Klein Lecture in Osaka, Dec 19 2014

I'll be speaking Friday in Osaka...

2014 Lawrence R. Klein Lecture

Prof. AlvinRoth

2012 Winner Nobel Prize in Economics	Title: The Economist as Engineer
	2014.12.19 (Fri.) Open15:30　Start16:00 Conference Room C01-02, 8th Floor, TOWER-C, Knowledge Capital, Grand Front Osaka   MAP *Lecture will be given in English Reception Time: 18:30 Venue: URGE (3rd Floor, Knowledge Capital, Grand Front Osaka)
		INTERNATIONAL ECONOMICREVIEW Osaka University　Institute of Social and Economic Research 6-1 Mihogaoka, Ibaraki, Osaka 567-0047 JAPAN E-mail: klein_lecture@iser.osaka-u.ac.jp URL: http://www.iser.osaka-u.ac.jp/~ier/lecture2014.html

Punishing puns in China

The Chinese government is reported to have taken steps to make puns repugnant. The Guardian has the story:

China bans wordplay in attempt at pun control
Officials say casual alteration of idioms risks nothing less than ‘cultural and linguistic chaos’, despite their common usage

"From online discussions to adverts, Chinese culture is full of puns. But the country’s print and broadcast watchdog has ruled that there is nothing funny about them.

It has banned wordplay on the grounds that it breaches the law on standard spoken and written Chinese, makes promoting cultural heritage harder and may mislead the public – especially children.

The casual alteration of idioms risks nothing less than “cultural and linguistic chaos”, it warns.

Chinese is perfectly suited to puns because it has so many homophones. Popular sayings and even customs, as well as jokes, rely on wordplay.

Programmes and adverts should strictly comply with the standard spelling and use of characters, words, phrases and idioms – and avoid changing the characters, phrasing and meanings, the order said.But the order from the State Administration for Press, Publication, Radio, Film and Television says: “Radio and television authorities at all levels must tighten up their regulations and crack down on the irregular and inaccurate use of the Chinese language, especially the misuse of idioms.”

“Idioms are one of the great features of the Chinese language and contain profound cultural heritage and historical resources and great aesthetic, ideological and moral values,” it added.

“That’s the most ridiculous part of this: [wordplay] is so much part and parcel of Chinese heritage,” said David Moser, academic director for CET Chinese studies at Beijing Capital Normal University.

When couples marry, people will give them dates and peanuts – a reference to the wish Zaosheng guizi or “May you soon give birth to a son”. The word for dates is also zao and peanuts are huasheng.

The notice cites complaints from viewers, but the examples it gives appear utterly innocuous. In a tourism promotion campaign, tweaking the characters used in the phrase jin shan jin mei – perfection – has turned it into a slogan translated as “Shanxi, a land of splendours”. In another case, replacing a single character in ke bu rong huan has turned “brook no delay” into “coughing must not linger” for a medicine advert."

Organs and Inducements: Special Issue of Law and Contemporary Problems edited by Cook and Krawiec

Volume 77	2014	Number 3
Organs and Inducements
Philip J. Cook & Kimberly D. Krawiec Special Editors
Foreword PDF		Philip J. Cook & Kimberly D. Krawiec	i
A Primer on Kidney Transplantation: Anatomy of the Shortage PDF		Philip J. Cook & Kimberly D. Krawiec	1
Six Decades of Organ Donation and the Challenges That Shifting the United States to a Market System Would Create Around the World PDF		Alexander M. Capron	25
Regulating the Organ Market: Normative Foundations for Market Regulation PDF		I. Glenn Cohen	71
Perceptions of Efficacy, Morality, and Politics of Potential Cadaveric Organ-Transplantation Reforms PDF		Christopher T. Robertson, David V. Yokum & Megan S. Wright	101
Philanthropically Funded Heroism Awards for Kidney Donors? PDF		Muriel Niederle & Alvin E. Roth	131
Reverse Transplant Tourism PDF		Kimberly D. Krawiec & Michael A. Rees	145
Organs Without Borders? Allocating Transplant Organs, Foreigners, and the Importance of the Nation-State (?) PDF		I. Glenn Cohen	175
State Organ-Donation Incentives Under the National Organ Transplant Act PDF		Sally Satel, Joshua C. Morrison & Rick K. Jones	217
Designing a Compensated–Kidney Donation System PDF		T. Randolph Beard & Jim Leitzel	253
Altruism Exchanges and the Kidney Shortage PDF		Stephen J. Choi, Mitu Gulati & Eric A. Posner	289
Reciprocal Altruism—the Impact of Resurrecting an Old Moral Imperative on the National Organ Donation Rate in Israel PDF		Jacob Lavee & Avraham Stoler	323
Organ Quality as a Complicating Factor in Proposed Systems of Inducements for Organ Donation PDF		Michael L. Volk	337

Virginia Postrel on the new allocation rules for deceased donor kidneys

Virginia Postrel is skeptical about the new rules for allocating deceased donor kidneys, and thinks there is likely to be some good news (about slower-growing waiting lists) that will just be an artifact of removing some incentives to get on the list early.

