Coase on Abortion

January 23, 2008 | 27 comments
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Estimates suggest that, on average, Americans behave as if they value a year of their life at, more or less, $100,000. This would put an average American life at a “revealed preferred” value of somewhere around $7 million. That might be high– depending on one’s methodology one might get numbers closer to $2 million. But surely the vast majority of people value their entire lifetime as worth more than one million dollars. They would not, for example, be willing to die in exchange for a million dollars. And they would be willing to pay (in medical care or what have you) $20,000/year to stay alive. So there is a starting point for thinking about the cost of a life.

One way to think about abortion (not the first way, or the last way or the only way, but one way) is as a bargaining failure. Hypothetically(!) imagine the fetus as an agent wishing to make a deal with the mother. If he could, the fetus would, judging from the above, happily contract with the mother to pay her if she would carry him to term, and let him be adopted by some yuppie family or, noticeably worse, put in foster care. (There are about 120,000 adoptions a year in the U.S., and my vague impression is that demand outstrips supply). It is not unreasonable, in fact, that he would be willing to make annual payments to the mother of, say $20,000/year. The payments could be made out of an account that could start out in the red but the child would make up for it later on with higher payments in adulthood.

Perhaps some children would rather die as a fetus than deal with a lifetime of such high payments, in which case, the question becomes what is the minimum payment the child must make in order to get the mother to bear the extra 5-8 months of pregnancy with all its incumbent problems?

Would most women, once they are already pregnant, be willing to carry a child to term for a million dollars? Or $7 million? Or even $100,000? Some would and some would not. That hypothetical market doesn’t exist and quite possibly never could, for a whole host of reasons, but even in its absence thinking about it points out the staggering asymmetry between the benefit to the fetus and the cost to the mother. What a tremendous opportunity for gains from trade that will never be realized!

And, of course, these are just averages. Since we are thinking about a group of over a million mothers and fetuses, surely the averages apply to enough people to make the thought experiment worth thinking about.

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27 Responses to Coase on Abortion

  1. greenfrog on January 23, 2008 at 4:44 pm

    I’m not sure I see the link to abortion, per se. Doesn’t the same line of analysis apply to every living skin cell on my arm, since with a little lab work each can be converted into a viable embryo?

  2. Adam Greenwood on January 23, 2008 at 4:54 pm

    I love economists. This is wild stuff.

    Obviously there’s no such market, but if there were it would also go a long way to solving the birthrate problem.

    I don’t think we’re anywhere close to implementing the ‘parenting tax,’ in which 10% of your income is remitted to your parents. But its interesting to think about. I’ve fiddled around with a bit in a couple of science fiction settings.

  3. John Mansfield on January 23, 2008 at 5:06 pm

    A little more than a little lab work, Greenfrog.

  4. Jeremy on January 23, 2008 at 5:25 pm

    I’m not sure I see the link to abortion, per se. Doesn’t the same line of analysis apply to every living skin cell on my arm, since with a little lab work each can be converted into a viable embryo?

    Perhaps not, but I would think the same line of analysis would apply to every twinkle in every potential father’s eye…

  5. Frank McIntyre on January 23, 2008 at 5:33 pm

    Jeremy,

    “I would think the same line of analysis would apply to every twinkle in every potential father’s eye…”

    I think the question you raise is a great one. And I suppose the answer hinges on whether that “twinkle” would not exist but for the couple conceiving (which would induce a large payment) or whether it would simply be a spirit born elsewhere or elsewhen (which might make for a very different, or possibly negative, payment). Either way, you are right that the analysis applies perfectly well to issues beyond just abortion to life creation in general.

  6. Jeremy on January 23, 2008 at 5:36 pm

    (Is there such a thing as quantum economics?)

  7. Frank McIntyre on January 23, 2008 at 5:44 pm

    Adam,

    Since our SS and Medicare payments basically go to our parents and other people’s parents we already have the tax at about 15% of income. Unfortunately it is not structured in a way that encourages people to have more children.

  8. Frank McIntyre on January 23, 2008 at 5:45 pm

    Jeremy,

    If that is where you account for multiple possible states of the world then yes, most assuredly. If that is the study of optimal decision making by subatomic particles then, well, I don’t think so.

  9. Frank McIntyre on January 23, 2008 at 5:47 pm

    Looking back, I guess my #5 was directed at both Jeremy _and_ Greenfrog. Frogs get too little respect.

