Misc. repugnant transactions: marijuana, camel meat, and concealed carry on campus

The Maastricht ban on selling marijuana to foreign tourists is spreading to the rest of Holland:
Dutch govt to ban tourists from cannabis shops (HT Bettina Klaus)
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A little-noticed move by American Express to ban the purchase of medical marijuana with its credit cards has reignited a longstanding debate: How much can a credit card company control what you buy?
        To the surprise of consumers, major credit card companies are making decisions about what they can and can't buy with their credit cards. What's off-limits? Legal purchases like gambling chips and donations to at least one controversial non-profit organization; in some cases, buying pornography is also restricted, and so, increasingly, is medical marijuana. Last month, shortly before Delaware became the 16th state to legalize medical marijuana, American Express told merchants that its cards could not be used to buy it.
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Good news for camel meat lovers: The Knesset's Defense and Foreign Affairs Committee annulled various outdated regulations Monday, including a longtime ban on the sale of camel meat. (HT Assaf Romm)
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And those of you looking forward to concealed carry on campus will have to wait a bit longer, even in the Lone Star State:
State legislators in Texas could not meet Monday's end-of-session deadline to pass a bill that would have allowed people to carry concealed weapons on campus -- meaning a win for higher education leaders, who almost uniformly opposed the legislation.

Kidney sales and incentives for donors: current controversy

The American Journal of Transplantation has over the past year been full of surveys about the attitudes of various groups towards compensation of organ donors, including particularly live kidney donors. The groups surveyed have included transplant surgeons, the general public, kidney patients, and kidney donors. The surveys reveal a great deal of variance within groups, but a surprising willingness across groups to consider various kinds of compensation for donors, especially when subject to government regulation. So there's at least a suggestion that some kinds of payment to donors may one day become a "formerly repugnant transaction," i.e. it seems that its status as a repugnant transaction may be shifting.

The discussion was punctuated by a signed editorial, with a surprisingly contemptuous tone, called “Kidneys for Sale: Whose Attitudes Matter?”  It took the point of view that kidney transplantation is a business run by kidney surgeons, and that no one else's opinions should be consulted on matters of health policy related to kidney patients.

This is an especially surprising view given that kidney disease is treated very specially by Medicare, to the great benefit of kidney patients (as well as kidney surgeons). (Medicare is financed primarily by payroll taxes and general tax revenues, as well as premia paid by beneficiaries, and it presently spends about $8 billion a year on dialysis, for example; see Medpac for good Medicare background).

But the view of the editorialists that kidney transplantation is only about surgeons seems to be a fringe view (certainly not shared by the surgeons I've had an opportunity to work with on kidney exchange, although they have varied opinions on donor compensation). Subsequent letters to the AJT rebuked the editorialists, not only for their contemptuousness, but also for misrepresenting the data from the survey of transplant surgeons.

Below are the citations, with abstracts of the articles, and excerpts from the editorial and letters, since those don't have abstracts.

Stimulus for Organ Donation: A Survey of the American Society of Transplant Surgeons Membership by J. R. Rodrigue, K. Crist, J. P. Roberts, R. B. Freeman Jr., R. M. Merion and A. I. Reed, Am J Transplant 2009; 9 (September): 2172–176.
     "Federal legislation has been proposed to modify the National Organ Transplant Act in a way that would permit government-regulated strategies, including financial incentives, to be implemented and evaluated. The Council and Ethics Committee of the American Society of Transplant Surgeons conducted a brief webbased survey of itsmembers’ (n = 449, 41.6% response rate) views on acceptable or unacceptable strategies to increase organ donation. The majority of the membership supports reimbursement for funeral expenses, an income tax credit on the final return of a deceased donor and an income tax credit for registering as an organ donor as strategies for increasing deceased donation. Payment for lost wages, guaranteed health insurance and an income tax credit are strategies most strongly supported by the membership to increase living donation. For both deceased and living donation, the membership is mostly opposed to cash payments to donors, their estates or to next-of-kin. There is strong support for a government-regulated trial to evaluate the potential benefits and harms of financial incentives for both deceased and living donation. Overall, there is strong support within the ASTS membership for changes to NOTA that would permit the implementation and careful evaluation of indirect, government-regulated strategies to increase organ donation."

"How Different Conceptions of Risk Are Used in the Organ Market Debate," by A. Aronsohn, J. R. Thistlethwaite, Jr., D. L. Segev, and L. F. Ross, American Journal of Transplantation, 10, 4, 931-937, APR 2010
"The success of kidney and liver transplantation is hindered by a shortage of organs available for transplantation. Although currently illegal in nearly all parts of the world, a living 'donor' or 'vendor' kidney market has been proposed as a means to reduce or even end this shortage. Physician members of the American Society of Transplantation, the American Society of Transplant Surgeons and the American Association for the Study of Liver Disease were surveyed regarding organ markets for both living kidney and living liver transplantation. The survey queried respondents about their attitudes toward directed living donation, nondirected living donation, the potential legalization of living donor organ markets and the reasons for their support or opposition to organ markets. Partial or completed surveys were returned by 346 of 697 eligible respondents (50%). While virtually all supported or strongly supported directed living donation (98% and 95% for kidney and liver lobes, respectively), the vast majority disagreed or strongly disagreed with the legalization of living donor organ markets (80% for kidneys and 90% for liver lobes). Both those who support and those who oppose a legalized living donor organ market rate risk to the donor among the most important factors to justify their position."


