1. shortage of kidneys. 2. The current

1.     Introduction


Thousands of people
die across the world every year because they do not get a kidney
transplantation on time. According to the National Kidney Foundation, in the US
alone 100,791 (as of 1/11/16) people are waiting for kidney transplants. On
average, these people are on the waiting list for 3.6 years before they finally
receive a new organ. Every healthy person has two kidneys and is able to live a
normal life with only one kidney. Unlike the market situation of most goods,
the kidney market is a repugnant market. As defined by Alvin Roth, a repugnant
market arises if some people want to engage in a transaction and others do not
think they should be allowed to do so (Roth,
In most countries, there are special laws. For instance, the US has the U.S.
National Organ Transplant Act of 1984, which states “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”. This law directly
prohibits any transactions of human organs. Such laws, which are part of most
constitutions across the world, make it even more difficult to alleviate the
current shortage of kidneys. This paper will examine the current situation of
the kidney market and introduce a variety of possible improvement proposals to
address the problem of lack of kidneys.

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First, this paper will
investigate the current situation of kidney sales and analyse how the shortage
of kidneys originated. Second, the change from a matching to an open market
system will be described and critically examined. Thirdly, this paper will
discuss the possible solutions to tackle the shortage of kidneys.



2.     The current situation of the kidney market


The kidney market is a
so-called market of matching. Normally, a market is regulated by demand and
supply, that automatically leads to an equilibrium. In a matching market, on
the other hand, a transaction only occurs when the person who needs or wants
the product is chosen to receive it (Roth,
In other words, it is impossible to just buy the product legally if you need
it. The matching market is regulated by a waiting list and voluntary donors of
kidneys. A demanding person, has to wait until a matching kidney is available,
and dependent on the turn on the waiting list, chosen to get a kidney. Over
100,000 people wait for kidney transplants in the US and the waiting list is
growing constantly. The current problem is that just around 17,000 kidney
transplants are carried out each year, but during that same period 36,000
patients in need of a kidney are added to the waiting list (National Kidney Foundation, 2016). This situation, in
which the new demand for kidneys exceed the number of conducted transplants,
leads to the problem of a constant rise in total demand year on year. In the
long-term, the shortage of kidneys will increase dramatically. To combat this
situation, the supply of kidneys has to rise. But how would it be possible to
convince people to donate one of their kidneys? The current situation of the market
of kidneys is illustrated in Figure 1 below. The figure shows the demand and
supply curve of kidneys in relation to price and quantity with the assumption,
that everyone adheres to the law of a fixed price of zero.

At the price of zero,
the quantity supplied is the quantity of people who donate their kidneys for
free. This price ceiling causes the quantity of kidneys demanded to be much
higher than the quantity supplied. This shortage in the supply of results in a
huge deadweight loss which project a loss of economic efficiency as illustrated
by the red triangle in Figure 1 (Fitzgerald, 2015). In the context of
kidneys, the deadweight loss not only presents a loss of economic efficiency
but also translates into the unnecessary deaths of people who could get kidneys
if monetary transactions were allowed. However, despite the fact that kidney
transactions are classified as repugnant transactions, some people are willing
to pay exorbitant amounts for kidneys and others are willing to give one of
their kidneys for a monetary compensation. That is why there is a black market
in the real world. This black market is a result of the price ceiling. The
person who is willing to purchase a kidney must purchase it at the black-market
price shown in Figure 1. This black market price is the maximum amount that a
donor is able to sell a kidney for, and it is dependent on the price ceiling at
a price of zero. If you analyse the black market from the perspective of
economic efficiency, it seems to be totally acceptable. But this black market
should also be analysed from an ethical perspective. The issue with the black
market of kidneys, and organs in general, is that the market is unregulated and
does not provide the donors with proper medical care and protection. The donors
in the black market are mostly poor people or are coerced into donating their
organs. The people who are able to purchase kidneys from the black market are
rich, which makes the situation even worse and widens the gap between the rich
and the poor dramatically. It seems to be economically efficient to have a
black market, but a comparison reveals that its ethical cost outweighs the
economic benefit. To solve this problem of the black market, the government
must intervene to reduce the price ceiling. What would happen if the government
changed the current repugnant kidney market into an open market?



1.     The change into a free market and its effects


A free market is a market that is regulated by supply and demand. The
demand and supply determine the price at which a product is traded. Figure 2
below shows the demand and supply curve of a kidney market that is free and not
regulated by the government. In a free market, anyone who is willing to supply their
kidney would be free to do so and anyone who needs a kidney can buy one. The intersection
point of the demand and supply curve leads to the equilibrium at which the
kidneys would be traded. The Equilibrium is shown as the red dot at which the
two curves intersect.


