1

ECONOMIC ASPECTS OF HUMAN CLONING AND REPROGENETICS

Gilles Saint-Paul1

Université de Toulouse I and CEPR

1. INTRODUCTION
The issue of human cloning brutally entered the public debate in 1997 when Dolly, a
sheep, was created with a genotype identical to that of its mother by Scottish scientists who
used somatic nuclear transfer2. Immediately, a debate on the ethical issues associated with the
prospects of human cloning arose. As of today, human cloning seems closer than ever, since a
scientist has claimed to have implanted cloned human embryos, scheduled for birth in
December 2002.
This paper analyses the economic issues associated with human cloning and new
reproductive technologies. We analyze the incentives for human cloning and its implications
for the long run distribution of skills and income. We analyse models of human cloning for
different motives, focusing on those which tend to produce new human beings with improved
ability. We thus ignore purely therapeutic applications, which may well be the most likely
ones to happen in the near future, but have no first-order implications for the long-run
distribution of skills and income.
We first briefly describe the technology of cloning and its recent advances.
The second part of the paper discusses various economic incentives for cloning. It first
analyses the consequences of cloning as a means of assisted reproduction. Next, we analyze
the incentives to use cloning as a means of producing a high ability offspring in a couple
where one member has a higher ability than the other.
Finally, in section 3.3 we discuss cloning as a form of financial investment.3 We argue
that there will be strong economic incentives to clone people of exceptional value in the labor
market. The extent to which the market will internalize this economic value depends,
however, on how much of the return to the clone's genes can be appropriated by the agents
who invested in creating the clone. We argue that the fraction that can be appropriated is
likely to be small, but positive. If the clone's expected income is very large, this may be
enough for cloning to be a profitable operation. A market for clones will then start operating,
and we show that only the most talented people will be cloned, while women at the bottom of
the ability distribution will specialize as physical mothers of the clones, thus getting a higher
income than if working in the production sector.
An important consequence of these models is that if ability is genetically heritable,
cloning tends to increase the proportion of high ability people in society, and that under some
hypothesis the distribution of ability converges to a mass point at the highest possible ability
1
This paper has been prepared for the Economic Policy panel meeting, Copenhagen, October 2002, and greatly
elaborates on an earlier, theoretical paper entitled "The economics of human cloning". I thank seminar
participants at IIES, Stockholm, DELTA, Paris, UCL, London, IDEI, Toulouse, the University of Chicago, and
especially Jérôme Adda, Orazio Attanasio, Pierre Cahuc, Daniel Cohen, Kjetil Storesletten, Eric Posner, Richard
Posner, Gary Becker, John Hassler, and the editors of Economic Policy Richard Baldwin and Paul Seabright for
their helpful comments and suggestions.
2
See Box 1 for a definition of technical terms.
3
This section, and the corresponding section in the Appendix, study a simplified version of the general
equilibrium, overlapping generations model studied in Saint-Paul (2000). The main difference is that the
marginal returns to labor and capital are held constant here, while in Saint-Paul (2000), they are endogenous and
depend on capital accumulation. The reader can thus refer to Saint-Paul (2000) for a more complete analysis, and
for additional results, in particular concerning the effect of cloning on factor prices and accumulation.
2

level. Under weaker assumptions, it is shown that ability-reducing genes are eventually
eliminated. However, if fertility is negatively correlated with ability, cloning leads to a
strongly segregated society with a top-ability caste and a bottom ability one which produces
clones of the top ability one.
Finally, Section 4 discusses the plausibility of these results in light on the evidence
from economics and other sciences on marriage markets, child selection, assisted
reproduction, and animals.

2. A BRIEF HISTORY OF CLONING4

Contrary to what many people would believe, the history of cloning does not start with
Dolly. During the 1960's, that is even before the introduction of in-vitro fertilization (IVF),
frogs were successfully cloned. The technique--called somatic nuclear transfer-- involves the
creation of a fertilized egg or of an embryo with very few cells, and the replacement of its
nucleus by a nucleus obtained from another cell. The embryo may then be implanted and its
genotype is entirely that of the donor cell. In the case of oviparous animals such as frogs, the
hazards associated with implantation are avoided, which explains why success was so quick.
The 'younger' the donor cell, the more the resulting organism is likely to develop properly.
Thus, cloning is more likely to succeed if the transferred nucleus comes from an
undifferentiated cell coming from an embryo than from say an adult muscular cell. However,
in the case of Dolly, the donor cell was a uterine adult cell.
The obstacles from the implementation of such a technique are thus purely technical,
and it is not surprising that progress is being made at an astounding pace. Cows were cloned
by French and Japanese scientists in July 1998. It quickly became a fairly reliable technique:
10 calves were cloned by scientists from New Zealand at the end of 1998. At about the same
time, a large number of mice were cloned by researchers at the University of Hawaii. It is
typically believed that mice were harder to clone than sheep, and that this represents a big step
toward being able to clone humans. In early 2000, pigs were cloned, which was heralded as a
progress towards the culture of spare organs for humans--due to the similarity in size between
pigs' and humans' organs. It was envisioned that genetic engineering, by adding human genes
on pig DNA material, could make such organs acceptable to human bodies. This was actually
achieved in January 2002. In january 2001, an extinct species of wild ox, the gaur, was
cloned; nuclei from skin cells of an animal who died in 1993 were removed and transplanted
into cow embryonic cells. The gaur calf who was born died after 48 hours. In january 2002, a
chip allowing to automate the process of somatic nuclear transfer was invented. This allows to
mass produce cloned embryos, thus considerably reducing the cost of cloning, whose key
impediment was the high failure rate. In February 2002, a domestic cat was cloned.
As for humans, there were reports of human embryo cloning as early as 1998.5 In
december 01, a large number of rhesus monkey embryos were cloned. In march 02, dozens of
human embryos were claimed to be cloned in China, while an Italian scientist reported
successful implantation of cloned human embryos, scheduled for birth in December 2002.
How healthy are clones? Evidence from Dolly has suggested that clones may age
prematurely, due to shorter chromosomes (chromosomes get shorter as people age. Hence a
clone starts its life with a chromosome length equal to that of the original donor cell).
However, cloned calfes have been shown to have longer chromosomes. The consequences of

4
This section's source is the New Scientist web page press release archive, [Link] ; useful
information can also be found in the BBC's "gene safari":
[Link]
5
''South Korean Scientists Say They Cloned a Human Cell'', The New York Times, December 17, 1998.
3

chromosome shortening on life expectancy are not well understood, and whether this feature
explains why Dolly has prematurely developed arthritis remains unclear. Other DNA defects
have been found in clones, and the failure rate remains quite high. It is unclear whether such
defects could be avoided in the future.
On the legal front, most developed countries are moving towards a strict ban on
human cloning, as far as the production of human beings is concerned. The stance is not as
clear, and varies among countries, with respect to the therapeutic use of cloned embryos. The
question, of course, is how can the ban be enforced and how long, given that some countries
may well allow it, as suggested by the Chinese example.

BOX 1: GLOSSARY6

Adult cell: a fully differentiated cell of a body, specific to the organ in which it is present.
Thus one may distiguish muscular cells, neurons, hepatic cells, blood cells, uterine cells, and
so forth.

Artificial insemination: fertilization by means of artificial introduction of sperm in female

reproductive organs instead of coitus.

Assisted reproduction: Refers to a set of treatments where infertility is overcome by using

advanced technologies. These techniques include artificial insemination, IVF, traditional and
gestational surrogacies, PGD, etc.

Chromosome: the microscopic, threadlike part of the cell that carries hereditary information
in the form of genes. The chromosomes, which carry the hereditary material, or DNA, are
contained in the nucleus of each cell. Chromosomes come in pairs, with one member of each
pair inherited from each parent.

DNA: The chemical material from which chromosomes are made. 1 chromosome = 1 single
molecule of DNA. However, two chromosomes from different individuals are not the same
molecule stricto sensu. Rather, they are a sequence of a large number of four building blocks
called bases. These sequences differ across chromosomes and individuals. A gene is a
"meaningful" subsequence, in that it synthesises a vital protein.

Gene: unit of hereditary information that occupies a fixed position (locus) on a chromosome.
Genes achieve their effects by directing the synthesis of proteins. A given gene can come in
several competing forms, called alleles. The resulting effect on phenotype (i.e. observed
traits) of a given gene depends on the two alleles of that gene that are actually present in the
two corresponding loci of a pair of chromosomes.

Genotype: the entire set of genes of a given individual.

Heterozygote: an organism with two different alleles for a specific trait. Contrary to
homozygote.

6
From [Link] ; [Link]
[Link] ;
[Link]
4

Homozygote: an organism with identical pairs of genes (or alleles) for a specific trait. If both
of the two gametes (sex cells) that fuse during fertilization carry the same form of the gene for
a specific trait, the organism is said to be homozygous for that trait.

Locus: a given location on a chromosome, where a gene (typically coming in several alleles)
is usually present.

Nucleus: the central part of a cell, which contains DNA.

IVF: This acronym stands for "In Vitro Fertilization". Fertilising the egg in the laboratory for
subsequent embryo transfer. Requires egg retrieval/pickup.

Oviparous: Refers to animals who lay eggs, such as birds, reptiles, etc. This contrasts to
mammals.

Phenotype: the observable traits of an organism.

PGD: This acronym stands for "Preimplantation Genetic Diagnosis". It consists in screening
an embryo for the presence of undesirable genes, prior to implanting it into a womb.

