Living Economics

Condom Economics
The externality and time horizon of costs and benefits bedevil college distribution of condoms.

Many college campuses give out condoms for free, sell condoms using the honor system, or dispense them in vending machines. But none of these methods works really well.

The opportunity cost of selling condoms in vending machines is just too high in terms of the foregone revenues that could have been earned selling more popular items. Duke University estimated that it was losing $6 for every one condom sold.

The honor system is losing money also due to lack of honor on the part of the condom takers. Brown University's honor condom distribution system spent $1500 on condoms and collected $150 in return.

And when free condoms are passed out by residence assistants, the embarrassment factor scares away all but the thick-skinned users.

Although condoms are private goods, the external costs and benefits associated with their use affect the decision on their purchase and consumption. Specifically, boys don't have to bear cost of abortion or pregnancy should an accident happen. Nor do the girls have a right to sue for the cost of abortion or pregnancy. The use of condoms also generates external benefits by reducing the incidence of sexually transmitted diseases. The reduction of out-of-wedlock births is another external benefit to society as a whole. If it is difficult to reassign rights to get rid of these externalities, there may be a case for subsidizing the consumption of condoms.

Many private goods, of course, generate external costs and benefits. If the private benefit exceeds the private cost, consumers will buy them without any subsidy. Do the private benefits of condoms exceed the private costs? Here, the answer depends on the probability of contracting pregnancy and sexually transmitted diseases. Also, the benefits of avoiding pregnancy and infection are real but distant, but the costs of inconvenience and mindfulness are real and immediate. So the short-term benefits might well be lower than the short-term costs. This consideration probably motivates the easy accessibility of condoms despite the moral reservation of seemingly condoning casual sex.

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