Leider, Stephen and Alvin E. Roth, “Kidneys for sale: Who disapproves, and why?” American Journal of Transplantation, 10 (May), 2010, 1221-1227.
     "The shortage of transplant kidneys has spurred debate about legalizing monetary payments to donors to increase the number of available kidneys. However, buying and selling organs faces widespread disapproval.
We survey a representative sample of Americans to assess disapproval for several forms of kidney market, and to understand why individuals disapprove by identifying factors that predict disapproval, including disapproval of markets for other body parts, dislike of increased scope for markets and distrust of markets generally. Our results suggest that while the public is potentially receptive to compensating kidney donors, among those who oppose it, general disapproval toward certain kinds of transactions is at least as important as concern about specific policy details. Between 51% and 63% of respondents approve of the various potential kidney markets we investigate, and between 42% and 58% want such markets to be legal. A total of 38% of respondents disapprove of at least one market.
Respondents who distrust markets generally are not more disapproving of kidneymarkets; however we find significant correlations between kidney market disapproval and attitudes reflecting disapproval toward certain transactions—including both other body markets andmarket encroachment into traditionally nonmarket exchanges, such as food preparation."


Patient Willingness to Pay for a Kidney for Transplantation, by D. K. Herold,
American Journal of Transplantation, Volume 10, Issue 6, pages 1394–1400, June 2010
     "While kidney transplantation is the most cost-effective treatment available for end-stage renal disease (ESRD) and affords patients with the best quality of life, the current supply of kidneys does not meet the demand. A potential solution to increasing the supply is to compensate living donors for a kidney. The purpose of this study was to describe ESRD patient willingness to pay for a kidney. Using a self-administered survey, 107 patients in 31 U.S. states completed the survey. The quantitative method and descriptive survey design employed descriptive, correlational, nonparametric and multivariate statistical tests to evaluate the data. Of participants, 78.5% were willing to pay for a kidney; there were significant correlations between gender, health status, household income, preferred source of a kidney and willingness to pay. Men, patients with poor and fair health status and those with household incomes ≥$50 000 were more willing to pay. Step-wise regression analysis found price and doctor’s influence accounting for 52% of variance in willingness to pay. As price increased and doctor’s opinion mattered, willingness to pay increased. This study supports development of additional studies with
larger sample sizes and patients on kidney transplant waiting lists."

 
"For Love or Money? Attitudes Toward Financial Incentives Among Actual Living Kidney Donors", by M. C. Van Buren, E. K. Massey, L. Maasdam, W. C. Zuidema, M. T. Hilhorst, J. N. IJzermans and W. Weimar, American Journal of Transplantation, Volume 10, Issue 11, pages 2488–2492, November 2010
     "Due to lengthening waiting lists for kidney transplantation, a debate has emerged as to whether financial incentives should be used to stimulate living kidney donation. In recent surveys among the general public approximately 25% was in favor of financial incentives
while the majority was opposed or undecided. In the present study, we investigated the opinion of living kidney donors regarding financial incentives for living kidney donation. We asked 250 living kidney donors whether they, in retrospect, would have wanted a financial reward for their donation.We also investigated whether theywere in favor of using financial incentives in a government-controlled system to stimulate living anonymous donation. Additionally, the type of incentive deemed most appropriate was also investigated.
In general almost half (46%) of the study population were positive toward introducing financial incentives for living donors. The majority (78%) was not in favor of any kind of reward for themselves as they had donated out of love for the recipient or out of altruistic principles. Remarkably, 60% of the donorswere in favor of a financial incentive for individuals donating anonymously. A reduced premium or free health insurance was the preferred incentive."

And here is the editorial against finding out what non-surgeons think:

D. L. Segev and S. E. Gentry “Kidneys for Sale: Whose Attitudes Matter?” American Journal of Transplantation 2010; 10: 1113–1114
"...Should we devote resources to investigating the nuances of public attitudes toward these markets? Probably not, for two major reasons."
"First, nothing else is relevant until physicians support organ sales....
"Second, and more importantly from a logistical standpoint, is that it will take an act of Congress—that is the reversal of the National Organ Transplant Act (NOTA) of 1984—to make organ markets a reality. And this act will be nearly impossible to come by."

And the following two entries are letters to the editor objecting to the Segev-Gentry editorial, the first by Arthur Matas (a kidney transplant surgeon and former president of the American Society of Transplant Surgeons), the second by Sally Satel, a doctor, kidney recipient, and commentator working at the American Enterprise Institute.

A. J. Matas, Department of Surgery, University of Minnesota
"Markets or Incentives: Terminology Is Critical," American Journal of Transplantation 2010; 10: 2374
     "I am disappointed in Segev and Gentry’s Editorial (1) regarding Leider and Roth’s survey, which was recently published in The American Journal of Transplantation (2). Leider and Roth conducted a survey of public attitudes regarding markets for living and deceased donation. They found that a majority of respondents approved of either individual or government payment for either living or deceased donation (although there was considerably stronger support for government payment).
     "Segev and Gentry respond by noting that a survey of the membership of the American Society of Transplant Surgeons (ASTS) showed that only 20% were in favor of ‘cash
payments’ for donation (3). Segev and Gentry are correct. But what they did not note in their editorial,was that for deceased donation, the majority of ASTS respondents were
in favor of funeral expenses (73%), an income tax credit (65%) and about halfwere in favor of a donation to a charity selected by the donor’s family (51%) and reimbursement
of next-of-kin expenses (56%). For living donation, the majority supported payment of lost wages (76%), payment of health insurance premiums (72%) or an income tax credit
(64%) and 56% supported payment of life insurance premiums."...
     "It is a disservice to the debate and discussion to present only part of the ASTS survey results. There are other issues with Segev and Gentry’s Editorial. They suggest that doing these kinds of public opinion surveys are a waste of resources because: (a) physicians are against ‘sales’ and (b) to establish trials of ‘organ markets’ would require changing the law (1). However, using the same survey data that they quote (see above), (a) physicians are in favor of incentives (and before trials of incentives could be developed the law would need to be changed) and (b) legislators are certainly going to be more inclined to change the law if the public supports such a change. Finally, they conclude that the many recent advances in donation may solve the tremendous organ shortage problem,
making need for incentives moot. But the data says otherwise;  in spite of laparoscopic nephrectomy, use of ECDs, DCD, desensitization and paired exchange, there has been little or no increase in donation over the last few years and the wait list for a kidney transplant has continued to grow (4)."

