GEA1_Case Study

(Pre-Writing)

Name: Megan Lepere

Course: ECO2023 Section 792
Semester: Summer B 2022
Instructor: Gabriela Hamilton
Date: July 22, 2022
 Today, there are over 100,000 people on the list waiting to receive a kidney

transplant. Kidneys are a scarce resource in today’s society, and the demand for these

organs is much larger than the supply of these organs. The problem is, we have a long

list of people waiting on kidney organs, but no kidneys available for these people to

have.

If the market for kidneys was a free market with no government intervention, we

would begin to see the supply of kidneys increase. A market is defined as “an institution

that enables buyers and sellers to interact and transact with one another.” (Chiang

2019) With that being said, making the kidney market a free market would mean people

literally selling their kidneys to those in need of one. With a market like this, many pros

and cons come along. One of the main benefits to a free market would be the simple

fact of more kidneys becoming available. One of the key principles of economics is

“People respond to incentives, both good and bad.” (Chiang 2019) Knowing that they

would be able to make money off of selling a kidney, more people would offer up their

kidneys to those that are in desperate need. This incentive would drive the supply of

kidneys up. Some countries have already implemented this and have seen drastic

changes in the health care world because of it. For example, in 1988 Iran made the

decision to allow a living person to sell their kidney. “Nearly three decades later, Iran is

one of the few nations without an organ shortage-- everyone who needs a kidney can

receive one.” (Houser 2017) Since legalizing the sale of these organs, Iran has seen a

huge difference in the number of willing people to donate their kidneys. “…about 55

percent of all kidneys donated in the nation are from living donors. For comparison, only

about 38 percent of kidney donations in the U.S. are from living donors.” (Houser 2017)
This statistic alone shows how many more people are willing to donate their kidney

when it comes with the incentive of money. Having more people willing to donate a

kidney comes with more benefits within itself; doctors have more kidneys to choose

from for sick patients, sick patients will not have to be attached to dialysis machines,

and doctors can better ensure that patients are getting healthy kidneys from living

people rather than kidneys from deceased people. Obviously with every benefit, there

also comes a cost. When there is money involved, people will tend to do whatever it

takes to get their hands on that money. People are concerned that if this process was

made legal, people would lie about their health in order to be able to sell their kidney

and make some money. “For example, patients will be more likely to hide or disguise

high blood pressure to ensure they could donate.” (Endocrine News 2018) This could

then further lead to more health issues for the receiver of the kidney, since the kidney

was not healthy in the first place. These costs and benefits are all part of the marginal

analysis that would need to be made when deciding if the market for kidneys should

become a free market.

As shown in graph one, if the market for kidneys was a free market, the supply of

kidneys would finally be balanced out with the demand. Without a free market, the

quantity demanded is much larger than the quantity supplied. However, since more

people would be willing to donate their kidneys with a monetary incentive, the supply

would then increase and there would no longer be a shortage of kidneys. As shown in

the graph, the demand for kidneys is downward sloping while the supply for kidneys is

upward sloping.
 Currently, in the United States, the market for kidneys is not a free market and it

is illegal for someone to sell their organs to another person. Currently, when someone is

in need of a new kidney, they are placed on a transplant list until a kidney comes

available for them, but until then, they can use a dialysis machine. The U.S. government

will not legalize the selling of organs for many reasons, and one way they ensure this

will not happen is through government intervention. “Governments sometimes intervene

in markets in order to achieve an objective that people may consider to be more

equitable…” (Chiang 2019) Our government does not allow for kidneys to be sold for

money because of equity concerns. An act was passed in 1984 called the National

Organ Transplantation Act that prohibits the sale of any organs. “The 1984 law banning

organ sales functions as a price ceiling – similar to affordable housing laws – and

creates a shortage in its wake, leading to what economists call a ‘deadweight loss’.”

(Feyman 2014) This deadweight loss is caused by supply and demand being out of

equilibrium, which is shown in graph two. Because of the fact that kidneys are in such

high demand, but there is such low supply of them, the two factors remain out of

equilibrium. This deadweight loss has a major negative impact on the sick patients in

need of a new kidney. They are unable to obtain what they need in order to survive.

Although this government intervention makes it somewhat challenging for these people

to obtain new kidney organs, it does help ensure that the receiver is getting a kidney

that they actually can benefit from, and that they kidney is healthy for them. There are

many reasons for government intervention in a serious situation like this one, but there

are three main points that are constantly discussed when this issue is brought up. First,

people say that human life can be violated by putting a possible price on it. If the kidney
market were to become a free market, people would literally be paying to live when

paying for a new kidney. Life does not have a price, and no price should be placed on it

in any way. The second thing that people believe is that the richer people will survive,

while the poorer people will not survive. If people are placing a price on their organs for

other people to buy, poor people will never be able to afford these organs and will not

be able to get the necessary organs for them to survive. Only the rich would be able to

afford these high prices, so they would be the only ones still able to live. The last point

that people are making is that people will lie about their health, just to make money. For

example, if someone was struggling with their money, they could offer to sell their

kidney to someone in need. Even if the donor had health problems, making their kidney

unable to be transplanted, they could lie and say they have healthy organs, just so they

could make money. These are all problems that could arise with having a free market

for kidney organs, and all of these problems are what makes government intervention

necessary in a situation like this one.