Recessive: a trait which is only present in the phenotype if the same allele is present in the
two corresponding loci of the relevant chromosome pair. By extension one may talk about a
'recessive gene'.

Somatic nuclear transfer: this technique consists in producing a clone by first producing a
fertilized egg via IVF, extracting the nucleus, which contains the DNA of the egg, and
replacing it by DNA from an adult cell from the model. The fertilized egg is thus
'reprogrammed' to develop into a genetic copy of the model.

Stem cell: See undifferentiated cell.

Therapeutic Cloning: cloning a human embryo then used to produce replacement cells in
order to provide a cure for the DNA donor. These includes blood cells, neurones, liver cells,
etc. This procedure does not involve implantation of the embryo into a womb, nor its growth
beyond a certain stage. In particular, the technique rests on the fact that a stem cell, if placed
in an environment of differentiated cells, differentiates itself in the same way. Thus, one does
not need to wait till the original embryo has differentiated.

Undifferentiated cell: at early stages of an embryo, its cell are undifferentiated, i.e. they are
not specific to any organ. As the embryo grows, cells gradually 'specialize' into bone, muscle,
neurones, blood, etc. However stem cells can be used as 'spare parts' in adult body, because of
their ability to turn into any type of adult cell. See Therapeutic cloning.

Reproductive cloning: cloning a human embryo in order to implant it into a womb and let it
develop into a human being.

Surrogate mother: a woman who bears a baby on behalf of another person, and who will
renounce her rights as legal mother of the child. One distinguishes "traditional surrogates",
who are artificially inseminated and therefore provide 50 % of the genetic material, from
5

"gestational surrogates", who are implanted an embryo following IVF and typically do not
provide any of the genetic material.

___________________________________________________________________________

3. MODELS OF HUMAN CLONING

3.1. Assisted reproduction

Along with therapeutic cloning, assisted reproduction is going to be the most likely
motive for human cloning in the near future. 7 In the current state of technology, assisted
reproduction implies that 50 % of the offspring's genes come from an egg or sperm donor who
is unrelated to the legal parents. This may be unpalatable to the couple, and legal problems
may pop out, as courts may rule that the donor is considered as the biological parent of the
child, with corresponding obligations. Cloning gets out of this problem by allowing infertile
couples to produce an offspring whose genes entirely come from one of their parents.8
Orentlicher (1999), for example, argues that cloning actually enhances the stability of
families, as compared to existing means of assisted reproduction which introduce genes alien
to the family into its offsprings. Many US lawyers argue that this is superior to the current
techniques of assisted reproduction in preserving the cohesion of the family and avoiding
legal complications.
There is not much economic analysis to be made about this motive. However, Posner
and Posner (1998) suggest an intriguing possibility, namely that cloning by infertile people
would eventually lead to the disappearance of sexual reproduction. The argument is simple:
assume that everybody makes the same number of children and that 2 % of the offsprings are
infertile for genetic reasons. Absent cloning, the proportion of infertile people in the
population is fixed at 2 %. Now, let us assume that cloning is available and that the infertile
produce the same number of children as others but by cloning themselves. By definition, their
clones are infertile too. But at each generation, to the infertile clones one should add the
infertile natural offsprings of fertile couples. So the proportion of infertiles goes up at each
generation and the economy converges to a situation where everybody is infertile and sexual
reproduction has therefore disappeared.
In order for this argument to be correct, it must be that infertility is caused by some
mutation. Under sexual reproduction, the infertility of mutant genes tends to eliminate them,
thus preventing their proportion to go beyond 2 %. Under cloning, mutant genes proliferate,
since they are passed to the next generation by cloning. This could be offset by a reverse
mutation which would restore fertility to an infertile genotype, but such event is precisely not
possible since the offsprings of infertile people are their clones!
Or is it? Some geneticists (Silver, 2000) envisage a world where reprogenetics
technologies are much more sophisticated than somatic nuclear transfer. They envisage a
world where specific genes could be removed or added at specific loci. In such a world,
infertile people would not clone themselves, they would rather engineer a fertile offspring by
removing the genes responsible for their infertility from an initial embryo, who could be a
clone of themselves, but would only be an input in the production of a genetically enhanced

7
It is typically envisioned that if cloning is ever permitted for reproductive reasons, it will be limited to infertile
couples (See Robertson (1999)). However, I do not see how this is compatible with equal rights; furthermore
enforcing such a distinction might not be obvious.
8
See Robertson (1998).
6

child. In such an advanced world, infertility would disappear, rather than drive out fertility,
and so would cloning for the purpose of assisted reproduction.9
Another situation in which the Posner and Posner result would not apply is if
infertility, rather than being caused by mutation, were produced by a rare recessive gene. In
such a case, absent cloning the recessive gene would gradually be eliminated from the
population. Under cloning, it would be maintained in its initial proportion, and one can also
show that heterozygotes would disappear. This is because heterozygotes sometimes produce
infertile homozygotes, who will only pass their genes via cloning, thus never producing
heterozygotes in the future.

3.2. Child enhancement: Parental cloning10

Once human cloning is established as an additional technique of assisted reproduction

for infertile couples, it would be discriminatory (and probably unenforcible) to preclude fertile
couples from using it as well. An additional demand for cloning coming from fertile couples
is then likely to arise. If people care about their children's human capital, they may want to
have clones of high ability people as children. We do not expect many couples to be willing to
raise children who are clones of other people, i.e. genetically unrelated to either mate.
However, within a couple there may be an incentive to raise a clone of the most able's
member rather than a natural child; or, to have some naturally produced children along with
one or several clones of the most able party.
When will a couple decide to produce a clone? Let us assume that the decision to
produce a clone vs. natural children is the outcome of bargaining between the two parties. In
order to figure out what this bargaining process will deliver, let us make the following natural
assumptions:

1. A person's utility is higher if the child is genetically related than if he is not. However, it
need not be increasing in the number of shared genes. Thus we do not rule out that people
love their sexually produced children more than their clones. But they do love both more than
their spouse's clone.

2. A person's utility is higher, the greater the skill of his/her offspring.

3. The clone has the same ability as its model.

4. The naturally produced offspring has an ability equal to the average of its two parents.11 12

We assume that the couple maximizes its joint surplus, i.e. the sum of the mother's and
the father's utilities. It is then not difficult to establish a certain number of properties.

9
Unless some people produce infertile children on purpose.
10
A formal analysis of the models of parental and economic cloning is found in the Appendix.
11
We just have to assume that its expected value is equal to this average; it may vary randomly.

12
One special case of this set of assumptions is the "sociobiological view", which relates the degree of altruism
to the number of shared genes. Under such a view, a dollar of consumption of one's clone is worth the same as a
dollar of own consumption; a dollar of consumption by a sexually produced offspring is worth half a dollar of
own consumption; and a dollar of consumption by a spouse's clone is worth nothing.
7

First, cloning is more likely to take place, the more ill-assorted is the couple. 13 In such
a case the total value to the couple of cloning the most able party is greater than that of
making a sexually produced child who is expected to have a much lower ability. The least
able party may either gain or lose from such cloning but if it loses, then it loses less than what
the most able party gains.
One consequence is that cloning is less likely to prevail, the more mating is
assortative, i.e. the more people find mates with similar characteristics.
Second, if cloning arises then it will affect the long-run distribution of abilities in
society. High ability people are going to be produced more frequently than in a no-cloning
society. Let us assume that if only sexual reproduction prevailed, then the distribution of
abilities among offsprings would be the same as among parents. We call this assumption the
ability invariance hypothesis. It is actually true at the level of the gene if fertility is
uncorrelated with ability. To keep things simple we go one step further and actually assume it
is true at the level of ability. Then, absent cloning, the distribution of abilities among the
population would be stationary, i.e. it would reproduce itself indefinitely. How does cloning
modify this situation? Some couples will replicate the most able party rather than producing a
child whose expected ability is the average of the two parties. Therefore, cloning produces a
deformation of the offsprings' ability distribution which takes weight out of the low end and
adds weight at the high end. Now, this deformation will be passed on to future generations
through sexual reproduction, since it leaves the distribution of abilities unchanged. And future
cloning will add further deformations in favour of high-ability workers. As this process
continues, the highest ability type crowds out all the others. Hence:

Under the Ability Invariance assumption, society converges to a perfectly egalitarian world
with only people of the highest ability type.

It is important to note that even a tiny amount of cloning is enough to gradually

eliminate low ability types from the population and to make sure that the distribution of
ability converges to a mass at the highest ability type. Simply, if fewer people clone
themselves, this convergence process is slower.
The ability invariance assumption is a strong one. More fundamentally, we expect the
distribution of genes to be preserved in sexual reproduction, provided birth rates are constant
across types or uncorrelated with genotypes--The Gene Invariance assumption. The above
result is then no longer valid in general if gene invariance holds but not ability invariance.
However, one can show that if there exists a gene such that all people who have it are of the
top ability type, then convergence to the egalitarian society where all agents are of top ability
holds again. This is because the frequency of the high ability gene is bound to increase at each
generation, as top ability types are those who produce the greatest number of clones, and gene
frequency is preserved among sexually produced offsprings.
Some other weaker results can be established under gene invariance, we will discuss
them below in the context of the analysis of economic cloning.
Finally, let us mention that cloning is also likely to affect the pattern of mating and
sexual reproduction. The option of cloning oneself reduces the cost for high ability people of
turning down low ability mates, so one may see a decrease in the degree of assortative mating.

