in major cities- a staggering figure for the average worker but easily affordable for wealthy entrepreneurs, sports stars, and celebrities. A news tells of a pregnant womand and her husband in Guangzhou who "strutted in " to their local birth control office, threw the money on the desk and said, here is 200,000 yuan, we need to take care our future baby, please do not come to disturb us.
Family-planning officials have sought to reassert the punitive aspect of the sanction by increasing fines for affluent offenders, denouncing celebrities who violate the policy and banning them from appearing on TV, and preventing business executives with extra kids from receiving government contracts. The fine is a piece of cake for the rich. The government had to hit them harder where it really hurt, at their fame, reputation, and standing in society, according to A Sociology Professor Zhai Zhenwu at Renmin University.
The authority regard the fine as a penalty and want to preserve the stigma associated with it. They don't want it to devolve into a fee. This is not mainly because they're worried about affluent parents having too many children: the number of wealthy offenders is relatively small. What's at stake is the norm underlying the policy. If the fine were merely a fee, the state would find itself in the awkward business of selling the right to have extra children to those able and willing to pay for it.
Tradable Procreation Permits
Oddly enough, some Western economists have called for a market-based approach to population control strikingly similar to the fee-based system the Chinese officials are trying to avoid. These economists have urged countries that need to limit their population to issue tradable procreation permits. In 1964, the economist Kenneth Boulding proposed a system of marketable procreation licenses as a way of dealing with overpopulation. Each woman would be issued a certificate entitling her to have a child. She would be free to use the certificate or sell it at the going rate. Boulding imagined a market in which people eager to have children would purchase certificates from "the poor, the nuns, the maiden aunts, and so on."
The plan would be less coercive than a system of fixed quotas, as in a one-child policy. It would also be economically more efficient, since it would get the goods (in this case, children) to the consumers most willing to pay for them. Recently, two Belgian economists revived Boulding's proposal. They pointed out that, since the rich would likely buy procreation licenses from the poor, the scheme would have the further advantage of reducing inequality by giving the poor a new source of income.
Some people oppose all restrictions on procreation, while others believe that reproductive rights can legitimately be restricted to avoid overpopulation. Set aside for the moment that disagreement of principle and imagine a soceity that was determined to implement mandatory population control.
Which policy would you find less objectionable: a fixed quota system that limits each couple to one child and fines those who exceed the limit, or a market-based system that issues each couple a tradable procreation voucher entitling the bearer to have one child?
From the standpoint of economic reasoning, the second policy is clearly preferable. The freedom to choose whether to use the voucher or sell it makes some people better off and no one worse off. Those who buy or sell vouchers gain (by making mutually advantageous trades) and those who don't enter the market are no worse off than they would be under the fixed quota system; they can still have one child.
And yet there is something troubling about a system in which people buy and sell the right to have kids. Part of what's troubling is the unfairness of such a system under conditions of inequality. We hesitate to make children a luxury good, affordable by the rich but not the poor. If having children is a central aspect of human flourishing, then it's unfair to condition access to this good on the ability to pay. Beyond the fairness objection is the question of bribery. At the heart of the market transaction is a morally disquieting activity: parents who want an extra child must induce or entice other prospective parents to sell of their right to have a child. Morally, it's not much different from buying a couple's only child after it has been born.
Economists might argue that a market in children, or in the right to have them, has the virtue of efficiency: it allocates kids to those who value them most highly, as measured by the ability to pay. But trafficking in the right to procreate promotes a mercenary attitude toward children that corrupts parenthood. Central to the norm of parental love is the idea that one's children are inalienable it is unthinkable to put them up for sale. So to buy a child, or the right to have one, from another prospective parent is to cast a shadow over parenthood as such. Wouldn't experience of loving your children be tainted if you acquired some of them by bribing other couples to remain childless? Might you be tempted, at least, to hide this fact from your children?
If so, there's reason to conclude that, whatever its advantages, a market in procreation permits would corrupt parenthood in ways that a fixed quota, however, odious, would not.
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