Wednesday, August 17, 2022

on the economic/financial implications of Indiana's abortion restrictions

Michael Hicks recently wrote an op-ed, expressing concern about the economic impact of Indiana’s new restrictions on abortion—particularly on colleges and businesses. He predicts “far fewer” students from a “substantial decline” in out-of-state students and a reduction of in-state students—as well as “fraught disadvantages” for businesses.

People make decisions based on the perceived benefits and costs of those choices. When the benefits or costs change, then behaviors become more or less likely. Hicks is correct to note that reduced benefits or increased costs will tend to deter behavior. But by how much—and what other economic concepts are in play?

One key question is “elasticity”: how much will behavior change when benefits and costs shift? Choosing a college—and even more so, choosing a location for a business—are complicated decisions. To what extent will a change in this one factor move the needle for decisions in either realm?

Will Indiana high school graduates be willing to pay out-of-state tuition rates—even those who might want to seek an (in-state) abortion? Will grad students from across the world avoid strong, reputable programs in Indiana and risk damage to their career prospects? Will small or large businesses routinely leave or avoid Indiana because of this? Most important: If we had abortion regulations that were slightly more permissive, would it make any significant difference? (It’s a Molechian fantasy to think we’d have few if any restrictions.) It’s difficult to imagine.

Another consideration: short-run vs. long-run responses. I’m not sure about Hicks’ claim that we now have the strictest laws in the country. But even if so, how long will this be true? Within a year or two, Indiana will be one of many states with restrictive laws. (Other states will choose a much more permissive route, even subsidizing consumers in other states.) Perhaps there will be an impact in 2023, but it will be reduced as other states pass their own restrictions.

This reminds me of a debate in Indiana a decade ago: those who thought liberalized labor laws would be a panacea for Indiana’s economic development. Sure, it helped, but only “at the margin”. The fact is that people and businesses make their decisions based on many factors—and in-state abortion access and labor laws are just two of those many factors.

And there are potentially positive effects: Perhaps we’ll attract more pro-life people who tend to raise more children in two-parent households, helping an array of social outcomes and long-term demographics. Perhaps we’ll attract small and large businesses whose owners value Indiana’s stand for life and the vulnerable. Perhaps our large universities will become (or be considered) less “woke”, making socially conservative and moderate parents more comfortable sending their kids to those schools.

All this said, my biggest problem with Hicks’ essay is that it displays a tin ear toward the morality and justice issues inherent in this policy debate. (It also ignores the impact of Roe and Casey as poorly-decided court cases and the cost of avoiding democracy by relying on federal courts instead of state legislatures.) I can understand the reluctance to discuss this: as economists, we try to avoid mixing positive analysis (what is) with normative opinions (what should be). But it seems unavoidable here.

Imagine the public response if I penned an op-ed about the end of slavery in a state as a drag on that state’s economy: The cost of labor will be higher, increasing production costs. This will increase prices for consumers and tend to drive businesses from the state, reducing our economic well-being. And so on. At the end of the day, the potential financial implications of ending slavery and legal abortions are interesting and perhaps noteworthy. But they pale next to the morality and justice concerns.

Many reach the pro-life position through science and/or religious beliefs, aiming to defend the most vulnerable in our society. Others say they are uncertain about when life begins, so we should allow people to err on the side of choice for one party, while ending the life of another. At least for those who rely heavily on science: even if this ends up costing Hoosiers some students and some businesses, this sacrifice would seem to be worth the financial loss.


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