SYLVIE DOUGLIS, BYLINE: This is PLANET MONEY from NPR.
(SOUNDBITE OF COIN SPINNING)
MARY CHILDS, HOST:
A couple decades ago, Al Roth was working on solving this problem - people who needed kidneys weren't getting matched effectively with people who had kidneys to donate.
AL ROTH: Part of the kind of work I do is called matching theory.
GREG ROSALSKY, HOST:
Al helped create this, like, beautiful, elegant algorithm that would match kidney donors with recipients.
CHILDS: You obviously won a pretty big prize for this work.
ROTH: I did. I recommend it.
CHILDS: OK. Yeah (laughter). You like the prize. It's a good prize.
ROTH: Yeah.
CHILDS: That's good to know.
ROTH: A week long of parties.
CHILDS: The prize he won? - it was the Nobel Prize in economics.
ROSALSKY: As you might know, Al's matching work vastly improved the way people get kidneys and saved literally thousands of lives. Like, in the year 2000, before Al's work, there were only two paired kidney transplants - two. Thanks to Al's algorithm, there are now about a thousand per year.
CHILDS: But, Al says, his Nobel Prize-winning algorithm - it isn't even the best way to get people kidneys. Technically, he says, the best way is to grow kidneys in a lab, so it's not even the second-best way.
I'm just envisioning you doing all this matching work knowing that this is, like, a little goofy. Like...
ROTH: Oh.
CHILDS: ...There's a easier way.
ROTH: I hope it's a lot goofy...
CHILDS: (Laughter).
ROTH: ...The work I'm doing, anyway.
CHILDS: (Laughter).
ROTH: No, no. That's right. So could we figure out a way to have more donors to have fewer deaths? I bet we could.
ROSALSKY: OK, so there is a much easier, more efficient way to get people kidneys. It's the way people get most things - with money. Like, what if we could just buy and sell organs?
ROTH: Oh, we'd have a lot more organs. That's how we get most of our stuff. There's a famous passage quoted from Adam Smith, which I'm going to paraphrase, but it says something like, it's not through the generosity of the butcher and the baker that you get your food. You buy it from them. It's how they - that's how they sustain their families - is by selling you food. And that's how you get food, and that's why there's enough food.
CHILDS: Right. The kidney market already has supply and demand. It just doesn't have prices to balance them because buying and selling kidneys is illegal in basically the entire world. So here we are. We don't have enough kidneys. We desperately need more, and yet, we refuse to pay more than $0 for them.
ROSALSKY: And as Al saw while working on kidneys, people had moral objections to the idea of paying for organs. They had concerns that just didn't really make sense to him as an economist.
ROTH: But when I started to look, it turns out there are lots of markets like that.
CHILDS: Lots of markets where people just don't want to allow a market. They feel icky about putting a price on something. Al has a list - for example, surrogacy - a legal and flourishing industry in much of the U.S., not in much of the rest of the world; assisted end of life - perfectly fine medical transaction in Oregon, illegal where I am in Virginia.
ROSALSKY: Al is actually working on a book about all of this.
ROTH: Its working title is "Repugnant Transactions And Controversial Markets." And the idea is that sometimes economists have perfectly good ideas that other people don't think are perfectly good.
ROSALSKY: Al has sort of made his own little subdiscipline in economics about this.
ROTH: "Ickonomics" (ph), "Yuckonomics" (ph) - you know, I trade in book titles. I'm open to suggestions.
CHILDS: You can email Al with your book title suggestions, though honestly, that's kind of hard to beat. In the meantime, when we have those knee-jerk reactions and our gut repels us from considering the icky thing, economics would like to humbly submit that maybe we should.
(SOUNDBITE OF JORDACHE V. GRANT AND SKINNY WILLIAMS' "OLDER HEADS")
CHILDS: Hello, and welcome to PLANET MONEY. I'm Mary Childs.
ROSALSKY: And I'm Greg Rosalsky. Today on the show, we apply an elegant economic framework to Al's market, the trading of human organs, to whether or not we should exact revenge on our enemies, and to whether or not we should trade on inside information.
(SOUNDBITE OF JORDACHE V. GRANT AND SKINNY WILLIAMS' "OLDER HEADS")
CHILDS: When we face difficult situations that don't have an absolutely clear right answer, economist Al Roth says borrowing tools from economics can be useful.