  10. Jeremy on January 23, 2008 at 6:18 pm

    #8 — I was thinking more along the lines of how much a possible baby might pay me per year to actually make him/her exist…

  11. Frank McIntyre on January 23, 2008 at 6:27 pm

    Payment should be no problem, because the only state of the world in which they pay you is the one in which they exist. But you see why it would be hard to run the market.

    Of course, the typical solution bandied about for a market failure is government intervention– either a tax/subsidy scheme or quantity regulation. Neither of those seem terribly feasible in this case…

  12. Mark B. on January 23, 2008 at 6:48 pm

    Now I understand (anew) the punchline to that old joke “The economist says ‘Let’s imagine we had a can opener.’”

    I like the $1,000,000 in exchange for my life offer. Whole lotta good that million bucks does you when you make your ‘payment’ in return.

    For those who believe that the abortion deprives a person of his chance to live, with no second chance, your market-based approach makes some theoretical sense. If, on the other hand, a pre-mortal spirit had a chance to see the situation of his birth, he may well hope that the unwed mother in the East LA barrio or the slums of Lagos or the medium security women’s prison somewhere goes ahead and has an abortion. He may think he’s better off waiting for another chance later.

    I could imagine a huge amount of resentment by the child, though. He gets to pay social security taxes just like everybody else, and on top of that he gets to pay his mother $20K a year. Why? Just because she felt like aborting him?

  13. Mark B. on January 23, 2008 at 6:51 pm

    One other thing: why the reference to Roald Coase in the title, and then no mention of him in the body of the original post? Is the educated non-economist expected to know that this proposal is his? Do any people in that class who did not pass through the University of Chicago even know the name?

  14. Frank McIntyre on January 23, 2008 at 7:01 pm

    Mark,

    “I could imagine a huge amount of resentment by the child, ”

    presumably this would in some sense be the case if aborted…

    “For those who believe that the abortion deprives a person of his chance to live, with no second chance, your market-based approach makes some theoretical sense. If, on the other hand, a pre-mortal spirit had a chance to see the situation of his birth,”

    This is similar to the point I made above and is absolutely correct. Of course, the _average_ birth on earth is to somebody in a third world country making a few thousand a year, so it is worth thinking about what exactly is the opportunity cost of not being born today to couple X. Also, I don’t have a good sense as to whether or when an aborted fetus gets a new draw on life or whether they stack up as an infant death.

    “Is the educated non-economist expected to know that this proposal is his? ”

    I don’t think Coase actually ever discussed abortion, did he? Coase is the guy who popularized the notion that many allocation problems could be solved by running a market and defining property rights. Those unfamiliar with Coase have ample resources online for dealing with that shortcoming, but you’re right, I’d have added a few sentences to the post if I’d remembered.

  15. Fletcher on January 23, 2008 at 7:41 pm

    Great post, Frank.

    The current adoption institution sucks out of lot of the surplus in the adoption market. Couples who go through channels (either LDSFS or buy a baby from China) end up paying a lot of money to agents. Loosen the regulations a little (advertise adoptions on craigslist or ebay), and those transfers could occur. Couples could make pay the off-setting costs (all net present valuations accounted for, of course) up front and the child can then make a stream of payments to the adoptive parents.

    As for property rights, I am sure there would spring up a market for adoption contract templates. No need for an expensive lawyer.

  16. Matt Evans on January 23, 2008 at 8:43 pm

    My third-year law school paper explored the morality of a system allowing adoptive parents to pay women considering abortion to place their child for adoption instead. It built on Posner’s famous “baby-selling” paper. The trickiest part (from the perspective of those who oppose surrogacy generally) is creating a system that restricts women from getting pregnant with the intent of participating.

  17. The Wiz on January 23, 2008 at 9:39 pm

    What is the dealio with all the multiple abortion posts lately?

  18. Timer on January 23, 2008 at 9:54 pm

    A typical woman has over a million egg cells in her uterus, every one of which will die (unloved and unfulfilled) if it is not fertilized, implanted, and carried to term.

    Now, if she could just give arrange to have all million of them implanted and born — and then charge each of them $1,000,000 for the privilege — she’d have over a trillion dollars!

