The Joy of Economics:  Making Sense out of Life
 Robert J. Stonebraker, Winthrop University
 

Not Enough Hearts

            And when your heart begins to bleed,

                        You’re dead, and dead, and dead, indeed.

                                                                        …..Mother Goose

            You gotta' have heart.  A liver, lungs, and kidneys help, too.  Some of us are blessed with healthy organs ready to carry us through a long and active life; some of us are not.  For most of human history, the consequence was straightforward: diseased organs meant death.

            That  no longer is true.  Modern medical maestros transplant thousands of organs annually.  Just as your auto mechanic can replace a damaged carburetor; your surgeon can replace a damaged heart -- if one is available.  Ah, there's the rub.

            In June 1993, Pennsylvania's then-Governor Robert P. Casey announced that without a double transplant, he would soon die from amyloidosis, a rare, and typically fatal, genetic disease.  Within days he was recuperating in the University of Pittsburgh Medical Center with a new heart and new liver -- compliments of Michael Lucas, a 34 year-old black man who had just died from a gang beating in nearby Monesson, PA.¹

            Controversy erupted immediately.  The average waiting time for hearts exceeded six months.  For livers, it was over two months.  How did a governor beat the odds and get both in two days?  Was it favoritism for the rich and famous?  No apparent improprieties occurred, but eyebrows were raised from Fairbanks to Fort Lauderdale.

Shortages

            To economists, the curious issue is not the Byzantine set of rules used to allocate scarce organs; it is that there is a shortage of organs at all. 

            The shortage is real.  Over 85,000 Americans were waiting for assorted organs in 2004.  Those waiting for kidneys survive on dialysis, a painful process even more expensive than kidney transplants.  Those waiting for other organs often die.  In 2003, almost 6,000 died while waiting; more than twice as many as died in the 9/11 attacks.    And the gap between quantities supplied and demanded is growing.  Dramatic strides in medical technology continue to make transplants safer and more successful.  With insurance covering much of the bill, the demand keeps growing.  But supply does not.  Despite educational programs and impassioned pleas, organ donations simply have not kept pace.² Recent studies estimate that almost 200,000 Americans will have died as a result of organ shortages by the year 2015.³

            Prices eliminate shortages in most markets.  Excess demands drive up prices.  The higher prices elicit increases in quantities supplied and dampen quantities demanded until shortages disappear.  Is there a shortage of minivans?  No problem.  Competition for the scarce vans will raise their price.  The higher price both discourages consumption and encourages extra production.  The process continues until the quantity supplied meets the quantity demanded and the shortage disappears.

            But the market price of organs cannot rise.  The National Transplant Act of 1984 prohibits any compensation for those who supply organs.  The price for organs, by law, is kept at zero.  A policy of free minivans would surely create a shortage of minivans.  That a policy of free hearts and kidneys might create similar shortages should be no surprise.

            The impact on costs and quality is less obvious.  Given the excess demand for organs, access to them can be very profitable for hospitals and surgical transplant teams.  In fact, transplants are so profitable that hospitals all over the country have crowded into the market seeking a piece of the action.⁴  However, the entry of new transplant centers has not been accompanied by an increase in the number of donated organs available for transplant.  The result is fewer transplants per center.  Transplant centers must invest in sophisticated and expensive technology.  When the fixed costs of these assets are spread over many transplants, the cost per operation is low.  But, when the number of transplants per center fall, the cost per transplant rises.⁵   More important, the success of a transplant often hangs on the experience of the transplant team.  With fewer transplants per center, experience levels drop and success rates are jeopardized.⁶

            Here's the summary.  Voluntary donations have not kept pace with the demand for transplantable organs.  Large and increasing shortages exist.  We end up with fewer transplants, poorer-quality transplants, more costly transplants, more dialysis, and more deaths.  Not a pretty picture.

Markets for organs

            Can we fix it?  Can we generate more organs for transplant?  When we want more minivans produced, we need only raise the price.  Why not do the same for hearts and kidneys?  That's right.  Sell them.  Create a market in human organs.  Despite legal obstacles and international pressures, open trade in human kidneys flourishes in many poorer areas of the world.  Humans need only one healthy kidney to survive and in 2006 a living donor in Iran could expect to sell a spare kidney for $3,000 to $4,000.⁷

            Living donors are not possible for many organs, but payments to surviving relatives might elicit additional donated organs.  Or, for a lump sum, individuals could sell contracts to brokers for permission to harvest any usable organs at their death.  Individuals who change their minds later in life could repurchase the contracts.  Even modest prices might dramatically increase the quantity of organs supplied.⁸

            Are you ready for the graph?  The graph below pictures supply and demand curves for transplantable organs.  The demand curve is likely to be relatively inelastic (can you explain why?).  The quantity supplied is more likely to be responsive to changes in price.  At the market equilibrium, organs would sell for a price of P₀ and a total of Q₀ organs would be bought and sold.  However, by restricting the market price to zero, the quantity supplied falls to Q₁ , well below the quantity demanded, and a shortage appears.

