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Repugnance as a Market Constraint

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. . .

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Repugnance as a Market Constraint

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  1. Repugnance as a Market Constraint

  2. Ewww!!!!

  3. Prostitution

  4. Gambling

  5. Tradable Pollution Permits

  6. Interest on loans

  7. Ticket scalping

  8. Horse meat

  9. Smoking Marijuana

  10. Sperm donation

  11. Dwarf-tossing

  12. Selling human organs

  13. Should We Allow a Market For Transplant Organs? Or. . . Brother,can you spare a kidney? Economics for JournalistsMarch 11, 2008Dr. Norman Cloutier, DirectorUW-Parkside Center for Economic Education

  14. 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.

  15. 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

  16. 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.

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

  18. Market for Kidney Transplants P S Total cost of kidney transplants $160,000 Price CeilingLegal max price of kidney = $0 D1 Q Qs Qd Number of kidney transplants

  19. 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

  20. 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

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

  22. 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

  23. 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

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

  25. 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

  26. 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.

  27. Can We Increase the Supply of Cadaveric Donations? • Presumed consent • Public and professional education

  28. Presumed Consent and Supply Shift P S S2 Total cost of kidney transplants $160,000 D2 Q Qs Qd Qs Number of kidney transplants

  29. 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.

  30. 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?

  31. 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?

  32. 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.

  33. Black Market ? P Black MarketKidney Price= $100,000 (?) S P* ProhibitionKidney Price= $0 Total cost of kidney transplants S2 $175,200 $160,000 D2 Q Qs Qd Q* Number of kidney transplants

  34. 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

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