Repugnant Markets | Sandra Klein

[00:00:00]So, um, today we're going to talk about I'm going to talk to you about repugnant markets. Um, Alvin Roth won, uh, the Nobel Prize in 2012 for his work in what he called market design. Um, and he said his aim in market design is to quote, "Know the workings and requirements of particular markets well enough to fix them when they're broken or to build markets from scratch when they're missing.

[00:00:29]So, in other words, when there's market failure, uh, somebody clever like Roth, Alvin Roth needs to come in, uh, and come to the rescue with some fancy complicated solution. We're going to talk about one of Roth's solutions, um, in a little bit. But uh one of the cases he says where market design is needed is when the good is uh when the good exchange in that market is considered morally repugnant which is the the topic of our our uh session today. Um Ross says that some transactions are repugnant um in some times and places uh and that can change over time becoming more or less repugnant uh just as there are changes in the culture. But some examples of repugnant markets that he cites uh include uh eating horse or dog meat, slavery, sex work, um lending at interest, uh narcotics, [clears throat] Mark Thornton did a lot of work in that, uh pollution permits, and then my favorite, dwarf tossing. So um dwarf tossing is a sport uh where men compete mostly men. I have seen a video of a woman tossing but a man where mostly where men uh compete to see who can throw a little person the farthest.

[00:01:59]So I have a little most of you are probably innocent and have never been in establishments where they do this kind of thing. So, I have some a kind of cleaned up PG video clip for you so you can see uh of what's going on here.

[00:02:17]When I go, I put on the helmet. I put on the harness. I am the superhero for the night.

[00:02:24]I'm mighty Mike MGA and I'm the mini man behind the dwarf tossing extravaganza.

[00:02:34]Okay. So, so the Little People of America, the LPA, uh they condemn the sport. They say it's dehumanizing. Uh they claim it's the uh objectification of quote individuals with dwarfism. So, the LPA active actively campaigns against dwarf tossing and they call for its prohibition. We need to stop this immediately. But um our question is who's it harming? Um yes, for the little person there's a certain amount of indignity and there's also probably a risk of injury in either the tossing or the landing. Um [clears throat] but it seems that mighty Mike MGA in the video, Mighty Mike MGA understands Rothbart's claim that the only rights that make sense are property rights, right? He says even the and and he probably even understands the principle of self ownership. Mighty Mike MGA says this is a quote. It's my body. I can do with it what I want. People love to throw a I'm just faking good at it. He goes on to say, "Hey, you want to throw a little person? Pay me a few bucks.

[00:03:43]Now's your chance." He emphasized, "I'm asking you to throw me for a little reimbursement, but Mighty Mike is not without principle." He says, "But but I do it as a sport." So, uh I want to point out it may seem crass and uh most of these things do happen in strip clubs, but most of these are in strip clubs. It seems crass, but it is a serious sport and the toss distances are measured with precision by legit judges.

[00:04:12]So, I want you to check out the keen discernment of this judge. So, I need to click again to make it the video play.

[00:04:22]and >> eight and a half feet. He calls out. But wait a minute, why does this guy look so familiar? Is that Ryan McM?

[00:04:35]Okay, so uh first it's the the resemblance is uncanny. I ask Ryan about this later. Okay. So, um [clears throat] first I want to dispense with the stupid argument against repugnant markets um like horsemeat or dwarf tossing and then we'll get to some more substantive off uh arguments against repugnant markets uh by Roth and and other people. So, uh the first one is the market produces gross stuff. Okay. Uh that's a stupid objection that uh dwarf tossing is gross. You'll hear something like this, uh, I hate free markets or capitalism because you end up with stuff like dwarf tossing and that's just gross. You'll have nasty brutes throwing little people for entertainment and they're a bad influence. They're going to get other people, other innocent, you know, goodnatured people uh, to enjoy the objectification of midgets. Okay, so as Tom Woods would say, well, how can we ever overcome that argument? Um well, first uh dwarf tossing could be produced in uh socialism. There's plenty of gross stuff under socialism, right? It could be it could be produced under socialism or any other system. Uh the advantage of capitalism is that in markets we have the exact amount right of gross stuff that's preferred by consumers. Um, it's going to be determined the amount of gross stuff we have just like the stuff of classy the amount of classy stuff we have is determined through the profit and loss system. Okay. Second, any lowbrow or distasteful good that's produced in a market economy is not a knock a knock on capitalism itself.