Old, Sick and Need a Kidney? Good Luck

"Within a few years, new rules about allocating kidneys, which went into effect last week, could shrink the waiting list. But this apparent improvement will be an illusion -- an artifact of the incentives the new rules create, not genuine progress. Changing who gets priority for scarce kidneys will help some patients and hurt others, and it might squeeze out a few more total years of healthy living for the lucky recipients. But a different process for managing the existing supply of kidneys won’t make a serious difference for the skyrocketing number of patients who need transplants.

In the past, how long you’d been on the waiting list was the main factor that determined how close you were to getting a compatible kidney. (Some blood types are harder to match than others, so someone with less compatible type O blood would wait longer than someone with type A.) The longer you waited, the further you moved up the list. The clock started when your transplant center did the necessary tests and listed you as a transplant candidate.

The old system hurt those patients, most of whom were black, who had spent years on dialysis before they got referred for transplants, whether because of medical factors, insufficient health insurance or complacent nephrologists. (About a third of the patients, about 35,000 people, currently on the waiting list are black.) The new system instead starts the clock when a patient goes on dialysis.

“In the previous system, it would make sense to list somebody even if they weren’t quite ready to get a transplant, so they could accrue waiting time,” Benjamin E. Hippen, a transplant nephrologist at Carolinas Medical Center in Charlotte, North Carolina, explained in an interview. Now, since they won’t have a shot at a kidney for years, there’s no reason to put them on the waiting list so soon. “It’s going to look like the overall list has shrunk,” he predicted, “when really it’s just a strategic move by the transplant center.”

While arguably fairer, counting dialysis years creates much more uncertainty. Every time a new patient is added, that person’s dialysis history rejiggers the list. It’s like waiting for an airline upgrade: If you’re a lowly gold status member, you may start out at the head of the line, only to end up in coach as platinum and executive platinum travelers put in their requests and push you down the queue. In this case, there’s a lot more at stake than more legroom and better meals."

...
“The people who lose in all this are going to be the people who are a little older, who are diabetic and who don’t have a lot of years of waiting time -- which is most patients,” said Hippen, a critic of the new system. “That sort of describes the average new patient.”

Yotel: hotel rooms to match the new airline leg room

It's a good thing we're all getting smaller...

Tiny Hotel Rooms Follow High Land Prices in Yotel Growth

"...Yotel, a minimalist hotel brand whose signature feature is tiny rooms, or “cabins,” of about 175 square feet (16 square meters). That means Synapse can fit 202 revenue-producing rooms into a building that would accommodate just 94 were it a standard hotel, he said.

“People in the industry in San Francisco thought we were crazy until they figured out that we were fitting in two times the amount of keys,” said Palmer, who bought the property with Yotel’s largest shareholder in April and expects to open the hotel in 2017.

"Yotel is finding that its small rooms are a big selling point as it seeks to expand globally. With land costs soaring in cities such as New York, San Francisco and London, the company is pitching itself to developers as a revenue-maximizing solution for small and odd-sized lots.

“You can unlock the potential from sites in an area where you don’t know what to do,” Chief Executive Officer Hubert Viriot, who’s based in Dubai and took the helm of London-based Yotel in May, said in an interview. “We fit pretty much everywhere.”

Herve Moulin at The Adam Smith Business School of the University of Glasgow

The University of Glasgow highlights the work of Herve Moulin:
Economists as Social Engineers: Professor Hervé Moulin, Donald J Robertson Chair in Economics at the University of Glasgow, explains mechanism design.


Hervé Moulin graduated in 1971 from the Ecole Normale Superieure in Paris, and received his Ph.D. in mathematics from the Universite de Paris in 1975. Before joining the University of Glasgow as a Professor (Donald J Robertson Chair) of Economics, he has taught at the Ecole Nationale de Ia Statistique et Administration Economique in Paris, University of Paris at Dauphine, Virginia Polytechnic Institute and State University, Duke University, and Rice University. His research has been supported in part by seven grants from the National Science Foundation  (USA). He has written five books and over 100 peer-reviewed articles.