Sally Satel, "The Physicians’ Voice Is Only One of Many," American Journal of Transplantation 2010; 10: 2558
    "...medical policy is a social activity, not a guild enterprise. The traditions and preferences of learned practitioners have a large role, to be sure, but they are not, nor
should they be, the sole determinants of clinical policies."
...
"As for physician opinion, Segev and Gentry relate only half of the story. True, a mere one-fifth of physician respondents to an ASTS poll endorsed cash payments to donors (1). Unmentioned, however, is the highly significant fact that 64% of respondents favored income tax credits to living donors (12% were neutral or undecided). This finding has critical policy relevance because it is regulated in-kind benefits, such as tax credits, not free market cash exchange, that have long been the basis for serious reform efforts in Congress and in state legislatures. Notably, the American Medical Association has endorsed proposals for pilot trials on three occasions between 1995 and 2008 (1995, 2003 and 2008) (3)."

Decline and decay of nudges

 Here's the latest paper to suggest that small "nudges" can have much less of a lasting effect than was initially thought.

The Semblance of Success in Nudging Consumers to Pay Down Credit Card Debt  by Benedict Guttman-Kenney, Paul D. Adams, Stefan Hunt, David Laibson, Neil Stewart & Jesse Leary, NBER WORKING PAPER 31926 DOI 10.3386/w31926  December 2023

Abstract: We run a field experiment and a survey experiment to study an active choice nudge. Our nudge is designed to reduce the anchoring of credit card payments to the minimum payment. In our field experiment, the nudge reduces enrollment in Autopaying the minimum from 36.9% to 9.6%. However, the nudge does not reduce credit card debt after seven payment cycles. Nudged cardholders tend to choose Autopay amounts that are only slightly higher than the minimum payment. The nudge lowers Autopay enrollment resulting in increasing missed payments. Finally, the nudge reduces manual payments by cardholders enrolled in Autopay.

The credit crisis and market design

The WSJ, in its Real Time Economics Blog and in a related story in their January 2 issue, raises some questions about how discussion of financial market regulation has turned into a discussion of market design (although that's not exactly the way they put it). They recount the poor reception given to Raghuram G. Rajan's 2005 presentation at the Fed's Jackson Hole conference in honor of Alan Greenspan. Prof. Rajan noted that banks' increased exposure to the securities markets would make them less able to serve as a source of credit in a crisis, and his concerns were, the story reports, met with disdain by those assembled. The blog summarizes the attitude at the time:

"The episode suggests one reason that the crisis went unchecked: A dangerous all-or-nothing orthodoxy had come to dominate the policy debate, where one was either for free markets or against them. "

The point of the market design movement, of course, is that markets aren't either "free" or non-existent. A better description is that markets have rules, and some rules work better than others, and the goal of regulators and others who shape the rules should be to find rules that enable markets to work better.

However the WSJ blog also quotes Professor Rajan on the difficulties facing academics who wish to offer opinions on compex issues of public policy:
"“Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about,” says Mr. Rajan. “They fear talking about things where everything is not neatly nailed in a model. They stay away and let the charlatans occupy the high ground.” "


(The story notes that calls for sensible regulation and market design were met with condescension before the credit crisis, a condescension that is being reevaluated now. So perhaps now is the chance I've been waiting for to note that an anagram for MARKET DESIGN is NEGATED SMIRK :-)

Legislative proposals to help living kidney donors

 Martha Gershun brings us up to date on various proposed pieces of legislation to help organ donors and increase access to transplants.

Legislative Efforts to Support Living Kidney Donors,  by Martha Gershun, Guest Blogger

"As a member of the Expert Advisory Panel to the Kidney Transplant Collaborative, I have been honored to provide input during the development of the organization’s priority legislation, the Living Organ Volunteer Engagement (LOVE) Act.  This legislation would help build a comprehensive national living organ donor infrastructure that would support a national donor education program, create a donor navigator system, ensure appropriate donor cost reimbursement, collect essential data, and improve all aspects of living organ donation across the country, substantially reducing barriers that limit participation today.

Key provisions of the LOVE Act would:

• Provide reimbursement for all direct and indirect costs for living donation, including lost wages up to $2,500 per week.
• Provide life and disability insurance for any necessary care directly caused by donation.
• Modify NLDAC rules so neither the recipient’s income nor the donor’s income would be considered for eligibility.
• Provide for new public education program on the importance and safety of living organ donation.
• Provide for new mechanisms to collect and analyze data about living organ donation to enable evidence-based continuous process improvement.

Numerous other federal proposals are also currently vying for support to address barriers to living donation on a national level.  They include:

Living Donor Protection Act (H.R. 2923, S. 1384)

• Prohibits insurance carriers from denying, canceling, or imposing conditions on policies for life insurance, disability insurance, or long-term care insurance based on an individual’s status as a living organ donor.
• Specifies that recovery from organ donation surgery constitutes a serious health condition that entitles eligible employees to job-protected medical leave under the Family and Medical Leave Act.