[00:06:26]Right? So, uh, remember from Peter Klein's lecture on Monday, the successful entrepreneur is the one who's best at anticipating and producing what the consumers want. Okay? So, here I'm not I'm not emphasizing the action of the entrepreneur so much as the fact that he's anticipating producing what the consumers want. Okay? Whether that is repugnant or classy. Okay? So um an anti- capitalistic mentality um [clears throat] Mises wrote desparingly of the popularity of what he called um detective stories and uh he he went on to say but it's not the fault of capitalism that common man does not appreciate uncommon books right so um we can't expect what's produced in the market to be any more moral or highbrow than or elite than um the actors in that in the market. Um here's a quote from Edmund Oppetit says, "The inherent frailties and shortcomings of the market follow from a definition of it. The market consists of people in free voluntary exchange of goods, services, and ideas.

[00:07:49]It follows therefore that the market will exhibit every shortcoming men exhibit in their thinking and peaceful acting for in the broadest sense it is nothing else but that right it's just people voluntarily acting exchanging and so we can't have anything better than what those people would prefer um Walter Block says that the market is the best means for providing the satisfaction for consumers wants and we all agree with that as Walter would say pity the poor fool poor I'm not fool that's Mr. T Walter said, "Pity the poor souls not fortunate enough to live in free markets." However, what some consumers want will pay for in the market are goods whose moral status are at best questionable, right? And uh in many cases we might consider them immoral.

[00:08:46]But Walter said um and this is from defending the undefendable, the free enterprise system thus cannot be considered a moral one.

[00:08:55]rather as a means of consumer satisfaction. It can only be as moral as are the goals of the market participants themselves.

[00:09:07]Since these vary widely all the way from completely depraved and immoral to the entirely legitimate, the market must be seen as amoral, neither moral Oh, there's a typo. Neither moral nor immoral. Okay. So um [clears throat] markets in markets we see preferences of the economic actors are revealed but markets don't impose preferences and so just the preferences of the people in the market um we are seeing them revealed. So now that we have the stupid question objection out of the way let's get to some of the uh more substantive objections from the literature starting with Roth. So um these are some slightly better objections to allowing trade in these repugnant goods. Uh uh first the the markets won't be sufficiently thick. Um buyers and sellers in these markets won't feel safe revealing their preferences about these goods. Uh and trading in these morally offensive goods presents a negative externality. And we'll go through these uh one at a time. Starting with the starting with the thickness argument.

[00:10:25]These markets are not going to be sufficiently thick enough. So sufficiently thick. So this is the charge here by uh Roth is that markets will fail because there won't be a large enough number of buyers and sellers to produce quote satisfactory outcomes on both sides of the transaction.

[00:10:48]Okay. So this is basically a fear that the buyer or the seller has some kind of uh some degree of market power either a monopsiny where there's a single buyer or a monopoly where there's a single seller. Now yesterday from Professor Fgley's lecture we learned that we don't need to be worried about market power and this problem of monopoly because first of [clears throat] all we can say all voluntary transactions are at least exconte mutually beneficial. People enter into these exchanges expecting to be better off. So we don't need an arbitrary number of buyers or sellers um for uh and also we don't need to declare anything about the outcome of the transaction um Alvin Roth besides both because both parties entered into the uh entered into the um uh transaction voluntarily. So, we have plenty of examples of this. One is what if there's only one living master artist who paints in a particular style.

[00:12:04]He's the only one who paints like this.

[00:12:07]And then there's also only one homeowner who is quirky enough to say, "I want this huge mural, you know, in my twostory entryway wall. I want this huge mural in that particular style. So, we only have one buyer and one seller. So, this market is not thick at all. Right.

