|Peter Boettke|
Economists are often accused of knowing the price of everything and the value of nothing. This is a weak criticism. Economists -- well those economists who actually practice price theory -- are not making a value judgement in their analysis, but merely describing the economic forces at work that guide and prod human decision making within specified contexts. At a very abstract level, individuals are always weighing marginal benefits (MB) with marginal costs (MC) and will continue to engage in an activity as long as the MB>MC, and will avoid engaging in activities where the MC>MB, so we can say that they will strive to equate MB with MC in any endeavor that they pursue.
In pursuing these endeavors -- whether profound or profane doesn't matter --- they sometimes err, but in committing an error they learn and adjust. Well, they do so IF the institutional environment actually guides them -- otherwise in some technical sense we haven't really understood what the MB and MC of the activity was that the individual decision maker faced. The institutional environment is established, again in an abstract way, by the property rights regime in effect, the flexibility of prices to freely adjust to changing circumstances, and the accuracy and "hardness" of the budget constraint imposed by profit and loss statements. Property, prices and profit and loss are all impacted by public policies such as regulation, monetary policy, and fiscal policy. But given whatever policy decisions have been made, then economic actors will work within the reconfigured system of property rights, array of relative prices, and profit and loss accounting such that MB-MC calculus can proceed.
The Economic Way of Thinking is universally applicable -- it is true as far back as we can reach in ancient history, and will be true for any coherent understanding of our future. As long as human beings must cope with the reality of scarcity, they will engage in trade-offs, and in order to negotiate those trade-offs they will need guide posts and those guide posts to decisions are provided by institutions, and in the context of market decisions those institutions are property, prices and profit and loss.
With that in mind, listen to this fascinating but also heart wrenching story about Israel evacuating 26 babies from Nepal after the devastating earthquake, while leaving behind the surrogate Moms that gave birth as well as 100 pregnant surrogates.
Why would Israeli men be going to Nepal to have their biological children in Nepal? It turns out that Israel has laws limiting surrogacy to couples. Why are the Moms Indian? Well, it turns out that Israeli men used to go to India to find surrogates because the price was low, but the quality of health care was reasonably high. So Indian women were the preferred choice of surrogates. So why are these babies and Moms in Nepal? Well it turns out that India recently passed restrictions on surrogacy to couples as well, and Indian women didn't not need extensive papers to cross the border into Nepal. Policy shaped the MB-MC calculus going on in both sides of this market, but given that each of the decisions is guided by the property rights regime in operation, the relative prices that decision makers confronted, and the profit and loss accounting that was rendered by the transaction.
Nothing in that analysis of the situation passes moral judgement on surrogacy or any of the policy decisions, including the current one by the Israeli government to aid the evacuation of the babies but not the mothers or the mothers to be. All that economics proper does is render intelligible human behavior in a variety of circumstances and across a great diversity of institutions and human experiences. In one of the greatest books of economic thinking Wicksteed's Common-Sensehe used examples from Caesar pre-battle oratory to St. Paul selling of tents to explain the universality of the economic calculus involved in human decision making. And we can add to the infinite list of examples Israeli Dads, Indian Moms, and Nepal births.
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