July 30, 2007


Repugnant Markets and How They Get That Way: Q&A with: Alvin E. Roth (Martha Lagace, 7/30/07, Working Knowledge)

Unfair. Undignified. Inappropriate, unprofessional, distasteful—and most of all, repugnant.

To the wonder and surprise of Alvin E. Roth, a Harvard economist, these harsh words are often hoisted to describe an important task of his: designing and building new markets. As Roth writes in a new working paper, he and fellow economists have found themselves handicapped by a problem just as real as any technological barrier or requirement of incentives and efficiency: the downright distaste that some people feel for particular transactions.

Roth's paper, "Repugnance as a Constraint on Markets," looks at a wide range of practices, legal and illegal, from dwarf tossing to slavery to California's ban on the human consumption of horse meat, and asks how economists can find a common language, if not a common point of view, with the winds of society. According to Roth, "We need to understand better and engage more with the phenomenon of ‘repugnant transactions,' which, I will argue, often serves as an important constraint on markets and market design." [...]

Roth recently elaborated on repugnance for HBS Working Knowledge.

Martha Lagace: How did you arrive at the subject of repugnant markets?

Alvin E. Roth: I started thinking about them while talking with kidney surgeons and learning about all the things they found repugnant. Meanwhile, a group of economists, particularly around Nobel Laureate Gary S. Becker at the University of Chicago, was quite perplexed that we just don't have a market.

As an economist who wants to understand things as they are, I wondered why we don't have some of the markets that economists like. Economists have the point of view that voluntary transactions should always be fine. If two people engage in a voluntary transaction, it must be because they both want to, and it makes them better off. The kinds of things I'm calling repugnant are transactions that some people don't want other people to engage in.

Repugnant is different from, say, disgusting. There are no laws against eating cockroaches in California, because nobody wants to eat cockroaches. The law of supply and demand takes care of that. But the reason there's a law against eating horse meat in California is because some people would like to eat horse meat, and others think that they're doing something repugnant.

That's similarly the story about kidneys: why I can't buy yours, although I could accept it as a gift.

Repugnance is different in different places and at different times. I feel a little bit like a sociologist when I look at these things.


Posted by Orrin Judd at July 30, 2007 8:43 AM

Very interesting article from the Confucian point of view.

The name "repugnance" is being used in a contra-intuitive way. Roth excludes the economic actor's individual repugnance for the good or sevice in question, and substitutes in his definition repugnance as an economic term of art, the actor's willingness to coerce the choices of others.

We should have to read Roth's actual paper to tell where he goes with this. For example, what is made of the tribute vice pays to virtue. One may, for example, hold that prostitution is destructive and therefore should be economically discouraged by crimininalization, and still employ prostitutes. Hypocracy, and moral failing, to be sure, but not economically illogical.

We realy need a better way to describe this than "repugnance."

The crimininalization has the effect of increaseing the cost of the service by adding the risk of criminal prosecution. But the

Posted by: Lou Gots at July 30, 2007 9:48 AM


Repugnance is different in different places and at different times.

"People there are rich and like to eat exotic things..."

Someone's repugnance is someone else's exotic things.

Posted by: ic at July 30, 2007 11:36 AM

Give me $25k now and you can have both my kidneys if I croak. Give me $250k and you can have one right now.

The problem is I don't really need the money and poorer people are likely to drive prices down to where the middle class won't participate and it'll only be the poor selling organs.

Posted by: Pete at July 30, 2007 10:31 PM