repugnance as a market constraint
DESCRIPTION
Repugnance as a Market Constraint. Ewww!!!!. Prostitution. Gambling. Tradable Pollution Permits. Interest on loans. Ticket scalping. Horse meat. Smoking Marijuana. Sperm donation. Dwarf-tossing. Selling human organs. Should We Allow a Market For Transplant Organs?. Or. - PowerPoint PPT PresentationTRANSCRIPT
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Repugnance as a Market Constraint
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Ewww!!!!
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Prostitution
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Gambling
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Tradable Pollution Permits
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Interest on loans
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Ticket scalping
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Horse meat
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Smoking Marijuana
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Sperm donation
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Dwarf-tossing
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Selling human organs
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Should We Allow a Market For Transplant Organs?
Or. . .
Economics for JournalistsMarch 11, 2008 Dr. Norman Cloutier, DirectorUW-Parkside Center for Economic Education
Brother,
can you spare
a kidney?
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Kidney Transplant Background
• From the first kidney transplant in 1954, both transplants and those seeking transplants have grown over time.
• Transplants• 1990 10,000• 2005 13,700• Most of this increase came from live donors.
• Waiting list• 1990 17,000• 2006 65,000• Reasons for the increase?
– Technological advance.
– Inability of the current system to procure enough organs.
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• Waiting list is not a complete measure of kidney demand. In 2004, there were 50,000 on the official waiting list, but 335,000 on dialysis.
• The median waiting time for people placed on the kidney transplant waiting list is more than 3 years.
• People suffer and die while waiting for a kidney transplant:
• 1990 1,000 people died• 2005 4,000 people died
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• In 2004, 80% of living donors and recipients were related.
• The opportunity to buy and sell kidneys has the potential to save lives and improve the quality of life for many people.
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The Demand for Kidney Transplants Has Grown Faster Than the Supply
Source: Becker and Elias, 2007
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P
Q
$160,000
D1
S
Number of kidney transplants
To
tal c
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t o
f k
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pla
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Qs
Price CeilingLegal max price of kidney = $0
Market for Kidney Transplants
Qd
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P
Q
$160,000
D1
S
Number of kidney transplants
To
tal c
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t o
f k
idn
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pla
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Qs
Price Ceiling
Market for Kidney Transplants
Qd
Waiting List
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P
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$160,000
D1
S
Number of kidney transplants
To
tal c
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t o
f k
idn
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pla
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Qs
Price Ceiling
Market for Kidney Transplants
Qd
Growing Waiting List
D2
Qd
Technological advances have increased the number of patients eligible for transplantation
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P
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$160,000
S
Number of kidney transplants
To
tal c
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t o
f k
idn
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Price Ceiling
Market for Kidney Transplants
D2
Qd
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The Market Price of a Kidney
• Monetary incentives would change the supply of kidneys from completely inelastic to highly elastic.
• The potential supply of kidneys is very large relative to the number transplants.
• The “reservation” of price of a kidney?• Risk of death• Lost time on the job• Risk of lower quality of life
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• Risk of Death• Reported donor death rates .03 – .06%• Assume a conservative .1% risk of death• “Value of a statistical life,” VSL= $5 million• Value of risk of death= .001 x $5 mil = $5,000
• Value of foregone earnings• VSL is derived for a person earning $35,000/year• Four weeks of recovery= $2,700
• Reduced Quality of Life• Difficult to estimate• Arbitrarily assume $7,500
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Reservation Price of a Kidney
Risk of death $ 5,000
Foregone earnings $ 2,700
Reduced quality of life $ 7,500
Total $15,200
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P
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$160,000
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Number of kidney transplants
To
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Price Ceiling
Allowing for Legal Market Transactions
D2
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$175,200 S2
Q*
There would be a 9.5% increase in transplant cost, but a 44% increase in actual transplants. In 2005:
1.44 x 13,500= 19,440
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Not Only Saving Lives:Reduced Time on Waiting List
• Average time to graft failure increases with immediate transplant.
• Reduced pain and suffering• Employment rate of transplant patients is 15 points
higher than those on waiting list.• Measures of quality of life increase with transplant
relative to those on dialysis.
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Can We Increase the Supply of Cadaveric Donations?
• Presumed consent
• Public and professional education
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P
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$160,000
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Number of kidney transplants
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Presumed Consent and Supply Shift
D2
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S2
Qs
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Objections to the Sale of Organs
• Objectification• Money changes the nature of social relationships.
• Coercion• The poor should be protected from exploitation.
• Slippery Slope• Leads to unacceptable secondary effects and to
the possible legalization of truly repulsive transactions.
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Objectification
• Money transforms a “good” deed into a “bad” one.
• “…any procedure which tends to commercialize human organs or to consider them as items of exchange or trade must be considered morally unacceptable, because to use the body as an ‘object’ is to violate the dignity of the human person.” Pope John Paul II, 2000
• Does the fact that the poor tend to take more dangerous, life-threatening jobs diminish their humanity?
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Coercion
• “It is an unethical approach to shift the tragedy from those waiting for organs to those exploited into selling them.”
• Coercion in the absence of monetary compensation?
• In Iran, the introduction of monetary compensation has reduced the non-monetary coercion of relatives.
• Is it ethical to deprive the poor of the opportunity to increase their standard of living – and save lives?
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Slippery Slope
• Opposition to compensation for cadaveric organs is that it will lead to live organ sales.
• More support for live donor compensation among surgeons and the general public.
• Organ theft and black market in organs?• Legalizing live organ sales will reduce the chances
of organ theft and illegal markets.
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P
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$160,000
S
Number of kidney transplants
To
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f k
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Qs
Black Market ?
D2
Qd
$175,200 S2
Q*
ProhibitionKidney Price= $0
Black MarketKidney Price= $100,000 (?)
P*
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References and Further Reading
• Becker and Elias, “Introducing Incentives in the Market for Live and Cadaveric Organ Donations, Journal of Economic Perspectives 21(3), Summer 2007, p.2-24
• Howard, “Producing Organ Donors,” Journal of Economic Perspectives 21(3), Summer 2007, p. 25-36.
• Roth, “Repugnance as a Constraint on Markets,” Journal of Economic Perspectives 21(3), Summer 2007, p. 37-58.
• Teaching the Ethical Foundations of Economics, National Council on Economic Education, 2007.
• http://freakonomics.blogs.nytimes.com/2007/11/13/kidneys-for-sale/#more-2089