Markets in Everything, Disaster Relief Edition

Suppose a ship is sinking, and there aren’t enough lifeboats to get everyone off safely. How do we allocate spaces on the lifeboats? Most of us think it’s wrong to pay to get a spot on the lifeboat. Instead, spaces should go to people to those who most need it, or those who deserve it, or in a way that would be fair to everyone.

It also seems impermissible to pay, in advance, to reserve some spot on a lifeboat even if it’s never used. The point in time at which you pay doesn’t seem to be morally relevant.

That’s the intuition at play in this piece in WIRED on disaster insurance companies operating in crisis zones. These companies have a contractual obligation to rescue their clients–mountaineers and adventurers who tend to be much wealthier than the locals in the areas where these companies operate. However, if they divert resources such as expertise or capital from rescuing more vulnerable individuals, it seems that these companies have done something wrong. The objection is that they are allocating the right to be rescued on the basis of money rather than a principle like need. You can’t pay to reserve a spot on the lifeboat.

One point to make here is that the objection is distribution according to some principle other than need, not that people are buying the right to be rescued. It would also be wrong, according to the objection, for these companies to promise to rescue certain people than then rescue the promisees. In the lifeboat case, similarly, the captain could not allocate spots on the lifeboat to his friends, or family members, or people to whom he’d promised spots.

There’s also another possibility. Suppose that a group of people on the ship have paid a fee in advance to put a special lifeboat on it. This lifeboat is perhaps sturdier or better provisioned than the others supplied to the general passengers. If people can pay to put more lifeboats on the boat, we no longer have a fixed set of spaces to allocate. Different principles might apply to a case where we can increase opportunities for people to be rescued than one where the right to be rescued is rivalrous.

A world with disaster insurance companies might be like a world with AAA. AAA doesn’t directly send tow-trucks out to help the most needy drivers–it sends them only to its members and then allocates them through a queue. In each individual case, it might be true that there’s some more needy driver out there. But a world with AAA–where people are free to purchase the right to be rescued–might make drivers better off than one without it. The question is whether we have a lifeboat case with a fixed set of resources, or one where the set of resources is not fixed.


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