Some potentially repugnant markets

Jan Zilinsky writes with a selection of potentially repugnant markets:

 "I saw several pieces since late August, so I thought I would send along a few links:

-        Quebec is planning to cut in vitro fertilization insurance coverage and also “ban on in vitro fertilization for all women under the age of 18 and over the age of 42”

-        People protest rabbit meat in U.S. stores

o   Is the distinction between animals we eat and animals we love is entirely arbitrary?

o   Data: “producing six pounds of rabbit meat requires the same amount of food and water as it takes to produce one pound of cow meat”

-        Family judge warns pedophiles exploiting surrogacy laws

o   Legal situation: “Altruistic surrogacy is legal throughout Australia but commercial surrogacy is banned everywhere except in the Northern Territory, which has no surrogacy laws.”

o   Stated concern: “The Chief Judge warns that lack of regulation in many countries “creates a risk that children could be ‘commissioned’ specifically for trafficking or abuse purposes’’.”
*********

I don't think there's any repugnance involved in this last story, but it's still an interesting one, and where there's blood there may be repugnance...

-        Blood Industry Shrinks as Transfusions Decline

Insurance markets for terrorism

From Business Week:

The Unexpected Threat to Super Bowl XLIX
By Howard Kunreuther and Erwann Michel-Kerjan, December 09, 2014

"If you’ve already bought tickets for Super Bowl XLIX or are looking forward to watching it with your friends and family, you may be surprised to learn that there is a chance it might not be played. Congress first needs to make a decision on renewing a piece of legislation that you possibly never have heard of: TRIA—the Terrorism Risk Insurance Act.

"TRIA was signed into law in 2002 in the aftermath of the 9/11 terrorist attacks, establishing a risk-sharing partnership between the federal government and the insurance industry that made terrorism insurance widely available to U.S. businesses—among them, organizers of sporting events. Without federal support, most insurers had been unwilling to offer coverage. TRIA was renewed in 2005 and in 2007. It is set to expire on Dec. 31 unless Congress renews it. With two weeks until the deadline, the clock is ticking.
...
"Before 9/11, insurers included terrorism coverage in all commercial policies without charging for it because the risk was below their threshold level of concern. But after paying $44 billion in claims for 9/11—at that time the most costly disaster in the history of insurance—most insurers excluded terrorism from commercial policies.
...
"TRIA addresses the insurance supply problem. Under the program, the federal government provides a financial back-up for insurers by covering a portion of insured losses above $27.5 billion, up to $100 billion, giving the insurance industry some certainty as to its maximum exposure. In return, insurers are required to offer terrorism coverage to all business clients, which can decide to purchase coverage or not. About 60 percent of large businesses carry terrorism insurance, indicating strong demand for it.

Unless TRIA is reauthorized during the next two weeks, insurers will have the right to cancel terrorism insurance policies after Jan. 1. They are likely to do so for fear of insolvency should a massive terrorist attack take place with no government backup. By law, only insurance companies offering workers’ compensation insurance must include terrorism peril in their policies, whether or not TRIA is renewed. The only way for those insurers to limit their exposure to terrorism—say, in large metropolitan areas where they are heavily concentrated—might be to cancel some commercial insurance policies altogether if TRIA is not in place. Some businesses would then be unprotected against a wide variety of risks, ranging from fire to industrial accidents."
***************

See also the Wharton Risk Center report, “TRIA After 2014

Ramesh Johari's class on Platform and Marketplace Design, winter 2015

Here's a class by Ramesh Johari, well worth considering in the Winter quarter at Stanford:

MS&E 336: Platform and Marketplace Design The last decade has witnessed a meteoric rise in the number of online markets and platforms competing with traditional mechanisms of trade. Examples of such markets include online marketplaces for goods, such as eBay; online dating markets; markets for shared resources, such as Lyft, Uber, and Airbnb; and online labor markets. We will review recent research that aims to both understand and design such markets. Emphasis on mathematical modeling and methodology, with a view towards preparing Ph.D. students for research in this area. Prerequisites: Mathematical maturity; 300-level background in optimization and probability; prior exposure to game theory.

Updates on school choice

Some recent articles look at school choice in several American cities, including some (Denver, New Orleans, DC) where IIPSC has helped out, and some that are contemplating a unified school choice system.

Detroit Needs Universal Enrollment for District and Charter Schools, Report Says
"Creating a one-stop shop where Detroit families can enroll in both district and charter schools would help families navigate what has become a very complex school-choice system. That's at the heart of a series of recommendations made in a report commissioned by Excellent Schools Detroit, a nonprofit devoted to improving the city's schools."



