Tag Archives: economics

What if, instead of trying to turn back leaky boats full of desperate refugees, the Abbott Government could buy its way out of the asylum seeker issue?

What if, as has been suggested, there was a global market in refugee quotas, similar to an emissions trading scheme? What if it was possible for a country like Australia to pay another nation, say Papua New Guinea or Indonesia, to accept a certain proportion of its refugee allocation?

Some might say this is already happening, with Australia using its aid program and other incentives to help convince PNG to allow the Manus Island detention centre to be set up.

But that is an implicit arrangement, and what is envisaged by some is an overt, formalised international market in refugees.

Essentially, international obligations to care for those fleeing persecution and privation would be traded between countries, in much the same way as units of carbon pollution might be.

On the face of it, it could be a win-win transaction – the Australian Government unloads a responsibility it does not want, the PNG Government (for example) gets some hard currency, and the refugees land in a new country.

But, as Harvard University Professor of Government Michael Sandel points out in a thought-provoking piece in the latest Journal of Economic Perspectives from the American Economic Association, there is something inherently distasteful about such a transaction.

“It has something to do with the tendency of a market in refugees to change our view of who refugees are and how they should be treated,” he writes. “It encourages the participants—the buyers, the sellers, and also those whose asylum is being haggled over— to think of refugees as burdens to be unloaded or as revenue sources, rather than as human beings in peril.”

Sandel uses the example of such a scheme to make a broader point about the way many economists and much economic theory tend to view markets.

There is a tendency to treat markets as an impartial and inherently unbiased way of allocating resources, and view them as a handy way to deal with tricky political questions about who should get what.

But Sandel forensically picks apart this assumption, along the way challenging those who cling to the view that economics is essentially a “value-neutral science of social choice”.

As he says, “economists often assume that markets are inert, that they do not touch or taint the goods they regulate. But this is untrue. Markets leave their mark on social norms. Market incentives can even erode or crowd out nonmarket motivations”.

He uses as an example the decision by Israeli childcare centres to start imposing a fine on parents who picked up their children late, forcing teachers to work longer hours.

But once the fee was imposed, the number of parents arriving late for their child pick-up increased, because they treated the fine as a fee – one they were prepared to pay in order to have their child looked after for longer.

Another example of how a market pricing mechanism can debase or corrupt the intent of a policy was the decision of the Canadian Government to allow Inuit communities to sell permits to hunt walrus.

In 1928, the Canadians imposed a nationwide ban on the hunting of walrus, who were rapidly nearing extinction. An exemption was made for the Inuit, who for thousands of years hunted walrus as part of their subsistence lifestyle.

Once they got the go ahead, the Inuit began selling walrus hunting permits for $6000 or more.

“For the Inuit to sell outsiders the right to kill their allotted walruses arguably corrupts the meaning and purpose of the exemption accorded their community in the first place,” Sandel says. “It is one thing is to hono[u]r the Inuit way of life and to respect its long-standing reliance on subsistence walrus hunting. It is quite another to convert that privilege into a cash concession in killing on the side.”

He admits the moral judgements underlying this statement are “contestable”, but returns to the point that a market itself involves value judgements.

Whether or not you agree with his conclusion, Sandel’s piece at least provides an opportunity for economists to reflect on what it is that they do, and how they think.