Why did this year's Nobel prize-winning economist write about dwarf-tossing and horse meat?

Alex Tabarrok has a good layman's explanation of the work of Alvin Roth and Lloyd Shapley, this year's winners of the Nobel Prize in Economics. (Yes, yes, the Sveriges Riksbank etc. etc.) Their work on matching algorithms has been used to more efficiently and satisfactorily match students with schools, new doctors with hospitals, and most famously, patients with donor organs.

One of Roth's more interesting notions, and one that may be of particular interest to FP readers, is his work on repugnance as a constraint on markets -- the costs imposed by the fact that certain cultures find the buying and selling of certain goods and services to be too icky.

Roth was particularly interested in cultural taboos against the buying and selling of organs. We may find the idea of a teenager selling his kidney for an iPad 2 to be beyond acceptable market behavior, but many economists argue that this squeamishness should not stand in the way of either a destitute person willing to sell a kidney for money, or an ill person willing to pay to stay alive. 

In his 2007 paper, Repugnance as a Constraint on Markets, Roth considers several examples of repugnancy costs.  For instance, it is illegal to eat horse meat in California. But it is not illegal to kill horses -- just not for the purpose of eating them -- and many people in the state come from societies where eating horse is socially acceptable.  

He also discusses dwarf-tossing, an activity banned in many places and widely viewed as morally repugnant, though the physically similar sport of "wife-carrying," is widely accepted. Roth notes that a dwarf-tossing ban in France was overturned after one dwarf sued on the grounds that it violated his right to employment. 

In less wacky sections, Roth discusses why carbon trading schemes are now considered acceptable, but it is considered unethical to pay developing countries to take in waste from the rich world, any why paying mercenaries is considered less ethical than expecting young citizens to die for their country.There's also the charging of interest, a practice that only being acceptable in Europe around the 14th and 15th century and is still considered unethical in Islamic societies today, resulting in a cottage industry of sharia-compliant financial services.

Roth concludes by arguing that "the real repugnance that some people feel toward some transactions means that economists interested in proposing and designing markets must take this repugnance into account."

If one hopes to design more efficent and ethical systems of exchange, cultural notions of repugnance can't simply be dismissed as irrational. This would seem to be an argument with implications beyond economics. 



The Election 2012 Weekly Report: Veeps Week

The Benghazi fallout continues

The Obama administration continued to face criticism this week over its handling of the Sept. 11 attack that killed U.S. Amb. Christopher Stevens and three other Americans in Benghazi, Libya. Contradicting the initial statements made by senior administration officials, the event is now being described as a terrorist attack unrelated to the protests over an anti-Islam video that erupted elsewhere in the Middle East on the same day. At a dramatic hearing convened by the House Oversight Committee this week, the former chief security officer for the U.S. Embassy in Libya testified that his request to extend the deployment of a U.S. military team had been turned down by the State Department.

In her testimony, Charlene Lamb, a deputy assistant secretary in the Bureau of Diplomatic Security, insisted, "We had the correct number of assets in Benghazi on the night of 9/11," to which committee chairman Darrell Issa replied, "That doesn't ring true to the American people."

Democrats, including ranking committee member Elijah Cummings, criticized the GOP for politicizing the investigation into the attack, but Barack Obama campaign  spokesperson Stephanie Cutter took things a step further on Thursday by arguing during a CNN interview, "The entire reason that this has become the political topic it is because of Mitt Romney and Paul Ryan. It's a big part of their stump speech and it's reckless and irresponsible."

Romney was quick to take advantage of the gaffe, saying at a rally that night, "No President Obama, it's an issue because this is the first time in 33 years that a U.S. ambassador has been assassinated. Mr. President, this is an issue because we were attacked successfully by terrorists on the anniversary of 9/11."

Meeting of the running mates

Benghazi also came up on Thursday night during the one and only debate between Ryan and Vice President Joe Biden. The vice president insisted that the White House had not been made aware of the request for more security from Tripoli. "We weren't told they wanted more security. We did not know they wanted more security there," he said. Ryan also picked up on Cutter's remark, saying, "This is becoming more troubling by the day. They first blamed the YouTube video. Now they're trying to blame the Romney-Ryan ticket for making this an issue."