All countries around the world have different policies when it comes to donating

organs. Like I previously mentioned, in Iran, the market for kidneys is a free market, and

people are constantly selling their kidney organs to those in need. The Iranian

government views this as a huge change in the right direction for their health care

system. An article I read explains the kidney transplantation process in Iran and says

that it is “pretty straightforward.” (Houser 2017) When a patient is told by their doctor

that they need a new kidney, the patient shows up to an office of the Kidney Foundation

of Iran and are then added to a list by blood type. People interested in being donors

also go to one of these offices to have testing done to ensure their kidneys are healthy
enough for transplantation. They then take whoever is closest to the top of the list with

the same blood type as the donor and set up a transplant. The receiver and their family

pay the donor and the two sign an agreement and find a center to perform the surgery.

The process is not difficult at all, but the thought of literally selling an organ is still a bit

unsettling. Healthy people who are in need of a little bit of extra money can just walk

into an office, say they want to sell their kidney, and shortly after get paid actual money

for one of their organs. On top of that, the Iranian government will pay for the donor’s

healthcare for a year after the transplant. And all of this is legal in their country. It is kind

of mind blowing to know that there isn’t really any kind of government intervention in

these situations, and that everyone is okay with people making money off of their

organs. However, laws for organ donations differ in countries all over the world. In some

countries, like the Philippines, “Organ donation is legal… as long as donors and

recipients are blood relatives.” (Promchertchoo 2019) Officials in the Philippines stress

the importance of there being some sort of close relationship between the donor and the

recipient. Without any relationship, the transplant of a kidney would be considered

illegal. They have expanded on their law and have made some, but not many,

exceptions to the idea of only blood relatives being able to offer their kidney. “Donation

by non-relatives is also allowed – both for Filipinos and foreigners. However, the donors

must prove they are emotionally related to the recipients and their act is out of altruism.”

(Promchertchoo 2019) This does make the process a little bit easier for those in need of

a new kidney, but what if no one you are close to is willing or able to give up a kidney?

This is why the Philippines are known for organ trafficking. When patients get to the

point where they are quite literally desperate for a new kidney, or else they can’t live,
they will do whatever it takes to obtain one of these organs. People will literally wander

the streets of this country begging others for a kidney for either themselves or a loved

one. Saying they will pay whatever price is necessary or do whatever it takes just to

have the kidney of a healthy person. This should never be the case in any country, and

it is devastating to hear stories from people living in countries where this happens.

Shifting back to the market for kidneys in the U.S., our current state of the market

is not efficient, but changing to a free market would also not be the best solution for our

country. The government intervention that is present in today’s market causes a large

amount of deadweight loss, like I had previously mentioned. Because of the tight laws

and limitations within the market for kidneys, demand far exceeds supply at all times.

The process to even get on the list for a transplant is time consuming within itself,

having to first be referred to by a doctor, then doing your own research on the transplant

process, then finding a transplant center, then making an appointment at the center,

then getting evaluated and approved, then added to the list, all with a possibility of

never even getting that new kidney that you need. The government has made this

process extremely difficult for sick patients and these tight controls are only making the

deadweight loss in this market even greater. The people who are affected directly by

this large amount of deadweight loss are all of these sick people who are in dire need of

new organs.

Like I previously mentioned, the current government intervention is making it

nearly impossible for the kidney market to improve but making the market a free market

is not the best option for this situation. There definitely still needs to be some

government control when it comes to these serious situations, like someone’s organs. I
believe that something needs to be done in order to make the supply of kidneys

increase. I think that the best way for this to be done is by offering people an incentive

for offering to donate their kidneys. The whole process should definitely be monitored by

the government and it should not just be a simple exchange of money through the

receiver and the donor, but the government needs to do something to help these sick

people. Like I mentioned previously, one of the key principles of economics is that

people respond to incentives whether they are good or bad. An example of an incentive

that the government could offer is paying for healthcare for those who donate their

kidney. Many people could be very hesitant on donating a kidney because they fear the

health issues that could come along with only having one kidney. Knowing that they

would have support and paid healthcare if any issues arise, could change their minds

and make people more willing to donate. Another incentive could be a monetary

incentive. Most people will do anything knowing that they will receive a little bit of money

for it. Now in the free market, a monetary incentive is also present, but the difference

here is that the donor isn’t placing a price on their kidney. There would be a set price

that everyone who donates receives. Having the government be a part of this

transaction would also help ensure that all of the kidneys being donated are healthy and

good for a transplant.

Overall, the market for kidneys is struggling and there needs to be a change.

Government intervention is making it too difficult for those in need of a transplant to

actually get one, which is taking a toll on today’s society. With some new policies in

place, the supply of kidneys can increase, and the market can be back at equilibrium.
 Bibliography

Chiang, E. (2019). Microeconomics: Principles for a changing world. Worth Publishers.

Houser, Kristin. (2017) Black Market Bodies: “How Legalizing the Sale of Human Organs
Could Save Lives.”

Matrixsuperadmin. (2018) “The Market for Kidneys.” Endocrine News, September 6, 2018.
https://endocrinenews.endocrine.org/feb-2014-the-market-for-kidneys/.

Promchertchoo, Pichayada. (2019) “Kidney for sale: Inside Philippines’ illegal organ trade.”