            Is a market for organs abhorrent?  Is it morally reprehensible?  Some believe it to be.  Does it devalue life if we allow organs to be bought and sold?  Maybe.  But might it devalue life even more to let patients die on a waiting list?  Will not such markets prey on the desperately poor who see selling their organs as their only escape from wretched deprivation?  Maybe.  Will Shaquille O'Neal and Bill Gates be first in line to trade their kidneys for $1,000?  Don't hold your breath.  Low-income individuals are more likely to sell hearts and kidneys, just as they are more likely to sell blood in current markets.  But these are voluntary transactions.  Assuming individuals can make rational choices, they will sell organs only when convinced that such sales are in their self-interest; when the benefits they will receive exceed any costs they must bear.  The shame, if any, is not in the transaction.  The shame, if any, is in allowing citizens to reach such desperate conditions in the first place.

            What about costs?  Will an open market drive up the cost of transplants and make transplants less accessible to low-income patients.  Probably not.  Under the current system, shortages make transplants inaccessible to the rich and poor alike.  If markets increase the quantities of organs supplied, the number of transplants going to both the rich and the poor can increase.  Even if the price rises, there is no necessary need to ration poor patients out of the market.  Since kidney transplants are cheaper than dialysis, society's savings could be redirected into subsidies to low-income recipients. Moreover, economist David Kaserman, himself a kidney-transplant recipient, estimates that the organ shortage could be eliminated with a price as low as $1,000, a mere fraction of the overall cost of a transplant operation.⁹

            On the other hand, free markets are not always efficient.  Consumers sometimes make irrational or uniformed choices.  Might that occur in organ markets?  And the decisions of some might harm others.  Might relatives "pull the plug" prematurely on Uncle Fred to get a crack at potentially valuable organs?¹⁰  Might organized crime networks find kidnap and/or murder more profitable if they can more easily fence the recycled organs of their victims?  No system is likely to be perfect.

            What do you think?  Anyone want to bid on my heart?

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Notes:

1.         The transplant afforded Gov. Casey seven more years of life.  He died in June 2000. His son Robert Casey, Jr.
            currently serves as U.S. Senator for Pennsylvania.

2.         See Beard, T. Randolph; Kaserman, David L. and Saba, Richard P., "Limits to Altruism: Organ Supply and Educational  Expenditures," Contemporary Economic Policy, volume 22, number 4, October 2004, pp. 433-442.

3.         Beard, T. Randolph, John D. Jackson and David Kaserman, "The Failure of U.S. Organ Procurement Policy," Regulation, Winter 2008, pp. 22- 30.

4.         See Barnett, A.H. and Kaserman, David L., "The 'Rush to Transplant' and Organ Shortages," Economic Inquiry, volume 33, July 1995, pp. 506-515.

5.         Ibid. pp. 507-508.

6.         Ibid. pp. 508-509

7.         "Your part or mine?" The Economist, November 18, 2006, pp. 60-62.

8.         See Blair and Kaserman, op. cit., pp. 422-424.

9.         Kaserman, David L. and Barnett, A. H., "The U.S. Organ Procurement System: A Prescription for Reform," AEI Evaluative Studies, June 2002.  Also, remember, shortages have driven the cost of transplants up.  It is plausible that a free market for organs could lower transplant costs enough to offset the additional expense of having to purchase the organ.

10.         In a controversial ruling, a California surgeon recently has been charged with speeding a patient's death to harvest his organs. See "Transplant Surgeon Faces Criminal Charges for Donor's Quick Death," amednews.com, May 12, 2008, http://www.ama-assn.org/amednews/2008/05/12/prca0512.htm

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Testing Yourself

To test your understanding of the major concepts in this reading, try answering the following:

1.         Explain why there is a shortage of human organs available to be transplanted and illustrate with an appropriate graph.

2.         How has the shortage of organs affected the cost and quality of transplants?  Explain.

3.         Discuss the pros and cons of allowing human organs to be bought and sold.

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