Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Online-views/  Repugnant markets
BackBack

Repugnant markets

India has a wide range of (niche) markets that may be considered repugnant by some

What India needs most is to deal more flexibly with the charge of ‘inappropriateness’ which results in market failure such as high cost queues for a quick darshan? Photo: Hindustan TimesPremium
What India needs most is to deal more flexibly with the charge of ‘inappropriateness’ which results in market failure such as high cost queues for a quick darshan? Photo: Hindustan Times

It is presidential election season in the US. For many years, there has been a real-money futures market (Iowa Electronic Markets) that has allowed betting on the outcome. This so called “prediction market" has been very accurate, particularly when compared with traditional polling methods. Imagine instead, a prediction market where you could bet on acts of terrorism and assassinations. Just such a market—called the Policy Analysis Market—was proposed by the Pentagon in 2003 with the objective of trading on political developments in several middle-eastern countries. It led to a furore and was cancelled quickly.

Markets in terrorism futures, child labour, cadavers, surrogacy, and live organ donation are all examples of repugnant markets. These are areas of exchange considered by society to be beyond the sphere of markets and generally viewed by at least a section of society to be repugnant. Time, location, culture and circumstance are important to this notion of repugnance. Slavery has been considered acceptable for much of history, but is a universally acknowledged repugnant market today. Others such as abortion are legal in many countries, but still produce a great deal of societal angst as in the US. Commercial surrogacy is legal in India but banned in many other countries such as France and Italy. Consumption of horse meat provokes (criminal) repugnance in California, but is routine in China, Mexico and Kazakhstan.

Alvin Roth, the winner of the 2012 Nobel Prize for economics, has researched and written extensively about repugnant markets. He says that one, often noted regularity is that some exchanges that are not repugnant when they are gifts or in-kind become repugnant when money is added in. For instance, the act of paying birth mothers for children put up for adoption somehow fundamentally changes the perception of the exchange. Many people view monetary compensation for organ donation as something that transforms a good thing into a bad one. According to Roth, money in these exchanges objectifies and potentially creates opportunity for coercion and is often considered something that takes society down a slippery slope of ever more repugnant behaviour. He also talks about market exchanges that are bothered by “inappropriateness" which may be short of repugnance. He and his colleagues study the problem and societal objections and attempt to design markets that create the exchange but do not trip on repugnance. An example is the New England Program for Kidney Exchange designed by Roth et al, which is a multi-centre, multi-lab live donor exchange programme. He has also worked on several problems simply called practical market design. The attempt is to overcome constraints of preference and matching, for instance, labour market related issues particularly for entry-level professionals where market failures have occurred.

In India, where sometimes even mainstream markets do not work well, does the understanding of practical market design and design under repugnancy have a role?

India has a wide range of (niche) markets that may be considered repugnant by some. Seval sandai or cock fights in Tamil Nadu, nation-wide commercial surrogacy, tradeable carbon emission rights, consumption of rabbit meat in Rajasthan and of silkworms and monkey meat in the north-east are examples. And new ones are emerging each day such as fetal organ matches for adults. It has an even bigger range of markets in need of stable matching. Mathematically speaking, every large matrimonial website in India should proceed to “stable match" (no pun intended) if males and females rank order their preferences. A solution called the Stable Marriage Algorithm was first proposed by David Gale and Lloyd Shapley (co-winner of the prize with Roth). The opportunity for large scale matching of candidates and apprentices with jobs using these approaches has great promise. Of course, prior to matching, a credible and widely accepted accreditation method for candidates is required.

Perhaps more than the use of these ideas in repugnant markets what India needs most is to deal more flexibly with the charge of “inappropriateness" which results in market failure. Is it okay to price drinking water? How about a high cost queue for a quick darshan? If you can have tatkal service for passports then why not one to jump the queue for liver transplants? A surprising new suggestion proposed by the government is a public private partnership model for our strategic oil reserves. Does the invitation to a private company for this task compromise strategic autonomy? Is it inappropriate? Will careful design mitigate the risk and ensure that the job gets done?

A large heterogeneous country such as India has need for many markets that might push the envelope, at least in the eyes of some of its citizens. Inappropriateness or repugnance is not reason enough to block them. For the greater good, we will have to try some of them.

PS. Don’t think of organ donations as giving up part of yourself to keep a total stranger alive. It’s really a total stranger giving up almost all of themselves to keep part of you alive. Anon.

Narayan Ramachandran is an investor and entrepreneur based in Bangalore. He writes on the interaction between society, government and markets. Comments are welcome at narayan@livemint.com

To read Narayan Ramachandran’s previous columns, go to www.livemint.com/avisiblehand

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 21 Oct 2012, 08:20 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App