3.3. Cloning as an investment: Economic cloning

13
Note that it is never worth cloning the least able party.
8

We now discuss a possibility which is more remote, namely cloning for economic
reasons. If top performers in the labor market have valuable genes, then cloning them will
generate a lot of economic value. The question we first ask is: can the market develop
incentives for such cloning to actually take place?14 A key issue is how much of the clone's
income can be appropriated by those who invested in creating it.

3.3.1. The role of property rights

If a clone were treated as a product, it could be patented. Those who put up the
resources needed to produce the clone could then reap all the returns to the clone's genes by
forcing "it" in the highest return occupation and expropriating all its labor income. In this
case, the market would internalize the "social benefits" of cloning and produce a large number
of copies of Bill Gates and of various top physicians and lawyers. Moral hazard could
mitigate these effects, but the producers could still get considerable returns on their
investment by imposing an adequate incentive contract.
However, clones are human beings, and, in Western countries, are likely to be granted
the same civil rights as other individuals15. People cannot be patented. If they do not have to
abide by a contract they have not signed, they will appropriate all the returns to their genes,
and the private economic incentives for cloning will be non existent.
This brings the following question: in a free, democratic society, what sort of devices
could investors use to appropriate part of the labor income of an individual they have
produced? Let us suggest the following appropriability mechanisms.
The simplest one is a negative bequest. The clone could be legally adopted by its
model and the model would borrow money that would implicitly be backed by the clone's
future earnings. Such negative bequests are illegal in most western countries, but not in Japan,
for example. Negative bequests come close to full appropriability of the clone's income.
Another possibility is information retention. A cloning firm could buy some DNA
from a top ability individual and produce clones in the hope of selling them valuable
information about their model: genealogy, career, etc. This information would also be
verifiable by any potential employer. Upon being contacted by the firm, the individual would
learn that he or she is the clone of a top ability worker. He is then willing to pay a substantial
amount of money to know whether he is the clone of a violinist or a surgeon. Thus, by
withholding information about the model's specific talent, the firm is able to appropriate part
of the clone's labor income.16
An extreme form of information retention is genome ownership. There is now a debate
about whether genetic code could be patented. If this turns out to be legal, the firm could
simply own property rights over the model's genome and its clones could have the option to
buy it, so as to use it in order to improve their health and labor market prospects. In the former
case, their motivation for buying their genome is unrelated to their earnings ability;
nevertheless, their willingness to pay for it is likely to be greater, the greater their earnings.
Hence the incentive to clone top performers remains. By making clones, the firm would then

14
At this stage, an important caveat is in order: we are not advocating that society should seek to establish
property rights on cloned human beings, albeit indirectly. We are just examining different mechanisms allowing
to appropriate part of the clone's income. The more efficient these mechanisms, the more likely it is that a market
for cloning will arise. We are not claiming that these mechanisms should be enhanced, nor that they will
necessarily be strong enough for cloning to arise.
15
The National Bioethics Advisory Commission (1997) advocates that ''any children born as a result of this
technique should be treated as having the same rights and moral status as any other human being''
16
Note that in such a case appropriability need not reduce the clone's welfare relative to the model's welfare,
since the clones saves on the costs of learning his best skill.
9

simply generate customers for a given genome. Or, more horrendously17 but perhaps more
realistically, one could on purpose clone top ability people affected by a genetic disease
requiring an expensive treatment, in order to sell the treatment to these clones--a genetic form
of 'advertisement'.18
Finally, one could potentially extract rents from clones via their specificity. If the
clone's specific talent is complementary to some form of capital, and if the owner of such
capital may bar competitors from accumulating/acquiring it, then they can expect to be in a
situation of monopsony, or bilateral monopoly, vis-à-vis the clone, which will allow them to
extract part of the return to the clone's talent.
For example, the movie industry had considerable difficulties in finding a replacement
to Sean Connery, the actor who played James Bond. The economic value of Connery's
specific physical characteristics is huge, and an obvious solution is to clone him. Under
perfect competition in the movie industry, this will not be of any help, as Connery's clone
would get all the returns; but under imperfect competition, potential profits are large
compared to the cost of making the clone. 19
This example is of limited relevance, though, because only one copy of Sean Connery
is needed (although one could make several for the purpose of having them compete with
each other).20
However, a similar mechanism could arise through higher education. The returns to
higher education are higher for top ability people. But there aren't that many top schools, so
that competition among those schools is imperfect. As a result they are able to extract rents
from their students in the form of tuition fees and gifts. They expect to get greater rents from
more able students. Hence, a consortium of top schools could invest in the cloning of top
individuals, knowing that a fair fraction of these clones will get educated at a top school. This
mechanism is operative only to the extent that there is no free entry in the market for
education. Otherwise, competitors would free-ride on the top universities institutions' cloning
investment by offering better terms and the consortium would eventually run out of business,
as it is unable to recoup its investment.
Clearly these mechanisms will generate an equilibrium level of cloning much lower
than if clones were granted fewer rights than original human beings. However, it is not
unreasonable to speculate that if the income prospects of the individual are large enough,
there will be enough incentives for cloning him or her even at such low appropriability
levels.21

17
Such a mechanism is not so different from the one currently in use, which consists in artificially making a
good addictive in order to increase demand and/or demand elasticity. For example, there are testimonies about
the cigarette industry's alleged practice of adding nicotine to cigarettes. See US FDA (1994), at
[Link]
18
Indeed, property rights on genetic information are evolving and there already exists a market for it. For
example, Incyte, Inc. is a firm specialized in maintaining and selling a database of DNA information, that it sells
to pharmaceutical firms. (Source: [Link] ) Clearly
for such a firm to survive in the future, property rights on DNA information must be enforced. According to the
New Scientist, 15/12/2001, Oxford GlycoSciences, a British company, had filed for patents on 4000 human
proteins and the genes that code for them. These are all proteins linked with illness. Oxford Ancestors Inc. is a
company which sells DNA tests to people in order to find genetic markers relating them to one of seven
primitive ''mothers'' who lived 150,000 years ago.
19
Another potential example could be the tabloid's press incentives to make a clone of Princess Diana. Again,
this mechanism is operative only to the extent that the rents it generates are not fully dissipated by entry in the
tabloid sector.
20
This is because the media are themselves a cheap replication technique, indeed cheaper than cloning, so that
only one copy of Sean Connery or Princess Diana is needed for its purpose.
21
Contractibility problems associated with the surrogate mother, on the other hand, are lighter, and not much
different from those already existing in the context of assisted reproduction. The firm could make sure the clone
10

To conclude this section, let us point out that, just like cloning need not be banned in
all countries, some countries may develop a legal system where clones have fewer rights.
Clearly, different cultures have different views about say, the rights of women or children, so
they might also treat clones differently. If this is so, appropriability may be high in a subset of
countries. Even if these countries are small, by attracting foreign direct investment in cloning
they may contribute to a high level of cloning worldwide.

3.3.2. Determinants of the market for clones

Let us now take for granted that some appropriability is feasible, and analyze how the
equilibrium level of cloning would be determined.
We assume that people can invest money in creating a clone of themselves. We rule
out any `narcissist' or `megalomaniac' motive for cloning; people are not made happy by the
existence of a copy of themselves. But when the clone becomes an adult, the model is able to
extract a fraction of his/her earnings. We denote by f that fraction. The cost of producing a
clone is p, and we shall assume for simplicity that it is entirely made of the compensation to
the surrogate mother (including child raising costs). Finally, people differ in their ability,
which is denoted by a. The present discounted value of their earnings is given by a.w, i.e. it is
proportional to ability.22 Clones have exactly the same ability as their model.
When is it profitable to clone oneself? Clearly, when it yields a return which is at least
larger than alternative investments. This will be true if

faw >= p(1+r),

where (1+r) is the return to alternative investments. The left hand side is the total value of the
money extracted from the clone. The right hand side is how much one would have made by
investing in other assets.
Consider an individual for whom this inequality is strictly satisfied. How many times
will he/she want to clone him/herself? The answer is: an infinite number of times. This is
because he can give away his DNA as many times as he wants. DNA is just a blueprint, a
piece of information, which is replicated very many times in each of the huge number of cells
that we have. From the point of view of the cloned individual, there is no scarcity constraint
associated with the factor he/she is contributing to the clone.
Consequently, this inequality cannot hold strictly, implying it must be violated for all
agents except the highest ability type. If cloning takes place then it must be satisfied with
equality for that type, implying that the price of a clone must be equal to p=p*=fa*w/(1+r),
where a* is the maximum ability level. Consequently, only the highest ability agents will be
cloned. Because, for a given p, there is no limit to the replication of a given individual, and
because the gains from cloning oneself are increasing with ability (since one knows for sure

develops properly by having her sign a contract specifying her diet during pregnancy, etc. One should note,
however, that once the clone exists there will be a situation of bilateral monopoly between the surrogate mother
and the firm. Such problems already arise regarding existing techniques of assisted reproduction. See Posner
(1989). According to Chester (1997), Dr. Joseph Schulman, the director of the Genetics and IVF Institute,
advocated in June 1997 that such problems should be solved by writing a ''complete'' contract between the parties
involved. Chester claims that there is a legal vacuum surrounding these issues and that such contracts should be
regulated for equity reasons, given the unequal bargaining power of parents, surrogates, and fertility clinics. He
also reports a New Jersey case of a conflict between a (genetic) surrogate mother and the inseminator's
household, where the surrogacy contract was invalidated but custody was granted to the latter.
22
For simplicity we assume constant factor prices, or equivalently a linear production function given by
Y=wL+rK. For a detailed general equilibrium analysis based on an overlapping generations model, see Saint-
Paul (2000).
11

that the clone will have the same ability as the original), the most able agents bid up the price
of cloning until less able people are driven out the market.23
In other words, the demand for cloning is infinitely elastic. In particular, it does not
depend on the number of people at the highest ability level. This is because they can supply
an arbitrarily large amount of their DNA at zero marginal cost. One could even assume that a
large fraction of the population does not want to clone itself. It is enough that some
individuals at the highest ability level are willing to do so to boost the price to p*. The
number of clones that will be produced does not depend on demand, but on supply. A
reduction in the number of high-ability workers willing to be cloned will simply be offset by
an increase in the number of times each of them is cloned.
Therefore, let us now look at the supply of clones. We assume that to raise one clone,
one needs a surrogate mother who must sacrifice a fraction b of her income per clone. 24 An
individual with ability a will become a surrogate provided the time spent raising a clone
yields more money than if it were devoted to work. This is true provided the compensation
per clone satisfies the following inequality:

p >= baw.

