Bob Murphy has a new podcast interview with Alex Tabarrok. (As Tyler would say, self-recommending.) One of my favorite segments discussed the shortage of kidneys for transplant, a topic I blog on quite often.
Alex pointed out that the kidney shortage could be eliminated if there were suitably strong incentives for people to donate kidneys. And since the US government already pays for kidney dialysis, which is more expensive than kidney transplant, this sort of program would actually save money. Alex estimates that as many as 30,000 Americans who die prematurely could have their lives extended for a considerable period of time if we could eliminate the kidney shortage.
Al Roth has written extensively of the subject of “repugnant markets” and the sale of kidneys is certainly an example of a potential market that most people find to be repugnant, at least at first glance. Alex discusses ways of doing this in a less repugnant way, such as paying the lost wages for people who volunteer to donate a kidney, or paying funeral expenses for kidney’s donated from people who die.
One particularly interesting example was to have a kidney market where the buyer and seller never interact, even indirectly. This would avoid a situation that many people mistakenly fear, the spectre of rich people buying kidneys from the desperately poor. One could have the government offer cash rewards to anyone who donates a kidney, and then have the kidneys allocated via a non-profit institution in exactly the same way as they are today, via a waiting list based on medical need.
While it’s true that the wealthy might still be able to game the system in some way, they already do so to some extent, even under the current need-based regime. More importantly, if the cash award were made large enough then there would be no kidney shortage and even the poorest Americans would get the kidneys they need. Iran’s system works something like this, and they have no kidney shortage.
It occurred to me that another tweak might also have some PR value (although personally I don’t believe it’s needed.) That would be to have background checks on all potential donors, and make sure they have a stable life with a job and no drug addiction. (Or at least their spouse has a job.) This would remove the scenario of homeless people selling a kidney to obtain the money for drugs or alcohol. Again, I offer this more as a PR suggestion, but with 30,000 needless deaths each year, we need to work hard to think of creative solutions.
The kidney discussion starts after the 1:04:00 mark, and is preceded by a fascinating discussion of the FDA approval process. Alex points out that we already have a vast drug sector that is free of FDA regulation, the so-called off-label drugs that were originally used to treat one illness and are later used for another illness for which they have never been approved by the FDA. The existence of this phenomenon suggests that something is wrong with the FDA process. Either the FDA should only test for safety (not efficacy) or they should require that even off-label uses be tested for efficacy. And yet the medical establishment defends this state of affairs, which suggest that the entire process is in some way not what it seems. As Robin Hanson says, health care is not about health.
I would prefer to just abolish the FDA.
PS. The segment from about 39:00 to 43:00 made me blush.
PPS: Off topic, I have a new piece in The Hill defending my Fed accountability and transparency proposal.
READER COMMENTS
Ahmed Fares
Feb 24 2019 at 6:46pm
I like the Israeli model best. It avoids the messiness of money…
If two patients have the same medical need, priority will now go to the patient who has signed an organ donor card, or whose family members have donated an organ (though medical necessity still takes precedence). This policy was nicknamed don’t give, don’t get.
https://en.wikipedia.org/wiki/Organ_transplantation_in_Israel
Scott Sumner
Feb 24 2019 at 7:18pm
Ahmed, That policy will lead to 30,000 needless deaths in the US every year. Roughly the number of US soldiers lost in the Korean War.
No thanks.
Yaakov
Feb 25 2019 at 5:06pm
Actually, Israel has a very different system. A non-profit organisation calls upon people to altruistically donate kidneys. It is run by a Jewish religious orthodox person and over 95% of the donors are Jewish religious orthodox people who donate under the condition that the kidney goes to a fellow Jew. This clears up quite a bit of the waiting list so non-Jews also benefit.
People requiring kidney implants, knowing where their potential donors are, publish heart breaking ads in newspapers directed to orthodox religious Jews requesting a donation.
The government ministry of health, despising private competition, also publishes ads in these newspapers, requesting potential donors to receive information about their donation from the ministry of health. The ministry of health also had the police investigate the non-profit organisation on the alleged crime of providing donors to the organization providing money for advertisements with precedence in receiving transplants. The police found nothing and closed the case.
The government provides donors with a small compensation for medical expenses and provides some small tax credits for three years after the donation. I would guess the total compensation is less than $10,000, all in all.
David Henderson
Feb 24 2019 at 7:46pm
Scott,
The interview was excellent. Bob Murphy does a great job of uncovering people’s early experiences because he’s so enthusiastic. And Alex showed equal enthusiasm. I learned a lot about Alex’s early intellectual life that I hadn’t known.
And the 39:00 to 43:00 part really was quite wonderful. Kudos.
Best,
David
John Palmer
Feb 25 2019 at 8:46am
I urge people to consider an options market for organs as a market mechanism that might address some of the objections to markets for organs.
The chronic shortage of human organs can easily be seen as an excess quantity demanded over the quantity supplied at zero price. The naïve, simplistic solution is to allow markets in human organs to emerge with positive prices for the organs (and the transplant procedure).
But the market solution is fraught with difficulties, including the problem of killing a donor or, more commonly, who bears the risk when the probability of death of a live donor is increased. Also the transaction, negotiation, and legal costs associated with identifying a legal heir and working out a deal with them after a potential donor is killed, typically in an auto accident or via stroke, can be ghoulish and daunting.
Consider an alternative: an options market for organs. Potential donors sign an irrevocable contract, receiving an upfront payment in exchange for their organs (should someone want them for transplant). Essentially, the purchaser buys an option of first refusal when the person dies.
It is expected that many of the buyers of these options would be life insurance companies who would most likely play a leading role in organizing the market.
https://www.eclectecon.net/2014/09/an-options-market-for-human-organs.html
Scott Sumner
Feb 25 2019 at 5:43pm
Interesting idea.
Mark Z
Feb 26 2019 at 5:56pm
This seems like one of those issues that should be a slam dunk, and the opposition is rather depressing. Some people genuinely value the suffering and death of rich people more than the welfare of people in general.
It might be possible to have a private market for donation of organs upon death as well. It would be like a reverse life-insurance: a large company could buy the rights to many people’s organs when they die, then, with a large enough pool, could accurately predict the rate at which new organs become available and sell ‘policies’ to people who need them, where the more urgent you need one, the more you’d pay to get the ‘promise’ of an organ in a shorter timeframe. More people would register as organ donors of course if they could get paid for it.
Kurt Schuler
Feb 27 2019 at 8:56am
See http://www.organreform.org
Comments are closed.