Organ Donor Clarification Act (H.R. 4343)

• Clarifies that reimbursement to living organ donation is not “valuable consideration” (I.e., payment), which is prohibited under the National Organ Transplant Act (NOTA)
• Allows pilot programs to test non-cash compensation to living organ donors.
• Modifies NLDAC rules so the recipient’s income would no longer be considered for eligibility.

Living Organ Donor Tax Credit Act (H.R. 6171)

• Provides a $5,000 federal refundable tax credit to offset living donor expenses.

Honor Our Living Donor (HOLD) Act (H.R. 6020)

• Modifies NLDAC rules so the recipient’s income would no longer be considered for eligibility.
• Requires public release of annual NLDAC report.

Helping End the Renal Organ Shortage (HEROS) Act

• Provides a $50,000 refundable federal tax credit over a period of five years for non-directed living kidney donors.

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And here's one more, from the Coalition to Modify NOTA

Surgery Grand Rounds at UCSF. "Kidneys and Controversies: Kidney Exchange Within and Across Borders" Oct 21 (7am PST)

 Tomorrow at dawn I'll give a seminar to the surgeons at UCSF, about kidney exchange, and the controversies it has overcome, and is overcoming.

Surgery Grand Rounds | Kidneys and Controversies: Kidney Exchange Within and Across Borders

Date: October 21, 2020 Time: 7:00am-8:00am Place: Webinar

Rishwain Visiting Speaker: Alvin E. Roth, PhD

Al Roth is the Craig and Susan McCaw Professor of Economics at Stanford University and the George Gund Professor Emeritus of Economics and Business Administration at Harvard University. He shared the 2012 Nobel memorial prize in Economics. His research interests are in game theory, experimental economics, and market design. In the 1990’s he directed the redesign of the National Resident Matching Program (NRMP) and currently is a member of the Board of Directors. He has been involved in the design and organization of kidney exchange, which helps incompatible patient-donor pairs find life-saving compatible kidneys for transplantation. He is on the Advisory Board of the National Living Donor Assistance Center (NLDAC). His work on kidney transplantation led him to become interested in repugnant transactions, and more generally how markets, and bans on markets, gain or fail to gain social support.

The University of California, San Francisco School of Medicine is accredited by the Accreditation Council for Continuing Medical Education (ACCME) to provide continuing medical education for physicians.  CME Course MGR21045

UCSF designates this live activity for a maximum of 43 AMA PRA Category 1 Credits™. Physicians should claim only the credit commensurate with the extent of their participation in the activity.

*The above credit is inclusive of credit for all Fiscal Year 2020-2021 Department of Surgery Grand Rounds.

Disclosure declaration – No one in a position to control the content of this activity has a relationship with an ACCME-defined commercial interest. Planners  Wen Shen, MD, Julie Ann Sosa, MD, MA, Lygia Stewart, MD, and Ryutaro Hirose, MD, have stated that they have no relationships to disclose. Speaker Roth has stated that he has no relevant relationships to disclose.

This activity is supported by the Department of Surgery’s Howard Naffziger Endowment Fund.

Join Webinar: https://ucsf.zoom.us/j/252447171?pwd=MWt0bG9vTjBSZEo1UnpidXRVWWU2UT09 

Blood Money, by John Dooley and Emily Gallagher

 Are paid plasma donors being exploited? Here's a paper that suggests not, but rather that the payments that plasma donors receive can improve their financial well being not merely by providing additional income, but also by helping them avoid going into expensive debt.

 Dooley, John and  Emily Gallagher, Blood Money (October 11, 2021). Available at SSRN: https://ssrn.com/abstract=3940369 or http://dx.doi.org/10.2139/ssrn.3940369

Abstract: "Little is known about the motivations and outcomes of sellers in remunerated markets for human materials. We exploit dramatic growth in the number of commercial blood plasma centers in the U.S. to study the individuals who sell plasma. We find sellers tend to be young and liquidity constrained with low incomes and credit scores; they also report less access to traditional bank credit. Plasma centers absorb demand for non-traditional credit. The opening of a nearby plasma center reduces payday loan inquires and transactions by 13–18% among young borrowers. Meanwhile, foot traffic increases by over 9% at both essential and non-essential goods establishments when a new plasma center opens nearby. Our findings suggest that, at least in the short-term, constrained households use the discretionary income from plasma centers to smooth consumption without appealing to high-cost debt."

HT: Mario Macis

Update: here's the published version

John M Dooley, Emily A Gallagher, Blood Money: Selling Plasma to Avoid High-Interest Loans, The Review of Financial Studies, 2024; https://doi.org/10.1093/rfs/hhae018

Payday loans

The NY Times has a discussion of payday loans, and whether and how they might be regulated. (See also my previous posts on payday loans.)

The Allure of Easy Money

INTRODUCTION

Kevin J. Miyazaki/Redux for the New York Times

In his State of the Union address, President Obama presented a series of initiatives aimed at the middle class and the growing income inequality in the United States.

One thing on the minds of many working-class Americans is greater federal regulation of payday loans, the small, short-term high-interest loans that are currently under state jurisdiction. Critics of payday loans say they lead to a cycle of ballooning debt for consumers, who can rarely afford to pay them back and must take out more loans to stay afloat. But payday lenders say that strict rules would eliminate the industry and with it, the only viable lending option for people with bad credit.

Should payday loans be federally regulated?

