The Price of Everything (27 page)

 

 

CULTURAL PREFERENCES ALTER
prices, which alter cultural preferences. Restaurants and hairdressers are more common in New York than in Stockholm. Maids and nannies are a fairly common sight across Lisbon. In Oslo they are rare. The household-help sector in Portugal is about three times the size of Norway’s, as a share of the economy. Scandinavia is one of the more expensive corners of the world.

All these differences can be traced to one price: that of work. In Portugal, maids and nannies are much cheaper than in Norway, relative to workers in other occupations. In New York, the service industry relies on an army of cheap workers that is not to be found in Sweden. Danish laundry workers are more expensive than Canadian, compared with people in other jobs.

A study in the mid-1990s found that Swedish workers in the bottom tenth of income distribution made three quarters of the median wage, while in the United States they made only 37 percent. So though income per head was 25 percent higher in the United States than in Sweden, on average, the cheapest Swede worker was paid 60 percent more than the cheapest American. These prices are the product of different cultural choices.

The United States and Europe share more in terms of attitudes and beliefs than Europeans or Americans like to admit. Still, the transatlantic cultural gap provides a telling illustration of how self-interested economic motivations intertwine with ideology.

Europeans are a jaundiced bunch. They believe in the luck of the draw as a defining characteristic of life, and are skeptical of the proposition that the rich deserve their riches. They are unlikely to attribute success to effort—ascribing it instead to serendipity and external social conditions. Believers in the world’s unfairness, they prefer high taxes and aggressive income redistribution to impose justice on an unjust society.

Europeans’ belief in the unfairness of the distribution of income and opportunity is likely rooted in Europe’s feudal past—when prosperity had nothing to do with effort and much to do with having the right parentage. Americans tend to live on the other end of the spectrum of outlooks. They believe crime doesn’t pay and honest, hard work is the key to prosperity, sure that the American Dream is available to all. Ten times as many Americans say hard work will lead to a better life as believe success is a matter of luck and connections. In Western European countries, the ratio is rarely above two to one. More than a quarter of Germans think taxing the rich to give to the poor is an essential task of democracy. Less than 7 percent of Americans do.

Each of these sets of beliefs has created its economic reality. Skepticism about the justice of the market led Europeans to build norms that favor redistribution and discourage inequality—including higher taxes, more spending on social insurance, and tighter labor-market regulations. In the United States, belief that the world is essentially just motivates people to work, to take risks and invest. It prompts them to educate their children to scale the economic ladder. It also provides the ideological underpinning for Americans’ preference for low taxes and a minimalist government. And it promotes the view that the poor are guilty of their poverty—too lazy to reap the rewards of honest toil.

This view is further bolstered, social scientists suggest, by American racial diversity. In 1996, the American sociologist William Julius Wilson wrote that American whites rebelled against welfare in the 1970s because they saw it as using their hard-earned taxes to give blacks “medical and legal services that many of them could not afford to purchase for their own families.” They didn’t think it was fair.

In the United States, an optimistic belief in a just market economy is a useful worldview to have—encouraging the investments that are most likely to lead to success. In France—where taxes on high incomes are higher and social supports for those with low income are more generous—these beliefs would be less profitable.

 

 

CULTURAL NORMS OFTEN
lead to what many economists would consider blatantly crazy behavior. Have you ever considered why you tip? To a classically trained economist tips are insane. They amount to paying something for nothing, giving money away. Tipping your regular barber might save you from getting an ear lopped off the next time around. But what’s the point of tipping a cabdriver you will never see again? Tips are not, by any means, universal. They are rare in Europe and Asia. I recall a waiter at a restaurant in Tokyo chasing me onto the street to return a few thousand yen I left on the table. Presumably, he thought the absentminded
gaijin
had forgotten his change.

In the United States, however, tipping is at the root of elaborate rituals. Even one-shot diners who will never return to a given restaurant insist on tipping the customary 15 percent. Waiters deploy friendliness to increase their rewards. Studies have found waiters and waitresses who introduce themselves by name, repeat customers’ words when taking their order, touch customers slightly on the arm, or draw a smiley face on the back of the check tend to get bigger tips.

These differences are, in part, adaptations to different labor markets. In the United States waiters earn little. As the minimum wage has risen to $7.25, for waiters it has been stuck at $2.13 since 1991, on the grounds that they can supplement it with tips. But the labor-market pricing differences are themselves rooted in different approaches to economic justice. Europeans believe such wages are unfair, and have thus imposed compulsory service charges to add to the bill instead.

There is ample evidence that culture can distort prices. Witness the betting at any international soccer match. No self-respecting fan will vote against the national team. National pride invariably leads fans to overestimate their team’s odds of victory. Bookies appreciate the biases. But cultural preferences can subvert economic logic entirely, impeding transactions at any price.

At Le Cheval du Roy, a butchery in Caen, France, in 2009 one could buy horse fillet—a choice cut—for €30 per kilo. In parts of the United States, trying to carve up such a cut might land a butcher in jail. A law in Illinois banning such butchery forced the last American horse slaughterhouse to close in 2007. For the past few years, Democrats and Republicans in Congress have been trying to pass a bill to ban the possession, transportation, purchase, sale, delivery, import, or export of horse meat or horses if they are intended for human consumption. Serving horse meat to humans has been illegal in California since 1998, when state residents voted a ban into law.