How Parents Experience Public School Choice
By Ashley Jochim, Michael DeArmond, Betheny Gross, and Robin Lake

From the executive summary:
"A growing number of cities now provide a range of public school options for families to choose from. Choosing a school can be one of the most stressful decisions parents make on behalf of their child. For all families, but for some more than others, getting access to the right public school will determine their child’s future success. How are parents faring in cities where choice is widely available?
...
"Parents experience school choice differently in different cities. Differences across the cities suggest parents’ perceived challenges and opportunities with choice vary depending on where they live.

"In Denver, New Orleans, and Washington, D.C., parents were more likely than parents in the other cities to say their school systems were getting better. In Philadelphia, only 11 percent of parents reported having a positive outlook about the public education system, compared to 65 percent in D.C.

"However, a generally positive outlook does not necessarily mean that families are satisfied with their public school options. Denver parents were most likely to report having another good public school option available to them, but parents in Philadelphia, New Orleans, and D.C. reported the most challenge finding a school that provided a good fit for their child.
...
"Cities have made uneven investments in the systems that support parent choice. Parents’ experiences with choice are likely shaped by the systems and supports put in place by policymakers, including access to information about schools, the enrollment process, and transportation options.

"Denver, D.C., and New Orleans have made the most progress in investing in these systems. However, we saw little consistent evidence linking specific investments with positive outcomes, which may simply be a reflection of the newness of the investment or may indicate the need for these cities to
go further into developing these supports.

"In Denver, parents who enrolled their child after implementation of the common (sometimes called “unified” or “universal”) enrollment system, which enables parents to apply to all charter and district schools via a single application, were less likely to report struggling with enrollment processes. Yet, in New Orleans, parents were more likely to report problems after the introduction of common enrollment. "

Jean Tirole's Nobel lecture

Jean Tirole - Prize Lecture

Market Failures and Public Policy

New York City high school choice: market design in the NY Times

The NY Times has a nice article on the high school application process, and how it arose, with particular attention to the work that Atila Abdulkadiroglu and Parag Pathak and I did with Neil Dorosin, when he worked for the New York City Department of Education. (We've since worked to help bring school choice to other cities, through IIPSC...)

How Game Theory Helped Improve New York City High School Application Process
By TRACY TULLIS  DEC. 5, 2014

Here's how the article begins:

"Tuesday was the deadline for eighth graders in New York City to submit applications to secure a spot at one of 426 public high schools. After months of school tours and tests, auditions and interviews, 75,000 students have entrusted their choices to a computer program that will arrange their school assignments for the coming year. The weeks of research and deliberation will be reduced to a fraction of a second of mathematical calculation: In just a couple of hours, all the sorting for the Class of 2019 will be finished.

"To middle-school students and their parents, the high-school admissions process is a grueling and universally loathed rite of passage. But as awful as it can be, it used to be much worse. In the late 1990s, for instance, tens of thousands of children were shunted off to schools that had nothing going for them, it seemed, beyond empty desks. The process was so byzantine it appeared nothing short of a Nobel Prize-worthy algorithm could fix it.

"Which is essentially what happened.

"About a decade ago, three economists — Atila Abdulkadiroglu (Duke), Parag Pathak (M.I.T.) and Alvin E. Roth (Stanford), all experts in game theory and market design — were invited to attack the sorting problem together. Their solution was a model of mathematical efficiency and elegance, and it helped earn Professor Roth a Nobel Memorial Prize in Economic Science in 2012.

"Before the redesign, the application process was a mess. Or, as an economist might say, it was an example of a congested market. Each student submitted a wish list of five schools. Some of them would be matched with one of their choices, and thousands — usually the higher-performing ones — would be matched with more than one school, giving them the luxury of choosing. Nearly half of the city’s eighth graders — many of them lower-performing students from poor families — got no match at all. That some received surplus offers while others got none illustrated the market’s fundamental inefficiency.

"Thousands of unlucky teenagers wound up waiting through the summer to get placed, only to be sent to schools they had not listed at all. And those schools, Professor Pathak discovered in a recent analysis, were “worse in all dimensions” — including student achievement, graduation rate and college admissions — than the schools the students had asked to attend."
*********
The article goes on to describe the deferred acceptance algorithm and some other matters. One nice thing about the story is that it makes clear that this was an effort that involved lots of people--not every newspaper account manages to make that point.

I ended up writing about the NYC school project at somewhat greater length in my forthcoming book, which should be coming out in June, if the creeks don't rise.

Students selling seats in popular courses

An Unusual Honor-Code Violation: Students Selling Seats in Popular Courses
(ungated access here: http://www.aacrao.org/resources/resources-detail-view/an-unusual-honor-code-violation--students-selling-seats-in-popular-courses )

"Course registration can be a stressful process on many college campuses, but students at Emory University have channeled their frustration into creative solutions—some more ethical than others.