READ THE DISCUSSION »

DEBATERS

• 

  Help Level the Playing Field for Desperate Borrowers

  VALERIE WILSON, ECONOMIC POLICY INSTITUTE
  Ban predatory interest rates. Make borrowers account for the ability to repay. Limit duration of debt and restrict lenders’ access to bank accounts.
• 

  Don’t Restrict Access to Credit

  DENNIS SHAUL, COMMUNITY FINANCIAL SERVICES ASSOC.
  Regulation already exists for legitimate payday lenders. In more than 30 states, there are already strict limits on loan amounts, fees and rollovers.
• 

  One Size Won’t Fit All

  LISA SERVON, PROFESSOR OF URBAN POLICY
  Research about whether these loans are helpful or harmful is inconclusive, and most of it lumps all borrowers together.
• 

  Regulations Can Help Improve the Market for Borrowers

  RAJ DATE, INVESTOR
  Technological innovations will draw customers who use payday loans to cheaper products, like credit cards and installment loans, that better meet their needs.
• 

  End Predatory Practices

  GARY KALMAN, CENTER FOR RESPONSIBLE LENDING
  New rules must keep predatory lenders from pushing consumers into increased risk of losing bank accounts, their foothold into the mainstream financial system.
• 

  Let Banks and Nonbanks Play by the Same Rules

  JAMIE FULMER, ADVANCE AMERICA
  The Consumer Financial Protection Bureau must establish consistent guidelines for the entire marketplace, creating healthy competition.

Payday loans: usury, or access to credit? by Allcott, Kim, Taubinsky and Zinman

Payday loans and other expensive services to those without access to formal credit generate a good deal of repugnance and regulation (including bans), but may be the only source of credit available to their habitual customers. Here's a new NBER working paper on that finds that experienced borrowers don't misjudge their chances of borrowing again.

Are High-Interest Loans Predatory? Theory and Evidence from Payday Lending  by Hunt Allcott, Joshua J. Kim, Dmitry Taubinsky & Jonathan Zinman  WORKING PAPER 28799, DOI 10.3386/w28799,  May 2021

Abstract: It is often argued that people might take on too much high-cost debt because they are present focused and/or overoptimistic about how soon they will repay. We measure borrowers' present focus and overoptimism using an experiment with a large payday lender. Although the most inexperienced quartile of borrowers underestimate their likelihood of future borrowing, the more experienced three quartiles predict correctly on average. This finding contrasts sharply with priors we elicited from 103 payday lending and behavioral economics experts, who believed that the average borrower would be highly overoptimistic about getting out of debt. Borrowers are willing to pay a significant premium for an experimental incentive to avoid future borrowing, which we show implies that they perceive themselves to be time inconsistent. We use borrowers' predicted behavior and valuation of the experimental incentive to estimate a model of present focus and naivete. We then use the model to study common payday lending regulations. In our model, banning payday loans reduces welfare relative to existing regulation, while limits on repeat borrowing might increase welfare by inducing faster repayment that is more consistent with long-run preferences.

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Update: here's the published paper

Allcott, Hunt, Joshua Kim, Dmitry Taubinsky, and Jonathan Zinman. "Are high-interest loans predatory? theory and evidence from payday lending." The Review of Economic Studies 89, no. 3 (2022): 1041-1084.

Download

The Federal Reserve’s Term Auction Facility

As the credit crisis unfolded, the Fed prepared to auction funds to banks. Among other design features (such as how expressive a bidding language to allow) they thought about adverse selection: they wanted to reduce the signal value "stigma" of participation.

The Federal Reserve’s Term Auction Facility
July 2008 Volume 14, Number 5
Authors: Olivier Armantier, Sandra Krieger, and James McAndrews

Abstract: "As liquidity conditions in the term funding markets grew increasingly strained in late 2007, the Federal Reserve began making funds available directly to banks through a new tool, the Term Auction Facility (TAF). The TAF provides term funding on a collateralized basis, at interest rates and amounts set by auction. The facility is designed to improve liquidity by making it easier for sound institutions to borrow when the markets are not operating efficiently."

Auction Design: "Once the Federal Reserve concluded that an auction format was an effective funding alternative, it added features aimed at ensuring the most efficient distribution of funds to banks with a high demand. In particular, the Fed established a minimum rate at which bids could be submitted that was set in a comparable, competitive market (rather than a penalty rate, which is set at a premium to existing market rates).This market-based minimum bid rate was likely to encourage participation and reduce any stigma associated with receiving auctioned funds, since banks would not necessarily signal an abnormally high demand by bidding. The Federal Reserve also chose a uniform-price (or single-price) auction rather than a discriminatory (pay-your-bid) auction in part to spur participation further. By using the uniform-price structure common in Treasury auctions, the Fed reasoned that banks would be more comfortable with bidding. Finally, to allow for the widest allocation of funds, the central bank imposed a cap on the bid amount corresponding to 10 percent of the auction size.
The Fed also imposed two important rules. First, based on its experience with option auctions in 1999, it would allow each bidder to make two rate-amount offers. This rule represents the Fed’s resolution of the trade-off associated with multiple rate-amount offers: as the number of offers increases, the auction becomes more complex, but participants are able to make bids that are more representative of their demand. Second, the central bank would require TAF participants to pledge collateral beyond the amount necessary to secure credit in the new facility. This rule was imposed to ensure that bidders in the new facility could still borrow through the discount window’s primary credit facility to meet unexpected overnight funding needs."

Would Professor Moriarty have invented an eBay, a Paypal or a Craigslist?

Professor Moriarty was, of course, Sherlock Holmes' nemesis (or was it the other way around)? I ask the question in the title of this post because a much more modern criminal mastermind has just been sentenced. Here's the headline from the London Telegraph: Mastermind behind 'eBay for criminals' is facing jail

"Renukanth Subramaniam, from north London, established the website DarkMarket, which threatened every bank account and credit card holder in Britain and caused tens of millions of pounds of losses.
It was described as a "one-stop shop" for fraudsters buying and selling stolen details such as PIN numbers, account balances, answers to account security questions and passwords for social networking websites.