Consequently, an individual with ability a becomes a surrogate if and only if her

ability is lower than a critical level given by

ã = p/(bw).

Low ability agents have a comparative advantage in producing clones. This threshold
increases with the price of clones and falls with the opportunity cost of producing children
bw. Cloning does arise in equilibrium if there exists a positive mass of agents with ability
below the threshold level ã. Let a be the lowest possible ability level. Using the formula for
the equilibrium price p*, we see that cloning will arise if

a/a* < f/(b(1+r)).

This condition is more likely to hold,

• the lower the time cost of producing children, b.

• the higher the appropriability of clone income f.
• the lower the rate of return r.
• the lower the ratio between the lowest and highest ability level.

The last property tells us that cloning is more likely to arise in more unequal societies.
Cloning is more likely to arise, the lower the opportunity cost of time of those who produce
clones relative to the income of those who get cloned, i.e. the greater inequality.

23
This phenomenon would be mitigated if there were no perfect substitutability across ability types, in which
case the amount of cloning in each type would be determined so as to equate incomes across clones. See section
[Link].
24
The idea that people would not accept to serve as surrogate mothers was already dismissed in Watson's (1971)
visionary article, which was written some years after a frog had been successfully cloned, but prior to the first
successful in vitro fecundation. He writes ''There already are such widespread divergences regarding the
sacredness of the act of human reproduction that the boring meaninglessness of the lives of many women would
be sufficient cause for their willingness to participate in such experimentation (...)''
12

Cloning is also more likely, the lower the real interest rate, because it is an alternative
form of financial investment. Finally, the first two properties are straightforward: cloning is
less likely to arise, the greater its cost and the smaller the fraction of the clone's income that
can be appropriated.
Hence, society will organize itself in three classes: a reproductive class at the bottom of
the distribution of ability; a productive class at intermediate levels; and a replicated class at
the very top of the ability distribution.

3.3.3 Long-run consequences

In the case of parental cloning discussed above, we have seen that the distribution of
abilities converges towards a mass of top-ability workers, provided the Ability Invariance
assumption holds. Economic cloning has the same implication, and the effect is much
stronger. In the case of parental cloning, cloning generates a gradual deformation of the
distribution of abilities in favour of high ability types. In the case of economic cloning, the
deformation is in favour of top ability types. Thus the speed at which the distribution of
ability is equalized and driven to the top is much higher.
Another important consequence is that cloning eventually vanishes in the long-run.
The reason is that society falls short of low ability people willing to act as surrogate, as top
ability people make up for an increasing fraction of the workforce.
These results depend a lot on the Ability Invariance assumption, which implies that
sexual reproduction among top-ability agents only yields top-ability offsprings. This long-run
equilibrium could not be sustained if sexual reproduction introduced some noise in the
distribution of offsprings' abilities. That is, under the ability invariance hypothesis the ability
distribution drifts under the pressure of transitory events without any tendency to return to
some stable long-run steady state. Therefore, even a vanishing amount of cloning is enough to
transform it permanently into a perfectly egalitarian distribution.
Under the weaker gene invariance assumption, mating between high ability people
may produce some low ability people, and this process may prevent the fraction of people
below a certain ability level from vanishing in the long run. Hence the preceding results no
longer hold: low ability people may still be produced by mating among high ability ones,
which prevents income equalization and may maintain a strictly positive relative supply of
surrogates. However, a weaker result can be established, which is as follows.
Suppose there exist genes which prevent ability from being greater than a certain level.
In particular, suppose that initially there is a strictly positive fraction of genes which prevent
ability from being greater than ã, the critical ability threshold. This implies that at each
generation we will find a strictly positive number of people willing to act as surrogates, so
that some cloning will take place. Then it can be shown that the frequency of genes which
prevent ability from being maximum--let us call them l-genes--eventually goes to zero. The
logic is simple: cloning implies that the genes of top ability people are replicated at a higher
rate than other genes. Given that l-genes are never found in top ability people, they eventually
vanish.
This does not imply that all people are of top ability in the long run; nor is it true that
cloning vanishes. l-genes, and, in particular, genes which reduce ability are eliminated. But, in
the long run, other genes can be combined to produce ability levels below the top, which may
even, in principle, be low enough to maintain the supply of cloning.

3.3.4. Extensions
13

The preceding model provides a useful benchmark but ignores several aspects which
we now discuss.

[Link]. Other demographic dynamics

It is useful to consider two other departures from the ability invariance assumption:

1. Mutation: Mutation implies that a fraction of sexually produced offsprings will have new
genes not found in their parents. Thus ability invariance is no longer satisfied. If some low
ability mutants are produced at each generation, society no longer converges to full equality.
Furthermore, these mutants may prevent the relative supply of surrogates from going to zero,
so that cloning need not vanish in the long run.

2. Negative ability dependence: One may also plausibly assume that fertility and ability are
negatively related.25 For example, in the U.S. 1995 census, the birth rate was 91 per 1000 for
women with a family income lower than 10,000 $, 60 per 1000 for the 30,000-35000 $
income range, and 53 per 1000 for a family income greater than 75,000. 26With fertility
correlated with ability, the ability invariance property collapses, as does the gene invariance
one. Absent cloning, the long-run distribution of income would collapse to a mass point at the
most fertile group, i.e. the lowest ability level. When cloning is available, the top ability group
is able to maintain its relative size through cloning. Indeed, the growth of the low ability
group increases the `supply' for clones proportionately, and even a single high-ability
individual would be enough to produce a large mass of clones. As a result, instead of
converging to a fully egalitarian society with only the lowest ability level, the distribution of
income converges to two mass points, one at the lowest ability level, the other at the highest
one. Top ability people make fewer children than anybody else but their size is artificially
maintained by cloning. In the long run, a two-class society emerges, with low ability people
producing the clones of top ability ones, while people at intermediate ability levels have
vanished, as they make fewer natural children than bottom ability types, and are not cloned
either.

[Link]. Non homogeneous labor input

In the above analysis, there is a single homogeneous labor input, i.e. ability is
unidimensional.
What would happen if ability were multidimensional? Assume for example that
people belong to different occupations, which are complementary in the production process,
and that within each occupation they have different skills. Assume that both 'talent', i.e. which
occupation one is best at, as well as ability is heritable.
Then one can show that the results are not much affected. If anything, the scope for
cloning is enhanced, because heterogeneity of occupations introduces an additional source of
variance in the distribution of income. The poorest in the least scarce occupation earn less
than if there were only one occupation, while the richest in the most scarce occupation earn
more.
The only novelty is that cloning is gradually diffused from the scarcest to the most
common occupation, while it remains true that within each occupation only the most able are
cloned. The most able individuals in the scarcest occupation are cloned first. This increases

25
From a methodological point of view, however, this is somewhat unsatisfactory, because it means that the
initial distribution does not correspond to a long-run steady state.
26
See U.S. Census Bureau (1997), table A.
14

