Monday, November 21, 2011

Market Uncertainties Impede Organ Market Development

My posted comment about organ sales on Cafe Hayek blog, "Free the Market. Save Lives." by Don Boudreaux:
Market prices, or as might be said in a Coasean framework, negotiated prices, include a bundle of legal rights and warranties related to the sale in addition to the item. Markets are most liquid and most accurately priced when all relevant information is available, such as when there is some standardization or fungibility of the product for sale. To me, market impediments and not illegality are stopping the sale of organs and development of an organ market.

In an organ sale, there is a lot of asymmetric information. The provider of the organ knows a lot more about his/her health, family's medical history and previous habits, such as alcohol use, drug use, smoking, high fat diets, exercise, etc.

The organ providers who are younger, healthy, ate healthy diets, exercised, refrained from drinking and smoking, and come from families with long life expectancy will want a market that allows them to capture a higher price for their better quality organs. The others with the less healthy organs will want a market that obscures or ignores the quality of their organs in order to obtain a price higher than under full disclosure.

Since standardization is impossible for organ sales (the organ quality will vary by individual), attaching product warranties to sales facilitates market transactions and alleviates many asymmetric information problems, but creates a new set of problems.

Should someone who gives up a kidney for cash, have to return the cash if the kidney is defective, disease-ridden, short-lived, fails in the recipient, etc?

Should organ sales be limited to only those providers who have healthier lifestyles, better genetics and who can provide a higher quality organ?

If sales of different quality organs occur, market prices will reflect quality (poor quality – lower price, higher quality – higher price) and have a range. Will society allow the sale of cheaper, poorer quality organs to poorer members of society who cannot afford to pay more for a better quality organ? Will society tolerate that some in poverty with unhealthy poverty related lifestyles will get less for their organs than those who are rich and can afford healthier lifestyles?

Who owns a child's organs? Can a parent ever sell a child's organ? Suppose, it is the only available means to raise funds for expensive medical treatments to save the child's life from another disease? Or child's organ, but parent's or sibling's life?

If the market will price younger organs at a higher price, are we creating a new risk for children?

As far as I know, there is not a significant black market selling and buying of organs in the US, despite severe shortages and the availability of wealth among some of the future recipients.

The lack of a sizable black market despite the apparent need for more organs indicates to me that market transaction impediments, and not morality or illegality, is the major obstacle to organ sales.

When the market can resolve the asymmetry information problems, sale transactions in organs will start to occur (probably underground and in a black market). When enforceable legal rights and warranties attach to the sales, a full-blown, visible and legal, organ market will develop.

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