This has little to do with the welfare of horses. It is perfectly legal to kill them for export, to feed zoo lions, and, less often, mince them into pet food. What’s definitely not acceptable is serving them to people. The ban is a straightforward product of repugnance. It is culture arbitrarily short-circuiting a potentially sensible economic transaction, no matter the price.

Discomfort with transactions can take byzantine shapes. People seem comfortable with paying for sperm, for instance, but get all queasy about eggs. A high-quality egg donor, like a Harvard coed with good scores on her SAT college entrance exams, could net $35,000. Still, some critics have charged that paying for eggs devalues life by treating them as commodities. The guidelines of the American Society for Reproductive Medicine allow paying donors up to $10,000 only because donating is physically costly—requiring screenings and about fifty hours in hospital. Many donations agencies offer more. In the United Kingdom paying for eggs is illegal. Donors can only recover out-of-pocket costs plus “reasonable expenses” of up to £55.19 per day—to a maximum of £250—to cover their forgone earnings.

It makes a difference what the eggs will be used for. In California it is legal for a woman to sell her eggs for fertilization but not for research. If she wants to provide them for research, she must offer them for free. In New York, by contrast, the Empire State Stem Cell Board authorizes using state research funds to pay up to $10,000 to egg donors.

Many transactions that are perfectly normal in one part of the world or at one point in time are considered repugnant in another. Indentured servitude, once a common way for Europeans to buy passage to America, today is banned across the world. Usury, an old sin of the Catholic Church, is today called credit.

Dwarf tossing, which used to be an everyday bar sport, was banned in France in the 1990s despite opposition from a dwarf, who took his case all the way to the United Nations, accusing the French government of discriminating against him by denying his right to employment. The job, he said, “does not constitute an affront to human dignity since dignity consists in having a job.” He lost.

In Seoul, South Korea, a dish of dog stew costs around ten dollars—about twice as much as the beef equivalent. Yet when the country hosted the 1988 Olympics, the city government banned the popular dish lest it nauseate its foreign visitors. When Korea co-hosted the soccer World Cup in 2002 with Japan, the French actress and animal lover Brigitte Bardot tried to move the Korean government to ban the entire industry. “Cows are grown to be eaten, dogs are not,” she told an interviewer on Korean radio. “I accept that many people eat beef, but a cultured country does not allow its people to eat dogs.”

 

 

REVULSION HAS MEANINGFUL
consequences. In 2009 there were about eighty thousand Americans on the official waiting list for a kidney transplant, almost five times as many as twenty years ago. But there are only about sixteen thousand transplants done each year. The waiting list keeps growing every year. In 2005, some ten Americans died each day while on the waiting list.

Allowing people to sell a kidney would increase the supply. Economists Gary Becker and Julio Jorge Elías calculated the price of an organ based on the value that government agencies put on Americans’ lives and health when they evaluate the benefits of public investments in their safety.

They plugged in certain estimates into the calculation: a 0.1 percent risk of dying during the operation and a 1 percent chance of suffering a nonfatal injury. They assumed such an injury would reduce a donor’s quality of life by 15 percent, which is a little worse than the deterioration of quality from blindness. They also assumed the median donor would make about $35,000 a year and would need four weeks in recovery. Plugging in the forgone wages and assuming the statistical value of life to be $5 million, they estimated that a donated kidney should go for about $15,200. At this price, allowing kidneys to be bought or sold would increase their supply by some 44 percent.

In Israel, people who have donor cards are “paid” with priority treatment if they ever need a transplant. The Islamic Republic of Iran legalized payments for kidneys in 1988. Donors get a flat fee of about $1,200 and often negotiate extra compensation with the recipient. Iranian officials argue that the practice has reduced the average waiting time for a transplant to a few months.

But buying a kidney is illegal in most of the world. Kidney donors live just as long and are just as healthy as those with two, according to recent research. But many people—including those at the World Health Organization—oppose renal commerce. In an address to transplant surgeons in Rome in 2000, Pope John Paul II argued that “to use the body as an ‘object’ is to violate the dignity of the human person.”

Some critics fear that desperately poor people would sell a part of themselves to obtain money. They note that an illicit market in human flesh is emerging—with customers hailing from wealthy nations like Saudi Arabia and Taiwan, and sellers from poorer places, like China, Pakistan, and the Philippines. In the United States in 1983, Representative Al Gore of Tennessee, who would go on to become vice president, sponsored legislation to ban the practice, prohibiting donors from gaining anything of “valuable consideration” in exchange, including proper medical care. It became law in 1984.

Proponents of kidney sales note pointedly that those outraged by the idea that the poor could sell bits of their bodies are not so squeamish when it comes to allowing the poor to enlist in the armed forces, where they vastly increase their odds of a violent death in exchange for a wage. But the culture allows for a professional army—perhaps because the individual soldier puts his life at risk for the tribe. Kidney sales, by contrast, are between individuals. So the culture banned them.