[00:12:29]Um [clears throat] uh to Alvin Roth and others, they would say this is a hindrance to me. Sounds like a match made in heaven. I mean, we got one buyer, one seller. They can get together and exchange. So, uh, what if there's only one seller and many buyers?

[00:12:49]What if there's many sellers and only one buyer? This is still not a problem because markets can allocate scarce resources to those who value them the highest. So, um, Ross says that economic actors in repugnant markets won't feel safe. They won't feel safe in revealing information on their preferences about these goods that are repugnant. Okay. Uh but the cost of revealing your preference for the good, the cost of whatever that embarrassment is you feel or shame for wanting this good, the cost of that is already taken into account in your subjective preference. Right? in uh in your subjective preference ranking. So remember mighty Mike MGA, he's going to be embarrassed. He's being tossed. He weighs the risk of uh not just insult but also injury. And he still chose to be tossed. So um another example of this is back in the 1980s and 90s even. Yeah.

[00:13:59]80s and 90s when you wanted to watch a movie that was not currently showing either on HBO or um one movie at a time on HBO, right? Uh for everybody or in the movie theaters, you had to go to uh you had to go to the Blockbuster or some video rental place and you had to go and get the video and take it back to your home to watch it. So, um, [clears throat] what if I went into Blockbuster to get a video of, you know, My Little Pony, Friendship is Magic. Um, and that's what I went there for. I wanted to get that.

[00:14:39]I was really needing some My Little Pony. And I get there and uh-oh, what if Super Hot guy from school is working at the video counter? So, um, now I have to decide what do I value more, the enjoyment I get from watching My Little Pony: Friendship is Magic or the good opinion of the hot guy at Blockbuster, right? So, um, the fear of revealing that information is already calculated into my subjective value preference ranking when I act. Right? So, uh, if Um, many video renters uh fear judgment from getting My Little Pony. That's all the better for me because then maybe it'll rent it. Uh, the price will fall, lower demand. I'll be getting My Little Pony at a discount. So, um, [clears throat] by the way, Peter told me, he said, "Hey, don't put my don't put my picture in every single one of your Mason Institute slide decks." So, you know, of course, I had to go Sophie Cunningham on him and put it and and he's in there.

[00:15:50]He's he's in all of them. Okay. So, [laughter] okay. Uh others will argue that allowing for trades in certain goods is morally offensive to some people and so this becomes a negative externality.

[00:16:07]Um uh and they'll say these trades shouldn't be allowed uh because of this negative externality. It's pretty obvious just from looking around the world. Maybe not here at the Mis Institute, but just you go out here and you walk a few blocks and you can tell uh pretty quickly that we don't all agree on what's moral and good, right?

[00:16:30]So, take for example um pineapple on pizza. Talk about the market producing gross stuff. Um, [clears throat] some of y'all weirdos really love it.

[00:16:42]But the rest of us normal people, uh, we we hate it. We hate it. That gets gross.

[00:16:47]So, uh, even though we may correctly we may correctly believe that pineapple on pizza is an abomination, um, we shouldn't be able to force our superior taste on uh, on the rest of the world and everyone else. So, let's make an extreme case. Let's say that 95% of the population hates pineapple.

[00:17:10]Pineapple on pe say this 10 times fast.

[00:17:14]Pineapple on pizza. Say that um 95% of the population hates pineapple on pizza so much that just the thought of it makes us, you know, sick, makes us throw up and it's a negative externality.

[00:17:27]However, negative externalities do not call for state action. We don't need state prohibition because if the action was truly harmful and violated property rights, uh it could be addressed through private legal system.

[00:17:41]So, uh you thinking about someone eating pineapple on pizza does not violate anybody's property rights. It might offend you, but you can simply abstain from consuming it yourself. So, uh the problem with banning the sale of goods [clears throat] Oh, difference agree. The pro the problem with banning the sale of goods uh that are d deemed inappropriate in some way, even morally repugnant, is the near inevitability of subjective dislike by at least one person, right? Anything that comes up, even uh My Little Pony: Friendship is Magic, somebody may find that morally repugnant and say, "I can't stand the thought of anybody watching that." So, it has to be banned, right?

