According to UNOS, more than 118,000 people are on the list for a life saving Organ Transplant.

In Jan and Feb of 2017 a little over 5000 Organ Transplants were conducted in the US. There are
about 2500 donors on the list as of March 2017. Currently, the purchase and sale of human
organs is illegal. Which means, the official Price of human organs is zero. This is a kind of price
ceiling that artificially keeps the Price of organs low at zero. This zero price has not eliminated
the market for organs. Instead, it has pushed such markets underground. The result is a huge
illegal market in Organs.

One common reason cited for having such laws is that it leads to exploitation of the poor. So,
poor people will be tricked into giving up their organs to satisfy the needs of rich people.
However, right now, rich and poor are both dying while waiting for organs. Is that morally OK?

The moral and ethical questions are impossible to resolve. Lets apply Economic Theory to this
topic and see if we can arrive at a somewhat reasonable middle range solution.

1. What are the economic benefits and/or disadvantages of such policies?

2. What happens to Consumer and Producer Surplus because of such policies?
3. What happens to Producer and Consumer Incentives when governments use such
policies?
4. Can you suggest a middle of the road approach to this problem using economic
principles?
Please make sure you apply economic analysis from concepts learned in Chapters 6 and 7 in your
discussion posts. Here are some resources to help you with the topic.

Chapter Readings:

Chapter 6: With Venezuelan Food Shortages, Some Blame Price Controls By William Neuman
(Section 6-1c)

In the News Segment in Chapter 4: Is Price Gouging Reverse Looting? By John Carney (Section
4-4b)

Video Links:

Episode from Law and Order: Special Victims Unit on Black Market Kidneys:

http://www.criticalcommons.org/Members/economicstube/clips/svukidneybrighter.wmv (Links
to an external site.)Links to an external site.

News and Journal Articles:

Short article in Medical Journal about Organ Donation

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3291132/ (Links to an external site.)Links to an

external site. (Links to an external site.)Links to an external site.
NPR News on Tax Credits for Organ Donation

http://www.npr.org/sections/health-shots/2012/08/30/160338259/tax-breaks-for-organ-donors-
arent-boosting-transplant-supply (Links to an external site.)Links to an external site.

Medical Journal Article on Tax Credits for Organ Donation

http://onlinelibrary.wiley.com/doi/10.1111/j.1600-6143.2012.04044.x/full (Links to an external

site.)Links to an external site.
As the saying goes, the road to hell is often paved with good intentions. In this case, the ban on
the sale of organs seeks to prevent the exploitation of the poor, but with the exchange of those
who need organs being left to die. From a purely economic understanding of the problem, it
seems unnecessary for the government to keep a ban in place. The government has no monetary
interest in the organ donation process, such as revenue from taxation, at least not yet.

For sake of simplicity, a full blanket ban over the sale of organs can be considered the equivalent
of a 100% tax rate, because the government is assuming full control over the exchange of organs.
With that, the governments deadweight loss is at the highest possible deadweight loss value,
because any revenue that can potentially be incurred would be effectively nulled due to the ban.
Overall, it currently seems that the ban is completely unnecessary and a complete hinderance to
possible legal transactions that can generate revenue.

Yet this type of policy can encourage and drive up revenue in other areas. If a consumer cannot
buy an organ, they can look to other alternatives: stem cell and robotics. As no consumer can
legally buy a living organ, demand would shift to other markets where potential revenue would
increase due to the increasing demand, assuming that most people would prefer not to be in legal
jeopardy.

Looking back to the organ sale market, consumer surplus and producer surplus would be at a
complete zero in the legal market due to the ban. Neither consumers nor producers can buy and
produce organs for any transactions in the legal and underground market. However, consumer
surplus and producer surplus would be pretty high in the underground market where there is no
taxes preventing prices from fluctuating freely and trying to reach equilibrium. In the
underground market, consumers and producers could potentially save a lot more than if their
transactions were to be legal and vulnerable to taxation. In regards to alternatives, the consumer
and producer surplus would depend entirely on the tax, supply, and demand.

When governments enact these types of policies, the incentives of producers and consumers who
participate in the market would cause them to find other ways to do the transaction, namely in
the underground market. Yet, it could also move more morally-aligned producers and consumers
to shift their production and consumption to other products and alternatives.

Overall, it seems that a ban may be necessary to encourage research and increase demand in
more moral markets, like robotics and bioengineering.