Bryan Caplan  

The Fungible Kidney

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After I made my animated case for a free market in human kidneys, Zac Gochenour - my co-author and soon-to-be assistant professor at Western Carolina University -  originated a rather clever argument.  Quick version: Suppose you're now poor and healthy.  You're worried that one day you'll need a kidney, but won't be able to afford the free-market price.  What can you do to sleep easy?  Simple: Sell a kidney now and bank the proceeds!  Self-help at its finest.

Here's Zac fleshing out the argument.  Reprinted with his permission.


A common complaint about a market in kidneys is that the sick poor would not be able to get kidneys as easily as with a first-come, first-serve system. Even the lowest estimates of the price of kidneys in a free market is a significant sum [1] for many of the world's poor. But this argument ignores one of their biggest assets - their healthy kidney before the onset of failure.

Most underlying causes of renal failure affect both kidneys [2], so keeping a reserve kidney in case one fails will usually not work. Also, kidneys can only be stored outside the body for about 30 hours [3], so storing your healthy kidney for future transplant is impossible. In a sense, though, it is possible to store your kidney: in a market for organ transplants, your healthy kidney can be sold and the money earned from the sale used for another purpose, such as the purchase of another kidney in the future.

One way to help ensure you will have the market value for a kidney in the future is to sell one now at current market value and save the money. Prohibition of the sale of kidneys takes away the one asset that most of the poor have that could potentially save their lives.

[1] Adams, A. F., A. H. Barnett, and D. L. Kaserman. 1999. "Market for Organs: The Question of Supply." Contemporary Economic Policy17 (April): 147-155.


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COMMENTS (17 to date)
Garrett writes:

I propose a kidney futures market to better facilitate the trade. Then the Fed could stabilize the nominal price of a kidney futures contract to stabilize aggregate demand.

Tim writes:

Of course this argument doesn't address the problem that a poor person with $15k in their pocket is very unlikely to save that money.

I don't qualify as "poor" from most working definitions, but I certainly don't have enough savings built up that I wouldn't eventually be inclined to see that Kidney Check as a Down-Payment-on-a-Home Check. (Insert Megan McArdle talking about home ownership as forced savings)

William writes:

Tim:

The "problem" that a poor person might decide to spend $15,000 on something other than kidney insurance, is only a problem if you think that buying a $15,000 insurance policy against kidney disease is a good use of money for someone who is short on funds.

MikeP writes:

Yeah, I'm going to say that this will convince zero people on the restrictionist side. They don't want to see a market in kidneys. Do you think they want to see a market in kidney derivatives?

But it does point to a good solution that does not require removing a healthy kidney. Surely someone who has a phobia about having to buy a replacement kidney could purchase kidney insurance. Indeed, as rare as the need is, it should be pretty cheap. In fact, it may be so cheap that it's part of a bundle of organs in some sort of organ insurance.

Okay, truth be told, all organs could be had with something like a $10 per month rider on a standard health insurance policy. Buy the rider now or buy a kidney when you need it.

Really? People think "the sick poor would not be able to get kidneys as easily as with a first-come, first-serve system" is an argument?

tomas writes:

There is really no possible moral or efficiency argument here that would result in the conclusion that any sort of kidney market/investment scheme is a better idea than just encouraging people, including poor people, to get involved in cryonics.

Obviously there are still additional arguments, not requiring idealist assumptions, against kidney markets from various principles.

Bob Knaus writes:

For kidneys, free markets + open borders = price collapse. Think of the billion or so who are poor enough that $100 for a kidney might be enough to entice them. With modern logistics, we could easily see the slums of Calcutta providing all the kidneys needed in the US.

I think many would be repelled by this kind of dystopian outcome, both in the US and abroad.

Daublin writes:

It's a good argument anyway. It might change more minds if you made it a kidney credit instead of money, and if you allowed a kidney credit to be used toward other life-threatening surgery.

@Bob, it's a good point, but surely $100 per kidney is an exageration. That would make kidney donation less lucrative than prostitution!

