Of Buffaloes and Children

The basic law of economics, of supply and demand, is a bitch. Like gravity, it is all-pervasive and you would have as much success overturning it as overturning the law of gravitational attraction or inventing the much sought after perpetual motion machine. It is primarily ignorance of basic physical conservation laws that makes designers of perpetual motion machines attempt the impossible. A similar lamentable ignorance of economics also impels people to act as if the iron law of supply and demand can be ignored.

Yesterday Timesonline carried a report titled “Buffalo: 15,000 rupees. Child: 500 rupees.” (Hat tip: Ben Lefroy.) It began:

It is cheaper to buy a child than a buffalo in India, according to activists who marched on a summit of South Asian nations in Delhi yesterday to protest against human trafficking.

Most end up in bonded labour or working as prostitutes, the leaders of Bachpan Bachao Andolan (Save the Childhood Movement) said as they escorted more than 200 children to the gates of the Indian Parliament to call for changes to legislation.

“While buffaloes may cost up to 15,000 rupees (£177), children are sold at prices between 500 and 2,000 rupees,” Bhuvan Ribhu, who conducted a study to be released later this year, said.

Usually such reports lay out the absolutely heart-rending numbers:

India still has more than 12.6 million child workers aged 5 to 14. In Asia the estimated number is 122 million, according to the International Labour Organisation. India still has more than 12.6 million child workers aged 5 to 14, the largest number of any country in the world. Campaigners say that the new law has yet to make any difference because India’s economic boom creates an insatiable demand in the cities for cheap labour. In Asia the estimated number of child workers is 122 million, according to the ILO.

The policy response is to ban child labor. “In October India introduced a law banning children under 14 from working as domestic servants or in the food and hospitality sector. Offenders face two years in prison,” the report notes.

I think that banning child labor under the conditions that exist in places such as India is actually a remedy that is worse than the disease. I have written against such a policy here. The problem of children working as laborers belongs to a class of related problems. Consider one more from that class: the problem of selective aborting of female foetuses. Actually, these are just symptoms and not the actual problem. I have written about why I think these are symptoms and not the actual problem. See “The Skewed Sex Ratio“, “The Lop-sided Sex Ratio Revisited“, and “Sex Selection in a Second-best World“.

It is seemingly heartless to point out that basic economic reasoning would predict the abhorrent situation where a cow is worth many times more than a child. If the return on investment on a cow is high, then the demand for cows will be high. The market price of a cow is determined then by the supply relative to demand. By a similar calculus, the return on investment in a child determines the demand for a child. Poor people are by definition poor and don’t have the resources to invest in the education of a child. If they had the resources, they would have invested in the child’s education. But they don’t. The demand for a child among the poor is low, consequently. The supply, however, is fairly high, for understandable reasons. The price once again is determined by the interaction of supply and demand. The supply is high, the demand is low, and therefore the price is low.

I think marching to the capital to point out the problems that poor children face in India is important. But unless the people also recognize that the problem can only be solved by addressing the causes of the problem, there will be little progess. Reducing the supply is one way to increase the price. Another way is to increase the demand. How does one increase the demand for children. By ensuring a positive return on investment. That is something that society can do. If the poor had the opportunity of educating their children, they would go for it.

The poor cannot afford to educate their children. Society can provide free education. But that still does not work out if the parents are sufficiently poor that they cannot afford to forego the income that the child would have had if he or she had been engaged in labor. Clearly, you have to not only provide free education but also compensate the parents for the lost income. All this requires resources. If the society does not have the required resources, or lacks the political will to actually allocate resources to the problem, the end result is the neglect of children.

The other way to increase the price of a child is to reduce the supply of children. Birth control, the availability of abortion services, increasing the marriage age, etc, are ways to address that angle. But they are politically hard to do. The easiest palliative is to ban this or that.

If banning something was sufficient to remove the problem, I would be first in line for banning. If banning drugs or alcohol, for instance, had the beneficial effect of no drug abuse and had no side-effect of organized crime and violence, it would be great — setting aside for the moment the question of whether a person actually owns himself or not.

I think reports such as the one in Timesonline are extremely important because they shame some people into thinking about the problems whose unfortunate consequences are what the report highlights. We as a society should be ashamed that cattle are valued more than children. We can fix the problem but we lack the collective will to do so.

Author: Atanu Dey

Economist. View all posts by Atanu Dey