The university’s stratified registration process gives priority access to students who have earned the most credits, such as seniors and juniors, and students who hold merit scholarships. So crafty students have devised a way to game the system: Those with earlier registration times enroll in courses to save spots for their friends, who arrange to pick up those class spots during the university’s "add-drop-swap" open-enrollment period, in the last weeks of a semester.

Some students even enroll in popular classes to try to sell their spots to others, according to some undergraduates.

"I’ve definitely heard it’s happened," said Priyanka Krishnamurthy, a senior. "I’ve seen Facebook statuses: ‘I’m willing to pay anybody who drops this class.’" In one case, students told a professor, the price for a spot in a prime course, such as a chemistry class or business-school prerequisite, was advertised at $100.

The practice is considered a violation of Emory’s honor code because it confers "unfair academic advantage" on those who have not earned it, according to Joanne Brzinski, senior associate dean for undergraduate education.

Payoffs for class slots have occurred, she said, and have been advertised via social-media posts. But Ms. Brzinski believes there have been only a handful of such cases.

"Quite frankly, that’s the sort of thing we’re more concerned about than anything," she said. "It would mean that students who can afford to pay for courses get an advantage."

Housing markets through thick and thin (and back again)

A paper in the December AER discusses seasonality in the housing market: when the market is thick, better match quality raises prices...


Hot and Cold Seasons in the Housing Market
By L. Rachel Ngai and Silvana Tenreyro

"Every year housing markets in the United Kingdom and the United
States experience systematic above-trend increases in prices and
transactions during the spring and summer (“hot season”) and
below-trend falls during the autumn and winter (“cold season”).
House price seasonality poses a challenge to existing housing models.
We propose a search-and-matching model with thick-market effects.
In thick markets, the quality of matches increases, rising buyers’ willingness
to pay and sellers’ desire to transact. "

I am The Fixer in the IMF's Finance and Development magazine

The Fixer, it turns out, is the title of a profile of me, based on an interview, and on conversations with some of my old and not so old colleagues, published in the IMF's Finance and Development magazine.

(The title makes me think of the Malamud novel, which isn't bad when you recall that the fixer was a handyman...and which is a lot better than thinking of the corrupt politicians who could "fix" your speeding tickets... A handy man is a characterization worth trying to live up to, sort of like Keynes' dentists...)

Repugnant transactions: gradual or radical change?

Policy makers and advocates who wish to relax a ban on some presently repugnant transactions may not always be glad to have the support of those who demand more radical change, since those more radical changes may remind people of just what aroused their repugnance in the first place.

Two examples have showed up in my email stream lately, the first having to do with those who support "death with dignity" and would like physicians to be allowed to help people nearing the end of life to die peacefully. The second comes from the debate about whether the ban on compensating kidney donors should be relaxed.

‘Prophylactic’ Suicide
"Perhaps the moment is right for broaching the idea of what we might call prophylactic suicide: the decision of an elderly person to pre-empt the grim reaper and avoid the disabilities of extended life.

Organizations such as Compassion and Choices, and Final Exit, are campaigning for dignified terminations of life for those with incurable diseases. And with some success, since Oregon, Washington, Vermont and Montana have recently established the right to aid-in-dying. What I propose goes a step further, extending the right to people before they face terminal or debilitating illnesses.

With nearly half of people 85 or older suffering from Alzheimer’s disease, concerns about quality of life in old age are reasonable, even if opinions about what to do about the situation vary widely. However sane prophylactic suicide might be, getting assistance is illegal."


And here's a counterpoint to the cautious proposal by Sally Satel that I blogged about yesterday.

The Kidney Crisis
by Richard A. Epstein
Monday, October 27, 2014

"Recently, a distinguished list of academics signed an open letter to President Barack Obama, Health and Human Services Secretary Sylvia Matthews Burwell, Attorney General Eric Holder, and the leaders of Congress. The letter implored the administration to take prompt and effective steps to end the shortage of organs now available for transplants, especially kidneys. Its signatories announced: “We call for the swift initiation of evidence-based research on ways to offer benefits to organ donors in order to expand the availability of transplants.“

I chose not to sign that letter. It was not because I disagreed with its unhappy diagnosis that the chronic shortage of organs available for transplants, especially kidneys, is inexcusable; on that point, the letter was spot on. Rather, I refused to sign because I believe that the letter’s call to action was hopelessly slow in the face of an unending cascade of unnecessary deaths. If heeded, its call will be the latest in a long series of well-intentioned failed attempts to end the government scourge created by the current ban on kidney sales. This ban was implemented by the National Organ Transplantation Act (“NOTA”) of 1984, sponsored by Senator Orrin Hatch and then-Representative Al Gore. NOTA’s central provision makes it illegal to “acquire, receive, or otherwise transfer” an organ to another person for “valuable consideration,” which with minor exceptions blocks both cash and in-kind payments.

