Should the disabled pay their own way?
Posted February 13, 2008
on:A blind couple are outraged that they got charged extra at a hotel when their dogs allegedly moutled all over the place and required extra cleaning work to be done. There appears to be some dispute over exactly what happened, and the manager of the hotel is clearly a PR disaster area, but is it fair that the couple should have been charged extra if it cost the hotel more to accommodate them?
Well, ordinarily, it makes sense to charge more when the cost of providing a service increases; however, it seems unfair to penalise those who are already disadvantaged through no fault of their own. Yet requiring hotels to house them and imposing the cost on the hotel owners also seems unfair: why should the hotel owners pay the entire cost of accommodating a few individuals’ disabilities? Since most people would like to see services provided for disabled people, yet few people are willing to individually pay for them, the obvious solution is to spread the cost over everyone.
There are two obvious ways to do this: first, the government could make it an offence to refuse service on the basis of a disability or to charge a different rate to a disabled person for providing a service. This would force service providers to spread the cost of providing services to the disabled over all of their customers. Prices would rise very slightly and everyone who used the service would subsidise the disabled people who also used it. The drawbacks is that this method spreads the costs only over those who use the service, not the entire population who profess to care about the welfare of the disabled. It may also be difficult to police discrimination against the disabled. As a business, finding a method for reducing the number of disabled people using your service may allow you to cut your prices and gain an advantage over the competition. It may thus create a perverse incentive for businesses to find a way to circumvent the law.
Secondly, the government could directly subsidise the provision of services to disabled people. This has the benefit of spreading the costs of service provision over the entire tax paying population; however, it is likely to be a more cumbersome scheme with far higher administrative costs.
In either case the goal is to create a system which treats the disabled in an equitable fashion, without imposing unnecessarily harsh costs on any individual members of society. Unfortunately, mechanism design is not my forte, so does anyone with more talent and experience know of better schemes?
16 Responses to "Should the disabled pay their own way?"
[…] The visible hand in economics wrote an interesting post today on Should the disabled pay their own way?Here’s a quick excerptIn either case the goal is to create a system which treats the disabled in an equitable fashion, without imposing unnecessarily harsh costs on any individual members o f society…. […]
No, I disagree. The goal here is to compensate people for the unfairness of the disability – there’s anything unfair about being charged more when you require more expensive services. I think it would be unfair to give your CEO more than someone who worked from home assuming equivalent disabilities.
I’m thinking of this in terms of indifference curves. A disability makes consumption of some goods and services more expensive than others. Our goal is to compensate the disabled with a level of income that puts them on the same level of utility as they would have had with no disability (which we can do with an income transfer), but not to ensure that they have the same consumption bundle that they would have had absent the disability (which is what you’d be aiming to do via subsidies). It’s clear that the income transfer is cheaper for a given level of “do-gooding” in this framework.
“the government could make it an offence to refuse service on the basis of a disability or to charge a different rate to a disabled person for providing a service.”
In this case it wouldnt make a difference. The dogs moulted all over the place. The extra cost wasnt due to a disability, it was due to hairy dogs becoming less hairy.
“Itās not possible to compensate people through a lump sum payment since the utility cost of an identical disability is different for different people.”
Well, if we’re going to stick to what’s possible we can’t really compensate people through subsidies either because there’s no way to identify the consumption basket they would have chosen if they weren’t disabled. The point still holds that for any given utility curve the cash transfer is cheaper than the subsidy (and that’s even before we consider the externality cost of subsidizing things to below their true cost). Choosing an average level of compensation for everyone with a given level of disability seems like a pretty common real world solution, and a relatively fair one when there’s no way ascertain the individual cost of a disability.
For the specific example cited in your original post I’ll accept a subsidy is more efficient than cash (assuming we can’t trust blind people to tell the truth about their intended motel consumption). I think in terms of a general principle and a practical policy for how we compensate the disabled (assuming we and they think compensation is justified) cash transfers are better.
“Well, there doesnāt need to be if you subsidise such that the prices faced by the disabled are the same as the prices faced by able bodied people.”
The price for cleaning a soiled room is already the same, it’s the fact that being blind makes you more likely to soil it in this case. A good example of how subsidies are inefficient is the cost of food and care for the guide dog. I think your principle suggests society should pay for this as well, but this is “over-compensation” in the case where the person would have owned a dog regardless of being blind. Or, how many taxi chits should we give out to replace the ability to drive? It just seems that before long you’re going to have to settle for an average cash disbursement.
I suspect the general result I’m searching for is that subsidies are only efficient where blindness perfectly discriminates between the high cost and the low cost users.
[…] and egg economics 15 02 2008 After my recent post, which dealt with issues of equity, I have been invited to consider how appropriate it is to bring […]
1 | CPW
February 13, 2008 at 1:46 pm
Why not just a lump sum payment (or annual stipend) to the disabled, and let people charge what they like? That seems simplest from an administration point of view and most efficient economically given that the extra charges reflect real costs.