New Zealand maintained its third place ranking in this year’s Economic Freedom of the World reports, but it’s hardly a place allowing markets in everything. And that can be costly.
 
This week, The Guardian picked up on New Zealand’s shortage of donor sperm. And the UK’s Adam Smith Institute was pretty quick to see the cause. 

In 2004, New Zealand banned giving or receiving valuable consideration for providing human sperm or eggs to someone in need of either – on pain of up to a year in jail, $100,000 in fines, or both. At the same time, donor anonymity was taken away. Donors would be identified to the children when they turned 18. 

Result? Donations dried up. 

Being able to find out who your biological father is at age 18 is surely a nice thing. But even nicer is getting the chance to be born in the first place because donors had not been scared away. 

Meanwhile, in Denmark, there was such a surplus that they were turning some donors away. Said Ole Schou, one facility’s director, “There are too many redheads in relation to demand.”

The difference? The Danish fertility clinic could pay its donors. Donors there earned up to 500 Krona. Danish product was then shipped to 65 countries. Schou noted that their redhaired product remained in high demand in Ireland, where it sold “like hot cakes.”

Meanwhile, in America, not only are donors compensated, but there is also wide price dispersion. As of 2010, egg donors could expect an extra USD$2,350 in compensation for every 100-point increase in that donor’s Scholastic Aptitude Test score. For men, a PhD donor’s submission would draw USD$165 more than the discount brand. 

With one small tweak to New Zealand’s legislation, the government could not only fix a very serious problem for a whole lot of desperate couples, but also potentially open up lucrative new export markets. The government might want to protect New Zealand’s dominance in rugby by restricting export of some strategic supplies, but otherwise there are opportunities out there. 

Governments can pretend that incentives don’t matter when they pass legislation like the Human Assisted Reproductive Technology Act 2004. But reality does exist, regardless of legislative wants. And it does come to bite eventually. 

Liberalising this market would do a lot of good. And if we move a fractional point up the economic freedom rankings as consequence, so much the better.