To solve the problem of organ shortages, we must begin by repealing NOTA and implementing a free market for organs. The area in which that voluntary market would work best is for kidneys, both live and cadaveric. Kidneys are the most desperately sought organ. Of the close to 125,000 people now waiting on the Organ Procurement and Transplantation Network, (OPTN) transplant list, more than 100,000 are waiting for kidneys, and the number is rising daily. Relative to transplants of pancreas, livers, hearts, lungs, and intestines, kidney transfers are the easiest to execute, with the greatest benefits to the recipients and the transferors alike.

The open letter reports that we are in a losing battle with kidney shortages. On the supply side, the number of live donations is now down to about 5,700 per year from 6,000 per year some five years ago. Most of those transfers come from family members, where the matches may be less than ideal, and the health of the donor less than perfect. Also on the supply side, the number of accidental deaths of young individuals is down, which cuts off, for the best of reasons, the most desirable source of cadaveric kidneys. On the demand side, better healthcare now allows individuals who suffer from diabetes and kidney disease to live long enough so that they will actually need dialysis or other treatment.

The ability to get organ donations from strangers is very small even though the net benefits are enormous. The mortality risk to the donor is in the order of 3 parts in 10,000. The extra life to the recipient of a live kidney is in the order of 15 to 20 years. (That figure is far greater than the gains from a cadaveric kidney, whose condition is likely to be degraded at the time of death, and to deteriorate thereafter in the interval needed to complete transplantation, if consent can be obtained in time from grieving relatives.) The gains to recipients of a live transaction, if monetized, could easily exceed one, even two, million dollars, at a total cost that is below $100,000 per donor, which includes personal discomfort, loss of work time, and family dislocations. But altruism does not work well when donors have to incur uncompensated losses of that size. Unfortunately, the huge potential for gains from trade is blocked by the firm NOTA prohibition against organ sales.

The open letter does not refer to those gains from trade. It in fact criticizes them. “To ensure equality,” it reads, “private transactions between individuals should remain prohibited.” The letter then seeks to accomplish the impossible by endorsing a centralized approach administered by the United Network for Organ Sharing (UNOS). This nonprofit organization was founded in 1984, when the risks of kidney transplants were greater and the waiting lists far shorter than the 4.3 years of today. This is up from 2.8 years only five years ago. If UNOS remains in charge, the waiting times will continue to grow.

On the positive side, the letter proposes a set of possible healthcare experiments that might involve the provision of in-kind compensation to potential donors that could cover life-long health and disability insurance and funereal benefits. These could, in principle, be supplemented by “a pension contribution, tax credit, or charitable contribution.” Unfortunately, the letter frets so much about the downsides of improvident kidney transfers that it accepts a set of procedural limitations that doom the experiment. New experimental programs, doubtless subject to extensive internal oversight, have to meet as-yet unspecified standards on informed consent, psychological tests, and of course long wait periods before the donation can take place.

The simplest objection to this program is that it is too little and too late to dent the shortage. Any government experiment will take years first to debate and then to perform. Thereafter further delays will be incurred in trying to make sense of fragmentary data. Any pilot programs will prove yet again that justice delayed is justice denied, especially for the thousands of individuals who die in the interim.

It’s important to realize that any short-term experimental approach cuts out some indispensable benefits that only open markets can supply. The basic logic of a market is that it allows people to match up with others in order to secure gains from trade, which, as noted above, are huge for potential live kidney transplants. But kidney markets are difficult to organize because real gaps in information plague both sides of the market. After all, kidney transplants take place only once for any live kidney donor, and rarely more than twice for any kidney recipient. In one sense, these markets are even more difficult to crack than real estate markets, which exhibit a similar pattern of low-frequency and high-value transactions.

To navigate these markets, it is therefore critically necessary for third party intermediates to add their reputational bond and transactional skills to assure, as brokers, both buyers and sellers (no more donors, as it were) that the transaction will go as scheduled. And, no, there is no need for the government to supply these intermediates. The market forces that generate brokers for real estate could work here, where customers on both sides of the market enjoy full legal protections against bad performance, "

Compensation for kidney donors? Background, and Sally Satel's proposal

From the Washington Post, a post that frames the current debate about whether the legal ban on compensating organ donors should be revisited, followed by an interview with Sally Satel.

An organ shortage kills 30 Americans every day. Is it time to pay donors?  By Keith Humphreys.