Moderator Martha Raddatz, a veteran foreign-affairs correspondent for ABC news, pressed the candidates on a number of foreign-policy issues, including Iran's nuclear program, the escalating violence in Syria, and the war in Afghanistan. "Under a Romney administration, we will have credibility" on threats to use military force against Iran, Ryan promised, and said, "We wouldn't refer to Bashar Assad as a reformer when he's killing his own civilians with his Russian-provided weapons." But he offered few specifics on how a Romney administration's policies on these issues would differ going forward. "What would my friend do differently? If you notice, he never answers the question," Biden quipped.

Both candidates agreed on a 2014 withdrawal of American troops from Afghanistan, but Ryan criticized the Obama administration for announcing its withdrawal plan in advance. Biden said that U.S. goals in Afghanistan are "almost completed. Now, all we're doing is putting the Kabul government in a position to be able to maintain their own security. It's their responsibility, not America's."

There were no questions about East Asia, Latin America, Africa, Europe, or any country outside the Islamic world.

Romney speaks out

In a speech on Monday at the Virginia Military Institute, Romney referred back to the post-war policies of VMI graduate Gen. George Marshall -- not exactly a conservative hero in his day -- in arguing that Obama has weakened U.S. power through cuts to the military and has lost control of events in the Middle East. "I know the president hopes for a safer, freer, and a more prosperous Middle East allied with the United States," Romney said. "I share this hope. But hope is not a strategy. We cannot support our friends and defeat our enemies in the Middle East when our words are not backed up by deeds, when our defense spending is being arbitrarily and deeply cut, when we have no trade agenda to speak of, and the perception of our strategy is not one of partnership, but of passivity."

Attack of the RAND PAC

Outside of the presidential race, a political action committee associated with Kentucky Sen. Rand Paul has been buying ads targeting vulnerable Democratic senators over their support for foreign aid. In the first ad, targeting West Virginia Sen. Joe Manchin, the narration states, "While they tear down and burn the American flag in Egypt and shout ‘death to America, Joe Manchin votes to provide U.S. taxpayer aid to Egypt." It concludes: "Joe Manchin works with Barack Obama to send billions of our taxpayer dollars to countries where radicals storm our embassies, burn our flag and kill our diplomats." RAND PAC is also planning to run similar ads against Sen. Bill Nelson of Florida and Sen. Sherrod Brown of Ohio.

South Carolina Sen. Lindsey Graham defended Manchin from his Republican colleague's attacks, saying, "I'm sorry that my colleague Sen. Rand Paul felt that he needed to get involved and has gotten involved ... I very much would like to have a Republican president, and I'd very much like to have a Republican-controlled Senate, but when it comes to foreign policy and matters of war and national security, I really do try to be bipartisan and I respect Joe a lot."

The poll picture

Polls this week continued to show Romney making up ground. While the two candidates are in a dead heat nationally, a new Tampa Bay Times/Bay News 9/Miami Herald poll shows Romney with a 7-point advantage in Florida, a state that appeared to be trending toward Obama a month ago.

The shift is even starker on foreign policy. A Fox News poll released on Wednesday gave Obama a 6-point edge over Romney on handling of foreign policy, down from a 15-point lead prior to the Benghazi attack. A new Zogby analytics poll gives Romney a 48 to 45 percent advantage on national security.

The latest from FP:

James Traub looks at Biden's role in shaping the Obama administration's foreign policy.

Jacob Heilbrun wonders when Republicans decided they had always loved Harry Truman.

Danielle Petka, Joshua Trevino, and Justin Logan debate who's winning the battle for Romney's national security soul.

Ty McCormick looks at Romney's history of declinism.

Uri Friedman runs down the best moments in vice-presidential debate history.

Plus: Follow the latest from the campaign trail on The Cable and Passport.