MikeP writes:

Forgive me if I'm off by an order of magnitude or two, but doesn't a market in kidneys mean all kidney demand can be met by dead donors?

And I think I'm off on the side of "yes".

PKSully writes:

Transaction costs are way to high

Pajser writes:

Wait a minute. It is one thing to discuss kidneys for sake of discussions. But poor man who is concerned with his own kidney failure in the moment his kidney is OK already has hypochondria. He should think about beer, girls and football, or whatever poor people think about, not kidney. He needs psychiatrist.

And then, this guy advice such a poor man who kinda lost his mental balance and already leans to kidney without reason, to remove one healthy kidney and invest money for case of future kidney problem. Then he will have one kidney less and good reason to devote his life to kidney issue.

Funny.

Mike H writes:

@Bob Knaus

A $100 kidney means it's $100, buy or sell. So think about all the (slightly less) poor people who will now be able to afford a kidney replacement!

PaulS writes:

Leaving aside the moral/yuk factors, there's a basic practical snag. Unless you have a whole lot more than $15,000 to save, there's no useful place to "bank" it for this sort of a purpose.

Anything could happen, but most likely, you won't be needing that kidney for a very long time. But the government generally ensures that interest rates on ordinary savings accounts (currently essentially zero) are several points below inflation. So such accounts disappear fairly rapidly - even more rapidly when you consider that the interest is taxed despite being almost always well below inflation. And yet they're about the only practical place to park $15,000.

Houses are well-protected and well-subsidized by the government most of the time, even if not so much at the depth of the recession, but while $15,000 might buy a junkpile in a dangerous neighborhood in Detroit, it's nothing like enough to buy the sort of house that will keep its value reliably. Meanwhile, the transactional costs of putting such a small amount into the stock market will be high, and the volatility intolerable - there's simply and absolutely no way to know what you'd get back when all of a sudden you needed it.

So as a practical matter, the whole idea of savings of this kind seems to collapse of its own logistical weight, regardless of its possible merits in some idealized utopia.

MikeP writes:

Following up on PaulS's concerns about transactional costs in investing kidney proceeds, there are unconsidered transactional costs involved with transplanting kidneys too.

There are three costs with transplanting a kidney: (a) the cost of taking it out, (b) the cost of the kidney itself, and (c) the the cost of putting it in.

Presumably the market price of a kidney will include (a) and (b), and that is what the hypothetical kidney kiter will gain. But even assuming that his investment of the proceeds can keep pace with (medical!) inflation, he still needs to cover (c), which is likely to be quite high because he is sick.

So we're back to his needing insurance to cover (c) and wondering why that insurance doesn't cover (a) and (b) as well. This is of course all hypothetical because (a) and (b) are much cheaper coming from a dead donor and therefore swamped by (c).

john hare writes:

Larry Niven wrote a book series that included the organ banks that were stocked, involuntarily, from criminals. One wonders when and where some government is going to start harvesting from (their definition of) lawbreakers. There's a lot more than just kidneys from that sort of collection process. In the Niven stories, it reached the point that running too many red lights made you an organ donor.

Zac Gochenour writes:

For those concerned that the poor will spend their proceeds on something else: that is their prerogative. They might have higher-valued uses. By denying the right to sell your kidney, at the very least the person is being deprived of the approximate wealth they'd need to get a kidney in the future. This idea is intended to highlight the characteristic paternalism in the argument against kidney sales.

MikeP writes:

I think that those who argue for criminalizing kidney markets would wear the charge of paternalism as a badge of pride.

They would say that of course the poor shouldn't be able to sell their kidneys. It's obvious that they'll just be exploited.

Note that the same people also have a problem with markets in sex, drugs, and low wage employment.

AS writes:
Of course this argument doesn't address the problem that a poor person with $15k in their pocket is very unlikely to save that money.

If someone chooses not to save their money then they bear the consequences. That is how free markets work. No one else can decide for them.

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