the relative supply of labor in that occupation, thus taking care of its ''scarcity''. This process
continues until the point where there exists another, equally profitable occupation. Top
individuals in both occupations are then cloned, and so on. During this process, at any date
there exists a set of best-paying occupations whose top performers are cloned. Because of
complementarities, cloning brings down the relative wage of these occupations relative to
others, so that the set of best-paying occupations widens with time. Asymptotically, each
occupation pays the same wage. Then cloning proceeds so as to maintain that same wage
equal across occupations, by increasing labor supply proportionally in all sectors.
Asymptotically, people are again all of the top ability type but have different occupations.
In principle, the market should eventually work well in identifying the occupations
where cloning is most valuable. However, in early stages this might be more difficult. In
particular, replication of the most able individuals may have very different effects depending
on the nature of the good being produced and on the structure of the corresponding market.
For instance, there will be greater incentives to clone workers whose skills are not
replicable by other means. For example, the books written by a top economist are replicable at
low cost, and this will reduce the value of cloning the economist; the skills of a surgeon are
much harder to replicate. In other words, there is some substitutability between biotechnology
and information technology. In fact, cloning is just another new information technology
applied to life. The DNA is a sequence of bits and cloning is no different from copying a
computer programme.
In such an example, the surgeons rather than the economist will be cloned. On the
other hand, the clones of the top economist, while being economists themselves, may end up
writing totally different books.27 Their brains, while having the same efficiency and hereditary
predisposition for economic analysis, will be 'wired' differently, as the result of a completely
different experience. Assuming that the top economist earns much more than the top surgeon
– precisely because IT allows him/her to cover a much larger market – then one would reach
the opposite conclusion that the top economist should be cloned first. This is what the market
would do by just looking at their wages, whereas in the case where the economist's clones
would (unexpectedly) write the same book, the market would inefficiently clone them.
More generally, there exist professions where value is created not out of a huge direct
or indirect productivity (like managers), but out of creativity, which is greater, the more
different their output is relative to the existing stock of goods. Whether it is worth or not to
clone them depends on how the nature of their creations depends on their genes vs. their
acquired experience, a topic on which little is known and beyond the scope of this paper.
A related issue is the extent to which competition between clones of the same
individual could exert negative effects on their earnings. If this is simply due to the fact that
they exert the same occupation, this is well taken into account by the above analysis: the
market will create just the right number of clones of top ability workers in a given ability
dimension, so as to make sure that top ability people have the same earnings in any
occupation. Thus if an occupation initially earns more than others, more cloning will take
place, which will indeed depress earnings in that occupation, but not to the point of making
cloning initially unprofitable. However, there is also the case of "winner-takes-all" markets
where individuals are competing for a fixed prize: sports, and perhaps stock broking. In such a
case, cloning does not create any value. By increasing the number of top contenders, it just
reduces the probability that a given individual gets the prize—a pure congestion externality.
It does not follow that cloning would not take place, as cloners don't internalize that
externality. But the expected reward is inversely proportional to the number of top contenders,
so we expect very few clones to be made in such labor markets, relative to ordinary labor

27
I am indebted to an anonymous referee for this point.
15

markets. Finally, note that the actual quantitative relevance of such winner-takes-all situations
is a matter of debate.

[Link]. Environmental shocks

An important assumption made so far is that the ranking of workers by ability is

invariant over time. More realistically, one could assume that some changes in the
environment overturn that ranking. Thus, low ability people could become high ability, and
vice-versa. A clear example in nature is how the fitness advantage of skin color is related to
climate: bears are white in cold climates, and brown in warm climates. A climate change can
thus overturn the fitness ranking of skin color.
It is not so clear whether such a reversal can take place with respect to earnings ability:
it may be that greater ability means greater adaptability too. Let us however assume that
environmental shocks can change the ranking of genotypes in terms of earnings ability. Then
one has to distinguish two cases.
If any genotype has an equal probability of having its ability go up or down, as a result
of an environmental shock, then the change in the ranking is not predictable, and the ranking
of expected abilities is the same as the current one. 28 In such a situation, the highest ability
type today is the best bet one can make for the highest ability type in the future.
Environmental shocks make investment in cloning more risky, but if cloning takes place one
will still clone top ability people. As for the risk itself, whether it increases or reduces the
incentives to clone depend on the correlation between the cloning risk and aggregate
consumption. If people are risk neutral or if this correlation is zero, then the incentives for
cloning are unchanged.
If it is known that future environmental shocks will overturn the current ranking of
abilities, or reshuffle it in such a way that the most able people in the current environment
have no greater chance to be among the most able in the future environment, 29 then the
distribution of abilities in terms of average lifetime ability is much more compressed than the
distribution of current abilities, and this effect typically reduces the incentive for cloning.

4. OBJECTIONS AND EVIDENCE

The preceding analysis does not attempt to describe the future, and even less to
advocate cloning. It merely analyzes the economic forces behind human cloning, and suggests
that cloning – either for economic reasons or for child enhancement purposes –, if it takes
place, will increase the proportion of high ability genes, and possibly lead to equalization of
income levels from the top.
Clearly, there is enough uncertainty about the evolution of scientific knowledge,
reproductive technologies, of the legal environment and of relative prices, that one may doubt
whether this will happen at all. A number of objections can be raised; we now discuss them in
light of the available empirical evidence.
.

28
This would be the case if upon a shock the new ability level associated with a given genotype has a martingale
property, i.e. in expectations it is equal to its previous value.
29
This would be the case, for example, if upon an environmental shock, the new ability level associated with a
phenotype were drawn from a distribution independent of the initial ability distribution.
16

Objection #1: People don't marry and make children for utilitarian/monetary
purposes.

Different people marry for different reasons, but it is well-known that love is the main
motive for marriage only in certain civilisations, time periods and social classes. There is
evidence that mate selection on the basis of physical and economic characteristics is
pervasive. Love itself can be interpreted as a biochemical trick, a legacy of natural selection
which induces us to maximize the survival value of our genes.
Note that the value of a mate is twofold, as it affects the quality of children and the
utility derived from the match. A high ability spouse may be selected because of his/her
effects on offspring or because of the sheer impact on the value of the match. It is often hard
to disentangle these two effects.
Selection of mate on the basis of economic and physical characteristics is evident from
the empirical literature on the economics of marriage.
Murray (2000) shows that married men live longer and that this is partly due to
selection. Harper (2000) finds that physical appearance affects the likelihood of getting
married. Nakosteen and Zimmer (1997) show that part of the observed wage premium to
married men can be ascribed to a higher probability of getting married for men with greater
earnings. Along the same lines, Cameron and Collins (1999), who study female personal
advertisements, find a positive correlation between the likelihood of an ad insisting on a
potential repondent's physical appearance and that of the female offering wealth.
Marriage in polygynous societies is typically associated with a transfer from the
husband to the wife's relatives. As a result, wealthier males have more wives.30 If wealth is
correlated with genetically determined ability, then a polygynous society bears some
resemblance to the cloning society we discuss in this paper. The most able males have more
offsprings. Their wifes play to some extent the same role as surrogate mothers in cloning
markets. One key difference, however, is that in a cloning market top ability females will also
be able to reproduce at a supranormal rate, which is not the case in a traditional polygamous
society, or indeed in any population where only sexual reproduction prevails.
Borgerhoff-Mulder (1995,1998) has studied the determinants of bridewealth transfers
in the Kipsigis, a traditional East African society. Her findings suggest that marriage is very
much an economic investment, and that bridewealth--the "price" of a woman-- reflects the
return to that investment relative to other alternatives. Thus, bridewealth falls when the
relative supply of women goes up. Similarly, a woman's value also rises with her agricultural
productivity. This is true both for aggregate determinants of productivity -- hence the sharp
rise in bridewealth observed during the colonial era, which was associated with the
introduction of cash and induced productivity gains from specialization -- and for individual
ones. It is also plausible that part of the value reflects the expected quality and quantity of
children. Indeed, Borgerhoff-Mulder argues that a recent fall in bridewealth is partly due to a
fall in planned family size. Another factor is the rise in alternative forms of investment, such
as equipment.
Bridewealth is higher for brides from wealthy elite families, which probably reflects
the value of useful social connections rather than genes. It is higher for brides who reach
menarche early, thus reflecting their greater reproductive value.31 Interestingly, it is also

30
See Bergstrom (1996) for a survey and Bergstrom (1994) for a theoretical model.
31
But this correlation has disappeared in recent years, in accordance with the hypothesis of reduced planned
family size. Bridewealth is also found to be lower for women who already had children from another man, and
also for women who are pregnant from the groom. In the latter case, this is paradoxical, since it is a proof of
fertility. However, Borgerhoff Mulder argues that in such a case, the bride's family bargaining power is very
low.
17

increasing with the distance between the bride's home and the groom's home. According to
Borgerhoff-Mulder, this is because women from a nearby household are likely to spend more
time with their mother, which reduces their productivity. We find it equally plausible that
distance increases reproductive value by reducing risks of consanguinity.32It is also found that
wealthy grooms pay more for their wifes. This may reflect monopoly power or some
unobserved desirable bride characteristic, which wealthy men are more likely to afford.
Finally, bridewealth is higher for women with secondary education, reflecting higher
productivity or higher child quality, for nurturing or genetic reasons.
In contrast, the literature has found that children were not a profitable investment from
a pure economic viewpoint. The present discounted value of child food intake in traditional
societies is larger than the PDV of their agricultural output.33 However, this does not rule out
a role for economic motives. The desire for children is balanced by the economic costs, and
this cost is lower, the greater the children's contribution to household income.34

Objection #2: People do not want to select their children's characteristics.

