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Problem Set #4
Chapter 3: The Pareto Efficiency Cops
Objective: Policy evaluation with Pareto Efficiency.
The Commutation Fee During the Civil War
Source: Wikipedia, http://en.wikipedia.org/wiki/New_York_Draft_Riots
When the Civil War started in April 1861, New Yorkers quickly rallied behind the Union
cause, including a massive rally at Union Square attended by an estimated 100,000 to
250,000.[7] When Abraham Lincoln called for 75,000 volunteers to join the military and
fight for the Union, 8,000 from New York City signed up within ten days.[7] The First
Battle of Bull Run in July 1861 took a heavy toll on Union forces, including those from
New York City, leading to declining enthusiasm and optimism.[7] A large contingent of
Democrats in New York City, known as Copperheads, were opposed to the war and
favored negotiated peace.[8] New York Governor Horatio Seymour was elected in 1862,
running on an anti-war platform.[9]
As the war dragged on, a military manpower shortage occurred in the Union. Congress
passed the first conscription act in United States history on March 3, 1863, authorizing
the President to draft citizens between the ages of 18 and 35 for a three-year term of
military service.[10] Copperheads were dismayed by the news. Their main objection was
to national service of any kind, but in terms of rhetoric, they attacked the provision
allowing men drafted to pay either $300 or supply a substitute as a "commutation fee" to
procure exemption from service.[11] This led to the derisive term "300 dollar man". In
actuality, the draft was designed to spur voluntary enlistment, and relatively few men
were formally drafted into service.[12]
In practice, however, men formed clubs whereby if one was drafted the others chipped in
to pay the commutation fee. Regardless of the intent of the $300 provision—as a means
of securing some much-needed funding for the war effort or sparing the sons of the rich
from serving similar to draft dodging—public perception among the middle and lower
classes was that the war had become "the rich man's war and the poor man's fight."[
1. Is a draft law that does not permit “commutation” Pareto Efficient?
2. Suppose that during the Civil War you had $300. Under what condition would you
provide a substitute instead of pay $300?
3. The commutation fee was justified by the need to finance the war. Evaluate this
method of financing the war.
4. Is the all-volunteer army of today Pareto Efficient? Read the article below. Would
you have sided with McCain or Obama?
http://www.usnews.com/education/articles/2008/06/12/new-gi-bill-could-bring-morecollege-benefits
5. The law does not permit the sale of organs. Explain why the law creates an allocation
of organs that is Pareto Inefficient. Should the law be changed?