"The site even offered criminal users a secure payment system, training and advertising space to sell equipment used to clone bank and credit cards.
DarkMarket operated for almost three years as a “criminals only” forum, with more than 2,500 members at its peak, who could buy up to 10 credit card numbers along with other personal information for around £30.
It was shut down after a two-year global investigation in which undercover agents from the FBI and the Serious Organised Crime Agency infiltrated the site by posing as criminals.
A spokesman for Soca called it “one of the most pernicious online criminal websites in the world” and estimated that its victims lost tens of millions of pounds.
Officials said there was a code of “honour amongst thieves” on the site.
There was a secure payment system between criminals – described by Judge John Hillen as a "PayPal for criminals". "

See my earlier post: More on Darkmarket, the Craigslist of Crime

End Kidney Deaths Act intoduced in Congress

 Here's the press release from the Congressional sponsors:

Malliotakis Introduces Bipartisan End Kidney Deaths Act, August 12, 2024

"(WASHINGTON, DC) - Today Congresswoman Nicole Malliotakis (NY-11) joined Reps. Don Bacon (NE-02), Josh Harder (CA-09) and Joe Neguse (CO-02) in introducing the End Kidney Deaths Act, bipartisan legislation that would provide a refundable tax credit to living kidney donors who donate kidneys to strangers, specifically those waiting the longest on the kidney waitlist.

"Specifically, the End Kidney Deaths Act will provide a $10,000 refundable tax credit per year for five years ($50,000 total) to living kidney donors who donate kidneys. If enacted, this legislation is expected to save up to 100,000 Americans currently on the waitlist and save taxpayers an estimated $10 to $37 billion."

...

VIEW THE BILL TEXT HERE

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And here's the Coalition to Modify NOTA 's press release(which includes quotes from some of their long list of supporters...)

LIFE-SAVING END KIDNEY DEATHS ACT INTRODUCED TO CONGRESS; PROJECTED TO SAVE 100K LIVES AND $37 BILLION OVER 10 YEARS

Washington DC – The End Kidney Deaths Act (H.R. 9275) has just been introduced by Congressional Representative Malliotakis (R-NY) and Representative Harder (D-CA). This bill will save up to 100,000 American lives and $37 billion tax dollars over the next decade by offering refundable tax credits to encourage living kidney donation in this ten-year pilot program. The End Kidney Deaths Act will provide all Americans who donate kidneys to strangers at the top of the kidney waitlist with a refundable tax credit of $10,000 each year for five years, totaling $50,000."

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Earlier:

Saturday, July 22, 2023

Modify NOTA: a new effort

Pawn shops--high interest loans for the credit challenged

The Telegraph reports on the credit crisis in England: Financial crisis: hard-up consumers are selling jewellery for cash

Pawnbrokers make loans with goods as collateral, and mostly items are redeemed.

"Pawnbrokers are distinct from high street buy-back shops such as Cash Converters, where a customer will sell an item with the option to buy it back 28 days later. If the customer doesn't repurchase the item, it goes into the shop to be sold (items are not usually limited to gold and jewellery; they can be electrical goods, for example).
Pawnbrokers are regulated alongside banks and other lenders by the Consumer Credit Act 1974. Borrowing through a pawnbroker may not be suitable for everyone and high interest rates mean it is not a long-term solution, as they themselves acknowledge, but sometimes it can resolve short-term cash flow problems. "

Treasury abandons plans for reverse auction to purchase troubled assets

The Treasury announced today what had already become clear, which is that it has abandoned the initial plan to purchase troubled assets, in favor of buying equity in troubled companies: Remarks by Secretary Henry M. Paulson, Jr. on Financial Rescue Package and Economic Update

"As credit markets froze in mid-September, the Administration asked Congress for broad tools and flexibility to rescue the financial system. We asked for $700 billion to purchase troubled assets from financial institutions. At the time, we believed that would be the most effective means of getting credit flowing again.
During the two weeks that Congress considered the legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets – our initial focus – would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks. "

HT to Eric Budish (a market designer on the market)

Increasing the supply of transplantable organs, in the long term, and sooner.

 Here's an article on the website of The American Council on Science and Health, on technologies that might eventually replace the need for human organ transplants, and on policies to increase their supply while still needed.

We Urgently Need More Organs For Transplantation. Science And Policy Can Come To The Rescue. By Henry I. Miller, MS, MD and Sally Satel, MD

"Both scientific and policy advancements could provide desperately needed organs for transplantation. For example, there have been some promising early studies using kidneys from pigs genetically engineered to prevent rejection, but a policy change – paying human donors for donating organs – could be implemented immediately and would be a game changer.

...

"[A] sector of medicine that desperately needs breakthroughs is the transplantation of solid organs, which are in severely short supply. Currently, more than 100,000 Americans are waiting for transplants, and due to a shortage of hearts, lungs, livers, and kidneys, at least 17 die each day. Donor organs — from a living person or cadaver — must match the rejection recipient’s tissue type and size; they are often not perfect. By one estimate, approximately half of transplanted organs are rejected by recipients’ bodies within 10-12 years, despite a constantly expanding understanding of what causes rejection. Another obstacle is that the organ procurement system in the U.S. is inefficient, inconsistent, and unaccountable – in short, a mess that causes preventable deaths.

"We are making progress, but too slowly. Two new high-tech approaches to providing organs for transplantation might ultimately both eliminate the need for organ donors and reduce the risk of tissue rejection. And there is also a low-tech approach that would require only a tweak in healthcare policy.

"Organs produced by 3D bioprinting"

...

"Organs from genetically modified pigs"

...