At this equilibrium point the market would be economically efficient.
The problem of a free market pertains to ethical reasons that are similar to
that of the kidney black market. Only people who are poor and in desperate need
of money will sell their kidneys at the market price. Those who are
sufficiently wealthy enough will not take the risk of giving up one of their
kidneys as well as undergo the risk of surgery (Fitzgerald, 2015). Furthermore, wealthy
people will be the ones to receive kidneys because they can afford to buy them.
Meanwhile a poor person will not be able to afford to buy a kidney during an
illness. Opening the market would entail a great social risk that cannot be
covered by the economic benefit, and it would also widen the rich-poor gap in a
socially negative way.



1.     Possible solutions for the shortage of kidneys


There are several approaches to assuage the current situations of a
kidney shortage. The main issue is that the economic efficiency must be linked
to social concerns.


1.1   The government as buyer

One approach of
reducing the gap in kidney supply is through government intervention. To
intervene in direct transactions between two people, the government could adopt
the role of the kidney seller. The government could buy the kidneys in exchange
for compensations for the donors. These compensations could be made through
various options: tax deductions, monetary compensation, insurance discounts or
combinations of these options. The kidneys will be then distributed using the
current system of the waiting list, which would improve the fair distribution
of kidneys (Grace Fitzgerald, 2015). Such a solution is a good option for
combining economic efficiency and ethical concerns. It would also reduce the
stigma associated with selling a kidney. Such a model is similar to the one
that has been used in Iran since 1988. The programme was developed because of
the low number of kidney transplants in Iran. The first attempt to solve this
problem was that the government began to pay for its citizens to have living
renal transplants abroad. Four hundred transplants were funded in five years.
As this procedure became too expensive for the Iranian state, a network of
renal transplant teams was set up in Iran, but fewer than 100 transplants were
carried out per year. In 1988, the Iran legalized living non-related donations
(LNRD) of kidneys (Savaj & Ghods, 2006). The government set
up a regulated programme with compensations for the donors. These compensations
were not just monetary, and the donors also received free insurance and
payments from charitable organizations or the recipients. The problem of poor
people failing to afford kidneys was also addressed by the government, and in
most cases, charitable organizations sponsored kidney transplantations for poor
people. An important part of the system, which curbed undue influences of any
kind, was to ban the receipt of payments by medical and surgery teams or any
other person directly involved in the process. A potential donor was also not
allowed to have any contact with any person who was part of the waiting list.
By using this programme, Iran was able to completely reduce the shortage kidneys by 1999 and
gave everyone the opportunity to receive a kidney (Savaj &
Ghods, 2006).


1.2   The kidney paired donation

Another programme that was developed by Alvin Roth was based on the idea
of kidney exchanges. The programme targets people who are willing to donate a
kidney to a friend or loved one but are medically incompatible to do so. With
paired kidney donation, an incompatible donor pair can trade a kidney with
another incompatible pair and obtain a compatible kidney in return (Roth,
2007). This programme does
not directly increase the kidney supply, but it increases the chances of
getting a new kidney.  Kidney paired
donations makes it possible to increase the number of kidney surgeries without
allowing any monetary transactions. In order to maximise economic efficiency
and address ethical concerns as well, the government should combine the kidney
paired donation programme as well as compensate voluntary kidney donors.





Due to the huge shortage of kidneys nearly everywhere in the world,
thousands of people die every year. This problem is caused by the current
market system of kidneys which does not allow monetary transactions for kidneys
due to ethical reasons. Nevertheless, there is a black market of kidneys that
offers the opportunity for monetary transactions. The black market is able to
improve economic benefit, but largely neglects social concerns at the same
time. To solve the problems of inefficient supply and the black market, the
government has to react effectively. The two options presented in this paper
pertain to the government taking on the role of the buyer. In exchange for
their kidneys, the donors get a compensation in the form of money, free
insurance, tax deductions or other possible benefits. The kidneys thus bought
will be distributed as per the current waiting list. Another approach is the
kidney exchange programme that allows an incompatible donor pair to trade a
kidney with another incompatible pair and obtain a compatible kidney in return.
These options may not be perfectly ethical with regard to the people who donate
their kidneys, because mostly poor people will take the medical risk of surgery
and the long-term limitations related to kidney donation, but it will
simultaneously decrease the number of deaths due to the shortage of kidneys to
a large extent. In order to minimize ethical concerns and maximize economic
efficiency, a system that combines the kidney paired donation programme and the
government playing the role of the buyer should be used.




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