    But wait…. if these children grow up to have a million children of their own (on average — and hey, why not?) then surely she as the grandmother (who is directly responsible for the existence of each of them) deserves some compensation for that. Another million for each of them, and she’s up to a quintillion dollars.

    And with one hundred quadrillion dollars worth of tithing, why, just think of the temples we could build!!!!!!!!!!!

    Frank, this is absolutely brilliant. Whatever BYU is paying you, it isn’t enough. :)

    But wait, I just had another even less appropriate thought.

    “If, on the other hand, a pre-mortal spirit had a chance to see the situation of his birth, he may well hope that the unwed mother in the East LA barrio or the slums of Lagos or the medium security women’s prison somewhere goes ahead and has an abortion. He may think he’s better off waiting for another chance later.”

    Yes, that’s true. He’ll be much better off later. So much so that, if this spirit could be somehow identified, it’s only fair that he should compensate the unwed mother (say, $500,000?) to pay for the emotional anguish she endured as a result of aborting him.

    But wait, you say, how could we ever identify this exact spirit? Well, we can’t make a one-to-one identification between people-born-to-great-families and biologically-or-otherwise-unfit-mothers-to-whom-they-would-been-born-and-by-whom-most-likely-raised-barring-abortion… but… maybe this can be handled statistically. What if we require EVERYONE who is born to a great family to pay some amount to a fund to be distributed to EVERY completely-unfit-for-whatever-reason mother who had an abortion during the year or so prior to his or her birth?

  19. Adam Greenwood on January 23, 2008 at 10:08 pm

    Since our SS and Medicare payments basically go to our parents and other people’s parents we already have the tax at about 15% of income. Unfortunately it is not structured in a way that encourages people to have more children.

    I know. I was thinking of some kind of system where part of that 15% was directly allocated to the actual parents. It would change things in an interesting way.

  20. Frank McIntyre on January 23, 2008 at 11:33 pm

    Timer, diminishing returns– it’ll get you every time. But I’m glad to see you are catching the vision. Those women who have ten kids have produced on the order of 60 million dollars of value. Not bad at all!

    And, by the way, before your redistribution plan can go through you would need to establish that aborted babies are born again later– and if so, that they go to better families. Alternatively, one could broaden the fund to include all unfit people who don’t bear children.

    Also alternatively, we could charge great parents who fail to have kids and fine bad parents who do! It all depends (as Coase would note) on who starts out with the property rights.

  21. Frank McIntyre on January 24, 2008 at 12:18 am

    Wiz — Roe v. Wade anniversary.

  22. Josh Smith on January 24, 2008 at 5:28 pm

    Four professionals were walking down the street in NY: an accountant, a lawyer, an engineer, and an economist. A masked man with a gun runs up and demands “your money or life.”


  23. E on January 24, 2008 at 11:34 pm

    I’ll bet the amount of money it would take to convince the average woman not to abort would be way less than $100,000. I also think it would be almost impossible to find a woman who couldn’t be convinced to carry to term for a million.

  24. John Smith on January 25, 2008 at 5:51 am

    #22 And?

    I image that only the engineer handed over the money? Or is the plot different.

  25. Josh Smith on January 25, 2008 at 12:34 pm

    I really don’t know how the joke ends. From this post, it looks like the economist has all the tools to make a rational decision–you take life expectancy, current age, and the present discounted value of an income stream of 20K a year.

    Maybe the lawyer hands over his money, and his card.

    I don’t know what the accountant and the engineer say. Maybe the joke only needs two people walking down the street in NY.

  26. Josh Smith on January 25, 2008 at 1:14 pm

    How about this end to the joke:

    Robber: “Your money or your life.”

    Economist guffaws, gufaws, guf … economist smiles a quirky rational smile. “You think my decision is just about PDV and the value of human life. But, I’m perfectly aware that my rational decision depends on your incentives as a rational actor. You have a number of disincentives to shooting me. The probability of you actually shooting is a function of ….”

    Robber plugs economist.

    Lawyer laughs.

    “What’s so funny?” asks the robber.

    Lawyer smiles a quirky greedy smile. “Here’s $200 and my card.”

  27. Frank McIntyre on January 26, 2008 at 1:45 am

    “present discounted value of an income stream of 20K a year.”

    You’ve got to be kidding. _Grad_ students in economics make more than 20K a year working half time as RAs. :)