"The low-tech policy approach

"Although friends and relatives and even the occasional “good Samaritan” donor can donate kidneys, they must be given without compensation. Under section 301(a) of the National Organ Transplant Act of 1984 (NOTA), it is a federal crime 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.”  Therefore, we propose a federal tax credit for living donors willing to save the life of a stranger. The value of the reward should be between $50,000 and $100,000, which physicians and others who endorse donor compensation believe would be sufficient to address the organ shortage. An economic analysis published in 2022 estimated that a reward of $77,000 could encourage sufficient donations to save 47,000 patients annually.

"The credit would be universally available—refundable in cash for people who do not owe income tax, not phased out at high-income levels, and available under the alternative minimum tax. NOTA’s restriction on payments by organ recipients and other private individuals and organizations would not change—it would still be illegal for recipients to buy organs.

"A qualified organ donation would be subject to stringent safeguards. As all donors are now, prospective compensated donors would be carefully screened for physical and emotional health. A minimum six-month waiting period before the donation would filter out impulsive donors and donations by financially desperate individuals seeking instant cash.

"In addition to saving lives, the credit would save the government money, perhaps as much as $14 billion per year, by reducing expenditures on dialysis. Thus, donors would receive financial compensation from the government for contributing to the public good and bearing the risk of a surgical operation to remove the organ.

"This would be a compassionate and pragmatic policy. Moreover, it could be implemented immediately, rapidly clearing much of the backlog of Americans waiting for organs in advance of the longer-term high-tech approaches.

"The organ shortage kills thousands of Americans every year. We must do all we can to alleviate it now."

HT: Frank McCormick

Peer to peer lending in the credit crunch

Alan Krueger, writing in the NY Times blog, notes that even borrowers with good credit are being moved by circumstance to some of the peer to peer lenders: In Credit Crisis, Some Turn to Online Peers for Cash

Markets for durables when credit is tight

Two stories in the NY Times reflect changes in markets for durable goods and for real estate in the context of tight credit: layaway plans and rent with option to buy, respectively.

The Last Temptation of Plastic reports on the revival of layaway plans, which used to be popular before credit cards. In a layaway purchase, you make installment payments before taking possession of your purchase (e.g. a big furniture purchase); it's a form of enforced savings that locks in a price and helps supply self control and commitment (to save for the purchase) where it might be lacking.

Rent Now, Buy Later reports on the growing number of offerings in the NYC real estate market. These transactions allow potential purchasers to delay purchase until they have a bigger downpayment (and until they see which way the market is going), and they give sellers some rental income in the meantime.

These are both signs of tough times...

Tax credits for organ donors, and medals

The issue of what compensation or reimbursement if any to allow for organ donation continues to be raised, very slowly, cautiously, and modestly in American legislation. The latest attempt, in the current (111th) Congress: Living Organ Donor Tax Credit Act of 2009 (Introduced in House), proposes

"In General- In the case of an individual who donates a qualified life-saving organ of such individual for transplantation into another individual during the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the sum of--
`(1) unreimbursed costs paid by the taxpayer in connection with such transplantation, and
`(2) any lost wages of the individual in connection with such transplantation.
`(b) Limitation- The credit allowed under subsection (a) with respect to any individual for any taxable year shall not exceed $5,000."


If this sounds excessively cautious, note that the previous (110th) Congress passed, and on October 14, 2008, President George W. Bush signed into law, the Stephanie Tubbs-Jones Congressional Gift of Life Medal Act (HR 7198) (Public Law No: 110-413). (It was passed without opposition in both houses of Congress). The Congressional Research Service summary of the law reads (emphasis added)

"10/14/2008--Public Law.
(This measure has not been amended since it was introduced. The summary of that version is repeated here.)
Stephanie Tubbs Jones Gift of Life Medal Act of 2008 - Makes any organ donor, or the family of any organ donor, eligible for a Stephanie Tubbs Jones Gift of Life Medal.
Requires the Secretary of Health and Human Services to direct the Organ Procurement and Transplantation Network to establish an application procedure, determine eligibility, and arrange for the presentation of medals.
Allows only one medal per family. Requires that such medal be presented to the donor or, in the case of a deceased donor, the family member who signed the consent form authorizing the organ donation.
Authorizes the Network to collect funds to offset expenditures relating to the issuance of medals.
Prohibits federal funds from being used to carry out this Act. "

The evolution of eBay

Once eBay was primarily an auction site...a story by Jeff Himmelman in the NY Times Sunday magazine brings us up to date: EBay’s Strategy for Taking On Amazon

"Most people think of eBay as an online auction house, the world’s biggest garage sale, which it has been for most of its life. But since Donahoe took over in 2008, he has slowly moved the company beyond auctions, developing technology partnerships with big retailers like Home Depot, Macy’s, Toys ‘‘R’’ Us and Target and expanding eBay’s online marketplace to include reliable, returnable goods at fixed prices. (Auctions currently represent just 30 percent of the purchases made at eBay.com; the site sells 13,000 cars a week through its mobile app alone, many at fixed prices.)

Under Donahoe, eBay has made 34 acquisitions over the last five years, most of them to provide the company and its retail partners with enhanced technology. EBay can help with the back end of websites, create interactive storefronts in real-world locations, streamline the electronic-payment process or help monitor inventory in real time. (Outsourcing some of the digital strategy and technological operations to eBay frees up companies to focus on what they presumably do best: Make and market their own products.) In select cities, eBay has also recently introduced eBay Now, an app that allows you to order goods from participating local vendors and have them delivered to your door in about an hour for a $5 fee. The company is betting its future on the idea that its interactive technology can turn shopping into a kind of entertainment, or at least make commerce something more than simply working through price-plus-shipping calculations. If eBay can get enough people into Dick’s Sporting Goods to try out a new set of golf clubs and then get them to buy those clubs in the store, instead of from Amazon, there’s a business model there.