ROTH: Economists deal in trade-offs, and one of the things about trade-offs is you have to say to yourself, supposing there's something we really don't like, what will happen if we ban it? And if the answer is it won't go away, but it'll go underground or become criminalized or become very irregular, then you might prefer to regulate it rather than ban it.
ROSALSKY: And there are real problems with banning things. For example, remember that time we tried to ban alcohol, like, in the 1920s and 1930s?
ROTH: We discovered that it gave rise to a big criminal economy and didn't completely wipe out alcohol at all. So we legalized it. And the legal market for alcohol, with all its problems, is a lot nicer in many ways, a lot more socially useful than the criminal market - you know, Al Capone and the Saint Valentine's Day massacre and, you know, Eliot Ness.
CHILDS: Alcohol, as you may know, is legal today. Selling kidneys - no, not legal - with kidneys, we are in our Prohibition era.
ROTH: There is a black market for kidneys. And often it's pretty terrible because the almost-universal laws against compensating kidney donors have driven that market underground. And what underground often means is out of the hospitals and into hotel suites and apartments...
CHILDS: Eugh (ph).
ROTH: ...And - yes, so medically very bad, as well as, you know, not just illegal but dealing with criminals - medically very bad, bad for the donors, bad for the recipients.
CHILDS: And that's what we have today. That's the market we have chosen. We have the black market with money and the legal market with no money.
ROSALSKY: So Al has been thinking about solutions to this. Like, what can we do realistically to incentivize more kidney donations? How else could we go about creating a market for kidneys to be, as Al likes to put it, more generous to kidney donors?
CHILDS: And when Al thinks about how to design a market, he prioritizes investigating what exactly it is that we're objecting to so he can build a market that fixes or avoids those problems. And in the case of kidneys...
ROTH: There are metaphysical objections. You know, it's just wrong. But the objections that seem to touch on the world seem to say that you can't do this without exploiting poor people because poor people are so vulnerable that just offering them money takes away their agency.
CHILDS: The first reaction is just a gut reaction, which doesn't help inform Al on design. The second reaction is that money can be coercive, that if people have no money and you offer them money to participate in a study, they might have to do the study, especially if you offer a huge amount, like a life-changing amount of money. It's just too compelling. They wouldn't have a choice.
ROSALSKY: This argument does strike Al as unreasonable.
ROTH: There's lots of jobs that we pay people to do because otherwise no one would do them. And you can earn a decent living being a meatpacker. But that's one of the things that bothers people. They say, why should we allow a market that will be mostly - most of the participants will be in the lower parts of the income range? And of course, that isn't very sympathetic to people who are lower income, right? In other words...
CHILDS: Right.
ROTH: ...We need jobs that people with lower income can get. That's why they have some income - is that there are jobs.
CHILDS: Luckily, there is a really obvious, easy solution to this objection - just solve poverty.
ROTH: There'd be a lot less repugnance to monetary transactions if there was no income inequality.
CHILDS: (Laughter).
ROTH: If you wanted to sell me your kidney, but we all had the same income and the same prospects, it just might not be a big thing.
CHILDS: OK, failing that, Al mentioned another way to create a kidney market, a way to get kidneys only from people who aren't that poor - a tax break.
ROTH: People who are wealthy enough to benefit from tax credits on income tax aren't the poorest of the poor. So it might be that the way to start paying kidney donors is to say, we will give you a tax break on everything after the first $10 million of income in the year that you - you know, and then only hedge fund managers would donate kidneys, and that would be repugnant.
CHILDS: But there's a twisted logic to it because at least they could - like, should something go awry in the surgery or in the...
ROTH: Yeah, they'd be fine. They'd be fine. Yeah.
ROSALSKY: Perfect. Like, now we have a few ideas of how to make this happen without paying people for kidneys. We could resolve income inequality, or we could just, you know, do a tax credit and receive only hedge fund manager kidneys. And - right? - there's something a little goofy about all this because these solutions are trying to account for objections that are just hard to design around 'cause those objections are at least partly stemming from some messy human feeling or intuition that just won't let us exchange things in the normal way.
CHILDS: So do you think there'll ever be a U.S. market for kidneys?
ROTH: Well, I think we're not doing a good job yet and that we ought to find a way to be more generous to donors so that we have more of them.
CHILDS: And what that looks like - you're open to suggestion?
ROTH: I'm open to suggestions.
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