Another objection to parental cloning is that people will prefer to let nature operate
rather than choose their children's characteristics. There are reasons to have doubts about this
objection.
The market for adoption gives evidence of how parents can select the characteristics of
their children when left free to do so. In the case of adoption, price variation across children
typically take the form of adoption delays, especially since U.S. law prevents birth mothers
from being paid compensation. Thus, [Link], an adoption agency, makes the
following statement: ''In general, healthy Caucasian newborns and infants are the most sought
after children and the wait for these children can be many months to many years. If you are
willing/desirous of adopting a Black, bi-racial, or multi racial child, the wait may be much
shorter - only a matter of a few months. A special needs child, e.g. an older child, or a child
with physical, emotional, or intellectual limitations, can often be adopted through special
county, state, or private agencies in a relatively short period of time. The waiting period for
foreign-born children usually depends on the specific foreign country the child is adopted
from and can vary from a few months to a few years.'' Monetary costs vary in the same
direction as delays: ''You'll usually find that the costs involved in adopting a healthy
Caucasian newborn/infant are higher than in adopting a child of other races, children with
special needs, or children from other countries.'' (However, the prices quoted by that same
agency only vary with geographical origins: 19-22,000 for Chinese children, 23-27,000 for
Eastern Europeans, and 34-35,000 for US born, regardless of race).
Technology is now proceeding at a very fast pace in order to provide parents with
options to select their children's genetic characteristics. This may obey several motivations:
avoiding health problems, selecting a child's sex as the result of social pressure and/or other
factors (such as diversification), attempting to have good-looking and healthy children.
Embryo screening, also known as pre-implantation genetic diagnosis (PGD) is
developing very quickly and may be used to eliminate embryos with genes that favour
diseases such as Downs syndrome, Cystic Fibrosis, or Huntington's disease. More recently
one can detect genes for low IQs, dwarfness, obesity, and obviously observe the sex of one's

32
But such a sophisticated justification need not pop out in interviews.
33
See again Bergstrom (1996).
34
There also exists evidence that parents invest more in their biological than non biological children: See Case et
al. (2000).
18

child. Psychological problems such as panic and manic depressive illness have recently been
found to be inherited, suggesting the possibilite of future PGD for such traits.35 PGD is
available at most infertiliy cliniques, its reported cost is about 1,000 $.
These techniques are already in use to eliminate embryos with serious genetic
disorders. In my view, it is likely that they are also going to be used for less serious disorders
in the near future. It is not clear where the line should be drawn between the avoidance of a
serious disease and improvement in a child's characteristics by means of genetic selection.
Huntington's disease, for example, is awful, as is cystic fibrosis. But PGD is also available for
myotonic dystrophy, which according to the International Myotonic Dystrophy Organization
([Link] has the following symptoms:
''The disease causes a lot of unusual problems in people with the disease. They may
have trouble staying awake and have low energy levels. They may have depression. There
may be hair loss or digestive problems. It is very hard to relay to people that this is a real
disease and that the problems are real and not just a result of lack of motivation. In fact, lack
of motivation is one of the results of the disease. ''
The welfare costs of having such a disease is probably lower than that of being poor,
unemployed, or uneducated. If some people are willing to eliminate embryos with a gene for
such a disease, it is likely that they would also eliminate embryos with poor predicted
economic success.36
As for sex screening, it may be widespread for couples whose existing children are of
only one sex, or in societies with sex-biased social norms. Chu (2001) provides evidence of
prenatal sex determination in China by means of ultrasound scanning followed by selective
abortion. He shows that such a practice is widespread, and especially affects girls in higher
order pregancies when previous children tend to be girls.37 One may speculate that the
incentives for such selection are exacerbated by the existing family planning laws which
heavily tax a high number of children.

Objection #3: reproductive material cannot be traded.

Economic cloning depends on the trade of reproductive material. One may think that it
will not be openly traded, and/or that it will be prohibited. As a matter of fact, a market for
reproductive material already exists in the United States. "Donors" are compensated, and
there is evidence that their compensation depends on their characteristics.
Ideally, these rewards should give us an idea of how much society is willing to pay for
some characteristics that, rightly or wrongly, it believes to be genetically heritable.
Unfortunately, it is difficult to have systematic data on these prices. Assisted reproduction
cliniques do not quote them publicly for fear of being charged with discrimination. Most of
them deny practicing different prices on the basis of perceived donor quality. However, even
if this is true at the establishment level, it does not preclude individual characteristics from
being correlated with price at the economy level. Some establishments may offer a high price
and attract the most desired donors, and others may specialize in lower segments of the
market.

35
Source: Science Daily Magazine, 14/01/2002
[Link]
36
In particular, Clark and Oswald (1994) find a lower reported level of happiness in the unemployed.
37
Theoretical implications of endogenous sex choice are discussed in Edlund (1999).
19

Thus in order to get empirical evidence on that market, we resort to two sources: (i)
case studies and anecdotal evidence, and (ii) classified advertisements on the internet, coming
from independent donors and surrogates. In both cases, one should bear in mind some
methodological caveats. First, these sources typically give us bid and ask prices, rather than
transaction prices. Thus we may conceive that the equilibrium premium for a high IQ is zero,
yet observe that donors with a high IQ attempt to get an above-market price, and fail to
observe that no transaction took place or that the transaction did take place at the equilibrium
price. Second, in the vast majority of cases prices are not quoted, and there may be a self-
selection issue associated with price quoting. Characteristics can be misreported; for example
IQ tests can be forged, while the color of hair and eyes can be artificial. Finally, as can be
inferred from classifieds, many donors are not motivated by money, but by compassion,
religious feelings, or sheer enthusiasm about spreading one's genes.
Keeping these caveats in mind, let us now discuss this evidence.

Egg donors: The most striking piece of evidence regarding willingness to pay for
donor characteristics is an anectode reported in the Press. According to Anderlik (1999), there
was an ad circulated at top universities ''soliciting eggs from a 5-foot-10, athletic woman with
a score of at least 1400 on her SATs and a clean family medical history (...). The incentive
was $50,000. According to an article in the New York Times, the ad generated over 200
responses (an earlier ad that failed to name a price brought in only six).'' Similar figures for
egg donors with `desirable' characteristics are reported by the American Society for
Reproductive Medicine (2000), which compares it with an average price of 2,500 $.
An egg donor programme described over the internet38 is split in two categories: A
normal one, offering fees of about $3500-4500, and an ''exceptional'' donor programme,
reserved for women with an SAT greater than 1150, an ACT greater than 20, or an IQ greater
than 125. It is explicitly said that women in this category get higher fees, but not by how
much. Many other programmes do not quote any price, but mention the possibility for the
`Intended Parents' to ask the prospective donor to take an IQ test. Similar statements about the
existence of an IQ premium are found in another programme.39

Sperm donors: A web advertisement for an expensive sperm donation (500 $)

mentions size, hair color, weight, an ''athletic build'', sports and scholarly achievements, IQ,
desirable personality traits, longevity of ascendants, mother's and father's IQ, career
achievements, ancestors' geographical origins, and the existence of ''leaders'' and top
achievers among ancestors.
A reprogenetics clinic found on the internet40separates its sperm donors in three
categories:

1. A ''discount'' category, made of donors about whom not much is known. Each donation in
this category is priced at $135.

2. A ''normal'' category, which has the largest number of donors, and where much more
information is provided. The corresponding price is $195.

38
[Link]
39
[Link]

40
[Link]
20

3. A ''doctoral'' category, ''comprised of donors who are in the process of earning, or have
completed a Doctorate degree, these individuals include: medical, dental, chiropractic, law
(juris doctorate), veterinary, optometry, pharmacy, and Ph.D. students and graduates.'' The
price in this category is $240.

Note that sperm donation is much cheaper than egg donation, and that the premium for
''desirable'' sperm is much lower than for desirable eggs. This is quite logical since sperm is
reproducible at a very low cost (making male contribution to DNA quite similar to a non rival
good such as knowledge); while the best donors tend to drive other donors from the market,
they don't get much of a rent because of the low replication cost of their sperm.41

Internet classifieds: On the Internet can be found several databases of donors.

Academic achievements, proficiency and IQ tests are frequently cited, but explicit mention of
the fee is less frequent. Nevertheless, in order to go further in our analysis of the pricing of
individual characteristics for egg donors, we have collected a database of 49 advertisements
over the internet where price is quoted explicitly, along with some donor characteristics.
Education is frequently reported, and so are test scores, but which test is reported differs
across observations. SAT and GPA are most often reported, while explicit IQ scores are very
rarely reported. In order to avoid reducing the number of observations by too much, we have
constructed the following variables capturing intellectual achievements:
ID is a dummy equal to 1 if some test score is reported, and equal to 0 if not. DEG is a
variable equal to zero for those who report high school education, or who do not report their
education, to one for those who report college education, and to two for those who report
some graduate education. Thus, the identifying assumption being made is that nonreporters
fare poorly on these grounds. This is plausible if reporting a good score is associated with a
higher price, since there is then an economic incentive to report a good score, but not a bad
score.
Then we have regressed the price being asked on a set of physical characteristics as
well as intellectual ones. Results are reported in the following table.

__________________________________________________________________
---------------------------------------------------------------------------------------------------
Variable (1) (2) (3) (4) (5)

AGE -148.5
SIZE -19734** -18894** -12450
WEIGHT -68.05** -64.33* -35.77
EYE -1078.96**
HAIR 1339.17
DEG 2213.6*** 1262**
ID 162.26

41
Rents are not totally eliminated, though, since donors of various education levels coexist, and the most desired
donors get a premium. This is in part due to the fact that regulation puts a cap on the number of contributions
from the same donor, in order to prevent future consanguinity problems; this generates artificial rents for the
most desirable donors. Note also that free sperm donors are not infrequently found.
21

SAT 5.32* 4.5

__________________________________________________________________
Obs. 41 43 43 18 18
R2 0.27 0.2 0.35 0.13 0.31
__________________________________________________________________
Table 1--Determinants of egg retrieval fee. Significance levels: *=15 %; **=10 %
***=5 %.

