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Markets pervade our society. For transportation we have Uber, for living space Airbnb, and for tickets Stubhub. Even the right to pollute is for sale, at 13 Euros per metric ton of carbon dioxide on the European emissions market. Michael Sandel, the renowned Harvard University professor, complains, “We have drifted from having a market economy to being a market society.”
There are some who laud this expansion of market values. Libertarians believe markets promote individual freedom by allowing parties to engage in consensual and mutually beneficial agreements. The libertarian philosophy is that, as long as coercion is not involved, a trade of any sort will only occur if both parties stand to gain. Thus, any such trade should be permitted.
An exception is made only for instances in which a deal beneficial to the transacting parties may harm a third party. For example, if my neighbors rented out their apartment to a nightclub, the ensuing late night noise would bother me—and I neither consented to nor benefited from the deal.
Yet, despite the expanding role of markets, it is illegal in many countries for two parties to enter a consensual contract for the exchange of certain goods or services. Notable examples include prostitution, organ exchange, and commercial surrogacy. (Commercial surrogacy is a surrogacy agreement under which the surrogate receives compensation beyond reimbursement of medical expenses.)
A libertarian would argue that prohibiting such transactions impinges upon individual liberties. Preventing a transaction that would have benefitted both parties, and doesn’t harm a third, reduces economic efficiency. This, it is argued, reduces overall societal welfare.
Strictly speaking, bans on activities like commercial surrogacy do reduce economic efficiency: two parents who have found a willing surrogate mother cannot enter a monetary transaction.
It is common practice for parents to pay a woman in a country where commercial surrogacy is legal and costs are cheap—the most popular choice is India—to be a surrogate mother. This is effectively outsourcing pregnancy.
It is also legal in many countries for individuals to enter unpaid surrogacy agreements; why should commercial surrogacy be illegal?
The first argument strikes at the idea of consent. Advocates for the ban on commercial surrogacy assert that many women who agree to surrogacy contracts do so under duress or because their financial situation leaves them no choice. Indeed, desperation for money may force an individual into a contract he or she would otherwise reject. This is fundamentally a violation of his or her consent.
On a more complex level, people like Sandel argue that adding the word “commercial” to surrogacy inherently demeans and devalues the human body. As a society, it is argued, we have agreed that the human body holds a certain sanctity. This sanctity is violated when someone essentially rents out their womb. We live in a society that does not wish to objectify humans in such a way. In contrast, unpaid surrogacy hints at compassion, not objectification.
This objectification of the body, it is claimed, in turn fosters unhealthy attitudes toward the poor. Allowing the poor to be paid for surrogacy may lead to a social expectation that the impoverished act as surrogates to support themselves, and therefore lessen support for other welfare measures. Sandel points out that in such a case, market values have crowded out non-market values like empathy.
However, often left out in arguments of morality and legality is the presence of black markets. From the American experiment with Prohibition in the early twentieth century to the current war on drugs, it abundantly clear that when people want something, they find ways to get it—legal, or otherwise.
Bans on drugs, alcohol, and similar goods are conceived with the ideals of preserving public morality and enhancing society. Yet bans on desirable goods and services often empower organized crime and foster a culture of lawbreaking among otherwise law-abiding citizens.
Legalization, on the other hand, is not always the best solution: it would likely increase consumption of such societally harmful goods and services. In outlawing commercial surrogacy, the majority of the international community has concluded that the detriment to society by legalization is more serious than the creation of a black market.
Striking the balance between morality and markets is difficult. In sticking with the libertarian spirit, it is indeed generally advisable to grant individuals the freedom to consensually transact with each other. Outright bans cause damage of their own. But we must somewhere draw the line between individual freedom and social imperative.
A version of this article appeared in the South China Morning Post's Young Post on Thursday, June 30. http://yp.scmp.com/news/features/article/103489/dses-economics-signal-employers-youre-hireable
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