A key element of eBay’s vision of the future is the digital wallet. On a basic level, having a ‘‘digital wallet’’ means paying with your phone, but it’s about a lot more than that; it’s as much a concept as a product. EBay bought PayPal in 2002, after PayPal established itself as a safe way to transfer money between people who didn’t know each other (thus facilitating eBay purchases). For the last several years, eBay has regarded digital payments through mobile devices as having the potential to change everything — to become, as David Marcus, PayPal’s president, puts it, ‘‘Money 3.0.’’'
...
"The best current example of the digital wallet’s promise, according to many in Silicon Valley, is Uber, a digital platform that connects riders and drivers. You enter your credit-card information into the Uber app once, and then every time you want to use it, the app knows where you are and shows you how many cars are nearby and how soon one can be available. You order with one touch on a mobile screen, and a text lets you know a driver is on the way and then another tells you when he’s near. He greets you by name, you tell him where you want to go and then, when you are dropped off, there is no further exchange — no tip, no receipt, no signing anything. The app takes care of all that for you. Uber didn’t change anything about the nature of cars or how they are driven. It just figured out how to use data and technology to make what was out there work much more efficiently. (EBay, through its acquisition of the company Shutl, has begun to exploit a similar inefficiency in the spare capacity of courier companies.)
...
"‘‘It’s not about payment,’’ Jack Dorsey, a founder of Square, a PayPal competitor, says. ‘‘It’s about identity. And it’s about the experience that a merchant can create, which is what actually builds loyalty. We believe that it’s important that the technology, the mechanics of payments, actually fade away to the background. They disappear completely.’’ After helping found Twitter in 2006, Dorsey became chief executive of Square in 2009. Its initial innovation was the Square Reader, a small device that plugs into the headphone jack of a smartphone or tablet and enables anyone, anywhere, to process a credit-card payment. (PayPal now has a similar reader.) In 2011, Square introduced what would become known as the Square Wallet, an app that links to a credit card (as Uber does) and allows consumers to pay either by holding their phones up to a scanner or, in some cases, simply by having the phones on in their pockets. Dorsey talks about how cool it is to get your coffee without having to do anything, but he also emphasizes what it means for the merchants. ‘‘The seller gets this very interesting tool,’’ he says. ‘‘They can recognize me when I walk in.’’ 

Compensating kidney donors: a call to action by Brooks and Cavanaugh in the LA Times

 Here's a clarion call for compensation of living kidney donors, from two nondirected kidney donors.  It's not the first, and very likely not the last, given the difficulty of modifying the existing law.  But it makes the case very clearly (and proposes that a tax credit spread over ten years might be the way to move foreward).

Opinion: A single reform that could save 100,000 lives immediately BY NED BROOKS AND ML CAVANAUGH, JULY 9, 2023 

"Never in the field of public legislation has so much been lost by so many to one law, as Churchill might’ve put it. The National Organ Transplant Act of 1984 created the framework for the organ transplant system in the United States, and nearly 40 years later, the law is responsible for millions of needless deaths and trillions of wasted dollars. The Transplant Act requires modification, immediately.

"We’ve got skin in this game. We both donated our kidneys to strangers. Ned donated to someone who turned out to be a young mother of two children in 2015, which started a chain that helped an additional two recipients. And Matt donated at Walter Reed in 2021, after which his kidney went to a Seattleite, kicking off a chain that helped seven more recipients, the last of whom was back at Walter Reed.

"Ned founded, and Matt now leads, an organization that represents nearly 1,000 living donors

...

"eight years ago, when Ned donated, the number of living kidney donors was 6,000. With all the work we’ve done since, the number of living donors is still about 6,000 annually. In the United States, nearly 786,000 people suffer from end-stage kidney disease, more people than can fit in the 10 largest NFL stadiums combined.

...

"More Americans die of kidney disease than of breast or prostate cancer, and one in three of us is at risk. This illness is widespread, but what makes it worse is the staggering financial burden borne by everyone. The head of the National Kidney Foundation testified in March that Medicare spends an estimated $136 billion, nearly 25% of its expenditures, on the care of people with a kidney disease. Of that, $50 billion is spent on people with end-stage kidney disease, on par with the entire U.S. Marine Corps budget.

...

"The National Organ Transplant Act prohibits compensating kidney donors, which is strange in that in American society, it’s common to pay for plasma, bone marrow, hair, sperm, eggs and even surrogate pregnancies. We already pay to create and sustain life

...

"The ethical concerns regarding compensation are straightforward. Nobody wants to coerce or compel those in desperate financial straits to do something they would not have done otherwise. The challenge, then — until artificial or nonhuman animal substitutes are viable options — is to devise a compensation model that doesn’t exploit donors.

"Compensation models have been proposed in the past. A National Institutes of Health study listed some of the possibilities, including direct payment, indirect payment, “in kind” payment (free health insurance, for example) or expanded reimbursements. After much review, we come down strongly in support of indirect payment, specifically, a $100,000 refundable federal tax credit. The tax credit would be uniformly applied over a period of 10 years, in the amount of $10,000 a year for those who qualify and then become donors.

"This kind of compensation is certainly not a quick-cash scheme that would incentivize an act of desperation. Nor does it commoditize human body parts. Going forward, kidney donation might become partly opportunistic rather than mostly altruistic, as it is now. But would it be exploitative? Not at all."

...

Ned Brooks and ML Cavanaugh are living kidney donors, and Brooks is the founder of the Coalition to Modify NOTA.

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Here are all my posts that mention Ned Brooks, starting with this one:

Friday, February 26, 2016

A Freakonomics listener was inspired to become a non-directed kidney donor by the podcast on kidney exchange