Prices

1. Prices Lesson 17: Prices for Kidneys?

2. Should We Allow a Market For Transplant Organs? Or. . . Brother,can you spare a kidney?

3. Objectives Students will: • Describe the effects of a price ceiling on the market for kidneys available for transplant. • Analyze the effects of legalizing the purchase and sale of transplant organs. • Describe three main types of moral or ethical theories. • Use economic and ethical theories to evaluate four organ-transplant policies.

4. Kidney Transplant Background • Both transplants and those seeking transplants have grown over time. • Transplants • 1988 8,900 • 2008 13,743 • Most of this increase came from live donors. • Waiting list • 1990 17,000 • 2008 83,000 • Reasons for the increase? • Technological advance. • Inability of the current system to procure enough organs.

5. Waiting list is not a complete measure of kidney demand. In 2009, there were 83,000 on the official waiting list, but 367,000 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

6. In 2008, 80% of living donors and recipients were related. • There are currently 23 million Americans with chronic kidney issues. • The opportunity to buy and sell kidneys has the potential to save lives and improve the quality of life for many people.

7. The Demand for Kidney Transplants Has Grown Faster Than the Supply Source: Becker and Elias, 2007

8. Prohibition places a ceiling price on kidneys. Government mandated price ceiling of $0.

9. How many kidneys are donated at P=$0? 20,000 kidneys supplied (donated) at P= $0

10. How many kidneys are demanded at P=$0? 20,000 kidneys supplied (donated) at P= $0 80,000 kidneys demanded at P= $0

11. What is the shortage, and what caused it? 60,000 kidney shortage

12. What would happen if the ban on kidney sales was lifted?

13. Would a market in kidneys be fair to the poor? • No! • Poor are priced out of the market. • Poor may be “coerced” into selling kidneys. • Poor may not understand the risks. • Yes! • Sale would significantly increase the wealth of a poor family. • Is it ethical to deprive the poor of the opportunity to increase their standard of living – and save lives? • We allow markets in: blood, hair, and the use of a uterus.

14. Would a market increase the incentive for organ theft? Probably not. As opposed to prohibition, a market would make kidneys more available, lowering the price, making theft less profitable. A live donor market could eliminate the possibility theft. Under prohibition, what is the black market price of a kidney?

15. The Black Market price of kidneys?

16. Would there be fewer altruistic donors? S

17. Public campaign to increase altruistic donations? S

18. If it is obvious that a market would save lives, why don’t we allow it? Agent Action Consequences

19. Ethical Theories • Outcomes-Based: Right Consequences • It’s results that matter. • Market would save lives. • Duty-Based: Right Action • Proscribed ethical principles should be followed. • Is it right to treat your body as a commodity? • Virtue-Based: Right Agent • Intentions and personal virtues matter. • What would a “good” person do?

20. Repugnance as a Market Constraint ?

21. Prostitution and Pimps

22. Horse Meat Seller

23. Drug Pushers

24. Drug Addicts

25. Blackmailer

26. Slanderer and Libeler

27. Advertiser

28. Gypsy Cab Driver

29. Ticket Scalper

30. Dishonest Cops

31. Counterfeiter, not in Government

32. The Miser

33. The Inheritor

34. The Money Lender

35. The Charity Non-Contributor

36. Slumlord

37. Strip Miner

38. Scab

39. Child Labor

40. Dwarf-tossing

41. Selling human organs

42. Market for Kidney Transplants P S $160,000 is costs without kidney costs. Total cost of kidney transplants $160,000 Price CeilingLegal max price of kidney = $0 D1 Q Qs Qd Number of kidney transplants

43. Market for Kidney Transplants P S Total cost of kidney transplants Waiting List $160,000 Price Ceiling D1 Q Qs Qd Number of kidney transplants

44. Market for Kidney Transplants P Technological advances have increased the number of patients eligible for transplantation S Total cost of kidney transplants Growing Waiting List $160,000 Price Ceiling D2 D1 Q Qd Qs Qd Number of kidney transplants

45. Market for Kidney Transplants P S Total cost of kidney transplants $160,000 Price Ceiling D2 Q Qd Qs Number of kidney transplants

46. 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

47. 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

48. Reservation Price of a Kidney Risk of death $5,000 Foregone earnings $2,700 Reduced quality of life $7,500 Total $15,200

49. Allowing for Legal Market Transactions P 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 S Total cost of kidney transplants S2 $175,200 $160,000 Price Ceiling D2 Q Qs Qd Q* Number of kidney transplants

50. 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.