Legalize Organ Markets

In 1996, Hurricane Fran hit Raleigh, knocking out power and trees. Duke Political Science Professor Michael Munger describes the response of several citizens from a neighboring town who decided to exploit the situation.  These budding opportunist entrepreneurs rented some refrigerated trucks, filled them with ice and drove to Raleigh, where they sold the bags of ice for about $8 each.  Raleigh police eventually arrived, arrested them for price gouging, and allowed the ice to melt with virtually none distributed to the locals.

Was this a victory for the common folk or an interference with voluntary transactions that made everyone better off?  Given the shortage of ice, it seemed better to transport as much ice as possible to Raleigh, even if it is expensive; however, selling goods that people are in desperate need of just feels wrong.  At the time, it was apparent residents were willing to accept $8 as a price they would pay (there was a long line for the overprice ice after all) and, in libertarian thought, voluntary transactions are moral by definition. Yet there is a nagging feeling that this exchange does not fit the category of “voluntary.”

Let’s look at another example in which the stakes are much higher.  According to the government website organdonor.gov, roughly 79 transplants are done every day, while 18 people die waiting for an organ, and the gap between those waiting and the amount of organs transplanted continues to grow.  If there was a policy we could adopt to reduce the cost of human life, it seems morally imperative to implement that policy.  Economics would suggest that were we to compensate donors, we might see a rise in organ supply.  Even if the parties were willing, would society accept the selling of organs?

It is difficult to critique a purely voluntary transaction in which both parties have good alternatives.  Suppose there is a fictional prospective buyer who needs a kidney, has extra money, and is willing to pay for a donated organ. Suppose another person, Ben, has two kidneys, is healthy, understands the risks, has supplemental income, but wants extra cash from a kidney sale; in what manner can we criticize Ben?  The utilitarian analysis favors the exchange occurring. We cannot be concerned with exploitation, because Ben has good alternatives.  We could appeal to traditional values and say this is unnatural or goes against our religious beliefs, but that sort of argument is not based on rationalism and echoes of arguments against gay marriage and interracial marriage before that.  Using our religious beliefs to stop Ben from selling his kidney sounds fairly immoral. Furthermore, given that we generally believe people have a natural right to their own bodies, telling Ben, a perfectly healthy and rational person, that he cannot be compensated for undergoing the risk of being a living donor seems to infringe his natural liberties.  And since the utilitarian benefits are so clear, it looks like this transaction is both moral and beneficial.  Professor Munger actually invented a name for these transactions, calling them “euvoluntary,” or truly voluntary.

There is an enlightening corollary when looking back at the price gouging example.  No “euvoluntary” transactions occurred when the price gougers sold ice for $8, as the purchasers had no real alternatives.  But had the ice been sold before the storm, clearly the transactions would have been “euvoluntary”–and legal—since no one would have bothered paying $8 for ice when cheaper alternatives abounded.  If we tolerate “euvoluntary” transactions in other areas, and if such transactions only benefit those involved with virtually no room for exploitation, there are only reasons in favor of legalizing these organ transplants.  Legalizing the transplantation of euvoluntarily sold organs would save lives immediately.  Enforcing that the transactions be euvoluntary would not be difficult; a six month or one year waiting period to access the money could stop many from resorting to the sale of their organs if they are in dire need of fast money.  Donors could also be required to submit tax returns to ensure their incomes are above a minimum threshold.  Because it is so easy to enforce these rules, the exchange of organs ought to be legalized for everyone’s benefit.

But now it is important to analyze the more controversial situation by which the transaction of organs is merely voluntary: someone with low income needs extra money, maybe a single father wants to send his child to college, or maybe he is in danger of serious income shortfalls.  This person feels that selling his kidney would be the best option for him; however, if he were richer, he would definitely not take part in the transaction.  It is clear that the father would rather have the money to start a college fund, and whoever he is selling to would much rather have a functioning kidney than disposable income.  All in all, everyone is better off.  Yet, just as in the price gouging situation, we do not feel comfortable allowing disadvantaged actors to engage in trade when their options are so limited.

There is nonetheless a strong case to allow this activity, both in organ transactions and many other areas.  The less wealthy person is in a bad situation because of his or her endowment, or current wealth situation.  In other words, the father selling his organs does not have many options because he is poor.  But if we implement a policy which restricts these transactions from occurring, we have not changed the underlying economic problem, but only removed available options, making the person in question, in some sense, even poorer.  Returning to the price gouging predicament, the best policy would be to sponsor as many charitable supply transports as possible—to try and reduce the resource scarcity after the natural disaster. Separately, price gouging restrictions should be removed to allow prices to move freely.  This would incentivize private actors to bring supplies to hard hit areas. These locations would then be able to access some supplies for a fee, which is better than having no supplies at all.  Taxpayer sponsored relief and charity would help solve the scarcity problem, but we would never actively be making anyone worse off.

The corollary for organ transactions is legalization, allowing the market to fix the organ shortage while also providing income relief.  Separately, policies can be implemented to address income security.  It is important to note that in reality, humans are very bad at risk assessment. Consequently, an important critique of this system is that situations will arise in which the selling of one’s kidney may seem beneficial, even if the seller is unable to determine whether the long-term risks are too great. However, this logic only applies to living donors and, there is no benefit in restricting organ transactions that occur after someone has died.

There are more nuances to legalizing this market than first appear, and libertarians aren’t the only ones to notice the benefits; the New York Times’ Tina Rosenberg wrote an article in support of compensating organ donors.  Euvoluntary transactions have virtually no possibility of exploitation, and all that stands in the way of their benefits is the law. There is no reason to stop those who would like to be compensated for the risk they undertake as living donors, nor is there a need to stop those who would like additional incentive to sign up as organ donors post-mortem.  Low income organ donors must be approached with more caution, but even some of these transactions should be allowed to occur. While moral misgivings may bother us, it is more important to attempt to reduce the organ shortage, save more lives and better allocate wealth to lower income groups if possible.  Continued human loss of life due to our blanket discomfort with odd markets is irrational, harmful and should be unacceptable.

Further reading:

• EconTalk episode on organ markets.
• Gary Beckers’ article in the Wall Street Journal
• Shmuly Yanklowitz at The Atlantic
• Mike Munger’s paper on euvoluntary exchange

Picture info:
Camp Arifjan, Kuwait (Mar. 2, 2005) : Lt. Cmdr. Morteza Farr, MC, left, and Cdr. Greg Wolff, MC, examines an U.S. Army soldier’s broken wrist as Lt. Jason Gillespie, NC, adjusts the lights in the operating room at the U.S. Military Hospital, Camp Arifjan, Kuwait. U.S. Navy photo by Chief Journalist Kevin Elliott (RELEASED). Public domain image.