"Thirty years ago this week, President Reagan signed the National Organ Transplant Act (NOTA), which established the federal legal framework for the procurement, donation and transplantation of organs needed by desperately ill Americans. The law’s advocates hoped that it would end organ shortages, but today over 120,000 Americans are on waiting lists. With the need for organs – especially kidneys -- projected to outstrip supply even more in coming years, intense debate has broken out over whether NOTA should be amended to allow funding of incentives for donors.

The interests at stake are colossal. About 30 Americans a day either die on the waiting list or are removed from it because they have become too ill to receive a transplant. Taxpayers also bear a significant burden in the case of kidneys because of the special status of renal dialysis within the Medicare program. In 1972, Congress mandated that Medicare cover the costs of care for end stage renal disease regardless of patient age. In 2011, over 500,000 people took advantage of this benefit at a cost of over $34 billion, which is more than 6% of Medicare’s entire budget.

One commonly proposed solution to the organ shortage derives from behavioral economic “nudge” principles. Rather than requiring Americans to complete paperwork in order to opt-in to donation at death, the country could shift to the European model of presuming that donation at death was acceptable. But Tom Mone, chief executive of OneLegacy, the nation’s largest organ and tissue recovery organization, points out that “The recovery rate for deceased donors in the United States is actually better than that of European nations with presumed consent laws. "
...
"In any event, because less than 1% of deceased individuals are medically eligible to donate organs, and 75% of this group in the United States in fact does so, there simply isn’t enough “there there” to remedy the shortage with improved recovery from deceased donors.

This brings up the currently illegal option of providing incentives for living donors. NOTA’s main Capitol Hill champion, a then little-known Congressman Al Gore Jr., allowed for the possibility of rewarding donors if the purely altruism-driven donation system did not keep up with demand. Today, one of the leading exponents of this idea is Dr. Sally Satel, a resident scholar at the American Enterprise Institute. Sally recently participated in a forum on organ donation at Stanford Medical School, after which I interviewed her regarding her proposal to incentivize kidney donation. Below is an edited transcript of our discussion.

Keith Humphreys: What kind of incentives would you envision being tested and who would provide them?

Sally Satel: Donor enrichment would need to begin as a pilot trial. No one is talking about a traditional free market or private contract system. No organ “sales.” And no large lump sum of cash to donors. Those of us who want to test the power of incentives to increase the number of people receiving kidney transplants – and it is a rich network of transplant surgeons, nephrologists, legal scholars, economists, and bioethicists – envision a system where every needy patient, not just the financially well-off, can benefit.

Here is one model: a governmental entity, or a designated charity, would offer in-kind rewards, like a contribution to the donor’s retirement fund, an income tax credit or a tuition voucher, or a gift to a charity designated by the donor. Because a third party provides the reward, all patients, not just the financially secure, will benefit.

Meanwhile, imposing a waiting period of at least six months would ensure that donors didn’t act impulsively and that they were giving fully informed consent. Prospective compensated donors would be carefully screened for physical and emotional health, as is done for all donors now. The use of in-kind benefits coupled with a waiting period would screen out financially desperate individuals who might otherwise rush to donate for a large sum of instant cash and later regret it.
The donors’ kidneys would be distributed to people on the waiting list, according to the rules now in place. People who wanted to donate a kidney to a specific person — say, a father to a son — would still be able to, outside this system. Finally, all rewarded donors would be guaranteed follow-up medical care for any complications, which is not ensured now.

Kidney sales proposal in 1983, and the origin of the 1984 National Organ Transplant Act (history)

Dr. David Cohen at the NewYork-Presbyterian Hospital/Columbia University Medical Center Renal and Pancreatic Transplant Program recently shared with me the 1983 letter, below, that was received at Presbyterian Hospital from Dr Barry Jacobs, who proposed to purchase kidneys for transplantation, and was looking to enlist partner hospitals.

You should be able to click on the letter to enlarge it. The stamp is a bulk mail stamp (for 10.9 cents), which suggests that this letter was sent to many hospitals.

The letter states that there were 70,000 Americans with end stage renal disease in 1983, and a shortage of organs. Today those numbers are much higher.

I notice that the name of the proposed venture was International Kidney Exchange, Ltd.  The name "kidney exchange" has of course since come to mean something very different--the in kind exchange of kidneys without any money changing hands--although it is also often called "kidney paired donation," perhaps out of a lingering repugnance to the name as well as the idea.