The most significant determinant of price is education. An extra step in education

increases the fee for an egg retrieval by about 2000 $.42 Furthermore education is more
significant than physical traits.43 Finally, SAT scores seem to affect retrieval fee positively, by
about 5 $ per point, although this is insignificant when education is controlled for.
Even though heritability of physical traits is much more firmly established than for
intellectual traits, egg buyers are willing to pay a significant premium for the genes of highly
educated donors.44
Note that when human cloning becomes a mature technology, the scarcity rent is likely
to disappear, as the most desirable genotypes can be cloned without limits. This is what is
predicted by the above theoretical analysis, and what is largely observed in the market for
sperm donors.

Objection #4: People will not want to be cloned

One may think that people will strongly resist the idea of allowing for an identical
copy of themselves. Here, several comments are in order.
First, the long-run effects of cloning on the distribution of abilities do not depend on
how many people are cloned, they only depend on the fact that some people are willing to
clone themselves. If only the parental motive prevails, a reduction in the number of people
who clone themselves reduces the speed of convergence to the long-run equilibrium, but does
not change tha t equilibrium. If only economic cloning prevails, the number of people willing
to be cloned is irrelevant, what matters is the supply of surrogates.
Second, under economic cloning one does not even need to know that a clone has been
made. One just has to agree to sell some cells to the investor; the existence of the clone need
not impose any externality on the model.
Third, according to a 1997 poll, about 6 % of the people are willing to clone
themselves.45

42
We have also run a regression excluding observations for which DEG was equal to zero. This allows to limit
oneself to cases where education was actually reported. The estimated coefficient is significant at the 10 % level,
and is equal to 3000, implying that graduate studies increase the retrieval fee by 3000 $ compared to college
studies. This suggests some convexity in the retrieval fee schedule as one moves up the ability distribution,
lending plausibility to the very high prices quoted for top students at Ivy League schools.
43
Of these, only size and weight are significant. An extra pound reduces the donor's income per retrieval by 68
$, while an extra centimeter reduces it by almost 200 $.
44
Some back-of-the envelope calculations can be made to estimate the rent to 'desirable' characteristics. Seibel
and Kissling (1993) have estimated the opportunity cost of time for egg donors to 56 hours. At an average hourly
wage of about 15 $, this yields an opportunity cost equal to 56 x 15 = 840 $. The difference between that and
quoted prices reflect the pains and risks associated with egg retrieval, plus a scarcity rent accruing to desirable
donor characteristics. For retrieval fees above 10,000 $, this rent is likely to be quite large.

45
See ''Clone the clowns'', The Economist, March 1 1997.
22

Objection #5: Ability is not genetically determined

The empirical relevance of our predictions clearly depends on the extent to which
earnings ability is genetically transmitted. The issue is far from settled empirically.46 Surely,
a fair share of the variance of earnings is acquired. For example, Ashenfelter and Krueger
(1994), using a sample of identical twins, find returns to education as high as 12-16 %. This
does not mean, however, that genes do not matter. Some evidence suggests that ability test
scores are more correlated between twins raised apart than between non-twins reared together
(See Bouchard and McGue (1981))47.
Our reading of the evidence is as follows:
Psychometric studies often find a substantial degree of heritability in test scores, often
by looking at identical twins.48
Economic studies look at income, and find little heritability, as in the above mentioned
Ashenfelter and Krueger paper, or in earlier papers by Becker and Tomes (1979,1986), who
find a large level of intergenerational social mobility.
This evidence suggests that at least in the present situation, there is little value in
cloning top earners. This seems partly due to the fact that there does not seem to be a large
correlation between test scores and income.49 However, two caveats apply. First, heritability
of top incomes, which is what matters for the incentive to clone, may differ from average
heritability across the distribution of income. Second, heritability of income is itself
endogenous and depends on technology. An individual supplies a vector of characteristics to
the labor market, some of them are acquired (such as having a good network of connections or
knowing where to locate valuable information), others at least partly innate (such as having a
good memory or reacting quickly). His salary depends on the vector of implicit prices of each
characteristic, which depends on technology50 and may thus vary with time. Consequently, the
extent to which earnings potential is heritable is likely to be affected by technical change. It is
plausible that in recent decades acquired characteristics have become more important.
However, nothing precludes that this trend be reversed in the future.51
More recent evidence provided by geneticists and neuroscientists lends substantial
support to the view that intelligence is heritable. Geneticists have succeeded in producing
transgenic mice with an enhanced memory and better learning scores (Tang et al. (1999),
Tsien (2000)). This suggests that these intellectual abilities are at least partly genetically
determined. In a recent contribution, Thompson et al. (2001) find strong genetic influences on
brain structure by looking at identical twins, and that these genetically determined differences
in brain structure are strongly correlated with IQ.52

46
Cf. the heated ''Bell curve'' debate in the 1990s. (Herrnstein and Murray, 1995; Devlin et al. 1997; Cawley et
al. 1996; Ashenfelter and Rouse (1998)).
47
Furthermore, heritable physical traits such as weight and size affect earnings (See Blanchflower and Sargent
(1994), Harper (2000), and Biddle and Hamermesh (1994)).
48
See in particular Plomin, R. & Loehlin (1989);. McClearn, G.E. et al. (1997).
49
In Saint-Paul (2002), I argue that measured general ability scores may have little relation to income because
the labor market allows people to specialize according to their comparative advantage, thus running against
natural selection which would tend to keep only people with the highest general ability.
50
For example, if glasses did not exist, being myopic would surely be severely penalized in the labor market.
51
Conceivably, new information technology such as the Internet could reduce the value of knowing how to
locate information. See Hassler and Rodriguez Mora (2000) for a model where the relative importance of
intelligence vs. social background depends on the economic environment.
52
''We found that brain structure is under significant genetic control, in a broad anatomical region that includes
frontal and language-related cortices. The quantity of frontal gray matter, in particular, was most similar in
23

Objection #6: Cloning will not be a profitable investment

One may object to the model of cloning as a financial investment outlined above on
the basis that the cost of raising a child is too high, and that the benefits are too remote for the
investment to be worth being implemented. However, we can point out that there exists other
areas where the payoff from investment take quite a long time, such as pharmaceutical
research, for example. Furthermore, our key point is that only individuals with a very high
earnings ability will be cloned.
Back-of-the-envelope calculations suggest that even a moderate rate of appropriability
may make the cloning of top-earners a profitable investment. For example, with an interest
rate of 2 %, a sunk cost of cloning of 50,000 $, and a child-rearing cost of 10,000 $ per year
during 20 years, the total cost of the investment in PDV is equal to some 220,000 $. If on
average one can extract 12,000 $ per year from the clone during the following 40 years, then
this is worth the investment. With earnings of say 1,200,000 $, a ''royalty'' of 1 % is enough
for cloning the individual to be profitable. Of course one may want to invest more in the child
in order to enhance his/her human capital. With a yearly investment of 20,000 $ one needs to
extract 21,000 $ per year during 40 years, which is again a few percentage points for a
million-dollar earner. To be fair, however, at present it is quite unclear whether cloning a
million-dollar earner would yield a million-dollar earner in expectations. Cloning is unlikely
to be profitable if it yields individuals whose earnings are in the 40,000-100,000 $ range.
Cloning profitability in the future will clearly depend on how income distribution will evolve,
which itself depends on technology. 'Globalization' will clearly make cloning more likely by
allowing investors to locate the best genotypes worldwide, the cheapest surrogates, and the
most cost-effective and adequate rearing environments.

Objection #7: Why don't we already observe a similar market for sexual
reproduction?

A relevant question is: why don't we observe, even in the absence of cloning, a market for
sexually produced human beings? The answer is that this is not ruled out a priori, but the
incentives for such a market to arise are weaker than in the case of cloning. There are several
types of reasons for that.
First, the fact that reproducers are selected at the bottom of the ability distribution
inevitably reduces the average ability of the offspring, and thus the income that can be
extracted from it.53
That is not the end of the story, however. In the current state of technology, two top-
ability parents could produce an offspring using IVF and implant it into the womb of a low
ability surrogate mother.54 If the offspring were of top ability, this would not be different from
cloning from an economic point of view. The preceding analysis can then be viewed as an
analysis of the economic consequences of advanced reproductive techniques rather than
cloning per se. However, there are again some reasons to believe that this is less likely to arise
than cloning. First, some appropriability techniques such as genome ownership are less

individuals who were genetically alike; intriguingly, these individual differences in brain structure were tightly
linked with individual differences in IQ. The resulting genetic brain maps reveal a strong relationship between
genes, brain structure, and behavior, suggesting that highly heritable aspects of brain structure may also play a
fundamental role in determining individual differences in cognition.'' Thompson et al. (2001).
53
If a child's ability is the average of his two parents, then we get an offspring's ability equal to (a+a*)/2, with a
low, instead of a* in the case of cloning.
54
It is called ''gestational surrogacy'', as opposed to ''traditional surrogacy''.
24

feasible than in the case of cloning since the offspring's genome will be unique and not
identical to either parent's. Second, each parent will ex-post compete with the other in order to
extract rents from the offspring, which may again reduce appropriability. Third, two top
ability parents may not produce a top ability offspring, as ability results from a set of unique
combinations of genes that will be broken in the course of sexual reproduction. Fourth, even
though the female partner does not have to act as a gestational mother, she has to provide
eggs, which is costly and dangerous. And the number of offsprings that can be produced is
limited by the number of eggs that can be obtained from top ability females. This is likely to
reduce the scale of such a market and to hamper its viability if there are setup costs. This is in
sharp contrast to the market for cloning were the number of top ability agents willing to
participate is not a limiting factor.
In short, it may well be that neither cloning nor sexual reproduction "for profit" are likely
outcomes. But the former is more likely than the latter, and there exists economic
environments for which the former would arise, but not the latter.