And below is a story that ran in the NY Times at the time. Apparently Dr. Jacobs was not a model citizen: prior to making this proposal his license had been revoked and he had spent time in prison. This may have helped to make his proposal repugnant, and it was outlawed the following year, in the 1984 NOTA, which stated in part:
"TITLE 111-PROHIBITION OF ORGAN PURCHASES
SEC. 301. (a) It shall be unlawful for any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce.
(b) Any person who violates subsection (a) shall be fined not more
than $50,000 or imprisoned not more than five years, or both. "

The act has since been amended to read
(a) Prohibition

It shall be unlawful for any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce. The preceding sentence does not apply with respect to human organ paired donation.

Here's the NY Times story.

BUYING OF KIDNEYS OF POOR ATTACKED

By WALTER SULLIVAN  Published: September 24, 1983

"A plan to purchase kidneys from living donors, primarily the indigent, for sale to people needing transplants and able to afford them drew strong opposition yesterday on ethical and medical grounds from officials of the National Kidney Foundation.

¶A Virginia physician, Dr. H. Barry Jacobs, has formed an organization, International Kidney Exchange, to purchase and market the kidneys. Some of the kidneys would be purchased from people living in underdeveloped countries.

¶''It is immoral and unethical,'' said Dr. David A. Ogden, president of the foundation, ''to place a living person at risk of surgical complication and even death for a cash payment to that person.'' To do so, he said at a news conference in Manhattan, ''would make a travesty of informed consent, by introducing the temptation and bias of a cash award for consent.''

¶Furthermore, he and other specialists in kidney transplantation said the plan could not be justified medically. They asserted that the success rate in transplanting kidneys from cadavers was just as high as from donors with no blood relationship to the recipient. Contrast in Success Rates

¶Where a living donor and the recipient, being closely related, carry a relatively high percentage of similar genes, the rate at which the organ is rejected by the body's immune system is about 10 percent, according to the foundation. Where the kidney came from a cadaver the rate is 40 to 50 percent.

¶Another risk in purchasing kidneys cited by the physicians was uncertainty as to the medical history of the donor. Situations were also forseen in which parents in search of funds would consent to kidney removal from one or more of their children.

¶Dr. Jacobs, in a telephone interview last night at his office in Reston, Va., responded that 70,000 Americans were dependent on dialysis machines, which substitute for kidney function. Yet, he said, there were only enough kidney donors for a little more than 5,000 patients last year.

¶''How are they going to fill the gap?'' he asked. He also said the danger of infection in a cadaver kidney was ''slightly higher'' than that in a kidney from a living donor. He said the risk to the kidney donor was less than that from a hysterectomy, a relatively common operation involving the removal of all or part of the uterus.

¶Asserting that the voluntary approach had not produced the needed kidneys, he asked rhetorically: ''Where is the wind blowing? It is the money wind.'' License Was Revoked

¶In 1977 Dr. Jacobs's license to practice medicine in Virginia was revoked after he was convicted of mail fraud in a case related to Medicare billing, and he spent 10 months in jail.

¶Kidney foundation officials said there appeared to be no legal method to prevent Dr. Jacobs from buying, importing and selling the human organs.

¶They cited several moves to outlaw the sale of human organs and to promote their equitable allocation.

¶Senator Edward M. Kennedy, Democrat of Massachusetts, has introduced a bill that would establish a study group to explore the possibility of establishing a national system for organ procurement. In the House, Albert Gore Jr., Democrat of Tennessee, has introduced a bill that would outlaw the sale of such organs.

¶Foundation officials agreed there was a shortage of kidneys available for transplant. In 1982 more than 10,000 Americans were waiting for kidneys and only 5,358 transplants were performed."

Experiments as repugnant transactions (if subjects are paid)

Here's a paper that reports a survey of IRB members on whether payments to experimental subjects are coercive. (The focus was on medical trials...)

MONEY, COERCION, AND UNDUE INDUCEMENT: A SURVEY OF ATTITUDES ABOUT PAYMENTS TO RESEARCH PARTICIPANTS
by Emily A. Largent, BSN, Christine Grady, PhD, RN, Franklin G. Miller, PhD, and Alan Wertheimer, PhD, IRB. 2012 Jan-Feb; 34(1): 1–8.

"Nearly all agreed or strongly agreed with the statement that subjects are coerced if they are threatened with harm for not participating (91%). The majority also agreed that participants are coerced if the offer of payment makes them participate when they otherwise would not (65%), or when the offer of payment causes them to feel that they have no reasonable alternative but to participate (82%). Women tended to agree more than men (p = 0.03) that participants are coerced if the payment offer makes them participate when they otherwise would not. No other trends were observed by gender, education, or IRB membership. Most respondents agreed that payment offers are an undue influence if they cause participants to participate when they otherwise would not (81%), if a participant perceives he has no reasonable alternative but to participate (79%), or if the payment offer distorts participants’ evaluation of risks and benefits (98%). "


HT: Debra Satz