Objection #8: Markets will poorly understand genes and not be able to price them.

Our understanding of genetic determinants of behaviour is making considerable

progress, and the economic value of genetic characteristics is well understood and priced by
the market in the case of animals.
The economic value of specific traits in dairy bulls is well established by hedonic
55
studies . Dhuyvetter et al. (1996) are able to estimate a significant effect on price of a variety
of bull genetic characteristics, including race, conformation, muscle and color. Furthermore,
they do find a so-called ''superstar'' or ''winner-takes-all'' effect in that the most valuable bulls
sold at a price premium exceeding the estimated marginal contribution of their
characteristics.56 Such premia probably reflect the fact that more of these bull's offsprings are
likely to be used as inseminators, implying that the most valuables genes from an economic
viewpoint tend to crowd out other genes.57
This crowding out phenomenon raises concerns about long-run biodiversity. Such
concerns are empirically documented in Drucker et al. (2001). They report an erosion of
domestic animal genetic resources due to selection and overbreeding, especially in developed
areas such as Europe. Thus, 37 % of recorded breeds are at extinction risk in Europe, and
28.9 % in North America, against 6.8 % in Africa and 4.0 % in South America. 60 % of EU
cattle is derived from a single Breed, the Holstein-Friesian one. And, in accordance to the
''winner-takes-all'' effects apparent in the pricing of the best bulls, ''50 % of the 5000 Hostein-
Friesian bulls born in 1990, and evaluated by the Interbull Centre, (...) were bred by only five

55
See Schroeder et al. (1992), and Richards and Jeffrey (1996), who find a significant effect of performance
scores in milk and protein on the price of semen doses.
56
According to these authors, ''(...)some bulls brought considerably higher price than the sum of the marginal
predicted values of their quality differences(contributing to nonnormal residuals). (...) The top 10 % highest
priced bulls had an average residual of 16 to 18 %, suggesting prices for these bulls were under predicted on
average.''
57
Similar evidence about yearlings is reported in Lansford et al. (1998). They estimate a hedonic pricing
equation for yearling characteristics, and find significant premia for many components of pedigree, in particular
whether the sire or dam was a champion, whether second and third dams were champions, and whether the sire
has produced champions. Given the ''winner-takes-all'' nature of horse races, they find complementarities
between performance indices on the mother's side and performance indices on the father's side. Thus, the
estimated premium for a champion sire rises from 1,100 $ for low quality dams, to 3,300 $ for high quality
dams.
25

sires''. The authors document greater genetic diversity, i.e. a greater frequency of rare alleles,
in less developed countries, as a result of less intensive breeding.
Selection possibilities have been recently enhanced by the availability of advanced
reproductive techniques.
In 1998, transgenic pigs have been engineered, with a leaner meat than a normal pig.
According to Weaver (1998), such pigs are worth 6 $ more than normal pigs, as there is less
waste. 6 $ per pig sounds like a small number, but if multiplied by the number of pigs being
slaughtered in a given year, it makes it worthwhile to invest in such an innovation, provided it
is then widely adopted.
Herman is a transgenic bull who has been endowed with a human gene for producing
lactoferrin, a protein which serves the purpose of enriching milk with iron, which is essential
for infant growth but absent from regular cow milk. According to the USDA (1994), ''This
scientific advancement could have far-reaching effects for children in developing nations''.58
According to the New Scientist, in October 2000, a clone of Mandy, a prize dairy cow, was
auctioned to farmers in Madison, Wisconsin. Its price reached $82,000, seven times the price
of Mandy's normal calves. This sale actually took place before the clone was produced.
In the same vein is the ''Missiplicity project'', described at
[Link] This project aims at cloning a dog called missy. One of its
stated goals is to help clone dogs of exceptional value, such as ''assistance dogs for people
with disabilities, and search-and-rescue dogs.'' The authors add: ''A high percentage of dogs in
service training fail to complete their programs. While these are generally fine dogs by normal
standards, they lack the specific combination of intelligence, sensitivity and temperament
required in a good service dog. Identifying and cloning the most effective of the current
service dogs will eliminate some of the variables associated with developing these special
animals.''

Now, what about humans? The above evidence on gamete prices suggests that donors'
physical and intellectual characteristics do have an effect on their price. Clearly, though, one
has not identified specific genes for intelligence, being a good astronaut or having excellent
social-skills. The day this is done, one will be able to 'customize' humans just as one is
starting to do so for animals, as in the case of Herman. Meanwhile, cloning allows to replicate
a favorable combination of genes even though one does not understand which genes really
matter and why such a combination is successfull.
As the Mandy and Missy examples suggest, cloning allows investors to free-ride on
nature, which, thanks to chance and sexual reproduction, sometimes produces outstanding
individuals, and on the labor market, which reveals the true economic value of such
individuals. Thus it allows to replicate a combination of genes which causes economic
success, even though such combination may be complex, rare and poorly understood.

Objection #9: cloning will be banned

This is not the place to discuss the moral aspects of cloning; the reader can refer to the
NBAC report (1997). Let us point out, though, that moral values evolve, and are probably not
independent of economic forces. Is the fact that divorce is more morally acceptable than 100

58
Source: [Link] One could give many more
examples. In January 02, transgenic pigs were produced with spinach genes, etc. A compilation of brief scientific
reports on advances in genetic technologies can be found at
[Link]
26

years ago independent of the fact that technical change has considerably increased a woman's
return to labor market participation relative to homework?
From an economic point of view, cloning should be deterred if it exerts some
externalities. Even then, one could argue that a tax or quota is more appropriate than
prohibition.
A first concern is about cloning raising inequality. This is hard to justify since one is
not talking about having more poor, or about the poor getting poorer, but about having more
rich people. That is, shouldn't reasonable social welfare functions be increasing if the
distribution of income improves in a first-order sense? Furthermore, inequality need not
increase. As we have seen, under the ability invariance assumption, society is perfectly
egalitarian in the long run. And, in the short-run, cloning benefits poor women who increase
their income by specializing in surrogacy. In fact, surrogacy fees currently are currently about
20,000 to 30,000 $, which is above median U.S. annual income.
Another type of externality may have to do with social norms. By banalizing high
performance, cloning of top ability people may raise social norms and harm non cloned
people by reducing their income and labor market prospects. Indeed, one does not need social
norms: this may be mediated by technology and the labor market.59 This in turn may
contribute to displacement of sexual reproduction in the long run. The problem with this
argument is that it may also be used to repress the use of any technology which leads to
improved ability, such as education, the use of computers, etc. Admittedly, however, public
policy may intervene to help the least educated or those who don't use computers to cope with
the rising social norm; this is clearly impossible when one deals with a social norm of being
genetically enhanced.
Finally, by reducing diversity, cloning may increase systemic risk in human
populations. By selecting the same genes, cloning may lead to an impoverishment of the
population's gene pool. This can have an adverse effect if the population faces environmental
shocks. There are several objections to this argument, however. First, why should a
population care about its future survival as a whole, rather than simply the sum of the survival
probabilities of all its members? Second, an option for restoring genetic diversity in case of
future needs can be maintained by means of a genetic bank of frozen reproductive material.
This discussion is normative: it sorts out some of the potential social costs and benefits
of cloning. What about positive aspects? Do people have an interest in allowing cloning? In
fact, they do, because high ability clones raise the tax base in relation to GDP. As shown in
the Appendix, where we consider a model where people vote on the degree of appropriability
of a clone's income, voters are willing to allow a certain level of appropriability in order to
enjoy the extra public expenditures allowed by the presence of high ability clones.

5. Conclusion

This paper was motivated by the author's view that human cloning is inevitable, and
will take place rather soon. It has identified various economic forces for human cloning:
assisted reproduction, child enhancement, and investment. It is not clear whether these forces
are strong enough for the corresponding phenomena to actually arise. But we have analyzed
their implications for the long-run distribution of ability, and provided evidence that these
forces are already at work to some extent. And it is likely that cloning as a means of assisted
reproduction is around the corner.

59
While this runs contrary to standard economic assumptions which assume that high skill workers are
complements with low skill ones, there exists a body of recent theoretical work where an increase in the supply
of skilled workers reduces the labor market prospects of the unskilled. See Saint-Paul (1998) and Acemoglu
(1999).
27

A difficult question is: what can and should policy do? We have only tackled it from
the economist's viewpoint, identifying some externalities. As in the case of other externalities
such as pollution, taxation rather than prohibition is likely to be the appropriate response. But
this clearly ignores ethical and philosophical considerations, which have recently prevailed in
the decisions of most western countries (especially Catholic ones) to ban human cloning.
It is not clear whether such legal prohibition can resist strong economic incentives.
While lawyers say yes, economists say no. And facts agree with them. Drugs are prohibited
and yet widely consumed among Western youth, and even advertised in the lyrics of rock
bands. Abortion was prohibited not so long ago and prohibition eventually gave in, while
values evolved so as to make it more acceptable. Alcohol prohibition in the 1920's was a
major failure, while excess taxation of tobacco recently gave rise to smuggling. As for
cloning, it can be performed in countries where it is not banned—transportation costs are
minor relative to other cloning costs and to its benefits. Or it can simply be disguised as
traditional IVF. Prohibition will be effective only if the private incentives to clone are not too
high.

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[Link]

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Press
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