[00:18:31]Inevitably, there's going to be at least one Karen out there who's going to say, "I object." So, um there would be it would mean that uh there would be really no uh no sense of freedom at all. So, here here's an Italian-American immigrant is held and forced to watch in horror as pineapple is added to pizza for the first time. 1914 Brooklyn, New York. So um broadening the definition of harm uh beyond objective property rights violations leads a situation where virtually all action could be prohibited by someone, right? Someone could object to no matter what it is. So that would make uh meaningful freedom or any productive activity impossible.

[00:19:20]So I want to be clear and say that I'm not going to patronize dwarf tossing.

[00:19:25]I'm not going to start eating horse meat or pineapple on pizza. Um, so the defense of these repugnant markets is a limited one, right? It is limited to saying that these activities do not involve aggression and that does not mean that I'm saying they are moral or praiseworthy. So my time remaining I want to discuss one particular uh repugnant market that um Alvin Roth has come up with a very complicated um sol solution and his solution is still not perfect. is still problematic but um that market is allowing legal markets for transplantable kidneys or I would say even for all organs that would can be used in transplants. We're going to talk mostly about kidneys because that's where the bulk of the research has been done in having markets for these organs. Um [clears throat] but there are lots of different organs that have been transplanted successfully. Um kidneys have been done the most. Um others that have been transplanted include uh heart transplant. There's actually a a a good movie uh if you like romcom there's a not even calm or dramdy but uh called or drama uh a drama called return to me where there was a heart transplant star David Gubny. So anyway uh liver lung intestines pancreas cornea there has not been a successful full eye transplant yet. They have done a full eye transplant, but the guy can't see, so that didn't work. But they have transplanted cornea successful successfully. Um, in 2005, we had the first whole face transplant that stuck and worked. Um, the one that gives me nightmares is the hand transplant. Uh, the first one was done successfully in 1998.

[00:21:33]It was from a man on death row in prison. They took his hand and they put it on somebody else that's not in prison and it stuck and it worked and they could get to where they got the recipient could make the the hand uh flex and do all these things. That gives me nightmares. I would want to know was he in prison for violent crime? Did he did he choke anybody? That's what I would worry about. Okay. So, uh little bit about the history of kidney transplants. The first one was performed in 1954 from a living donor to his identical twin brother. Okay. Um, initially organ transplants were limited to living donors, taking it out of a living person and putting it in someone else. And the supply because of that was based solely on altruism. Right? At the time this seemed appropriate, altruistic supply uh where the personal affection for your family member was the motivation for donating a kidney. Um then in 1983 almost 30 years later 30 years later uh immunosuppressant drugs were approved for transplant surgeries. What that did was it prevented the person receiving the kidney from rejecting it. Um and that made more organ these drugs made more organ transplants possible from both living donors and from cadaavvers.

[00:23:01]So um because these new medications it was feasible to use kidneys from donors who were deceased and anonymous.

[00:23:10]Not a family member, not your friend that's a match, but anonymous donors uh to the recipient. So it no longer required familial affection. Um naturally because of this now demand for transplants grew. But the next year in 1984, one year later, the National Organ Transplant Act made it a felony to buy or sell cataric organs for transplant.

[00:23:36]So essentially this carried over the procurement policy from this earlier period of living and related donors even though it was unnecessary with this these new drugs. But the altruistic supply was locked into place and instead of allowing uh uh rationally sorry instead of rationally allocating scarce cataaric kidneys through the price system now they're allocated um by waiting. Okay, people are on a waiting list. The average weight time for a kidney is about five years. Uh but that's probably less accurate because some people are taken off the list because their health deteriorates while they are doing the waiting and some people are actually never qualified.

[00:24:25]They are never allowed on the list. So that five years really understates it.

[00:24:30]Um people on waiting list report they have uh low rates of employment and there's significant deterioration of their quality of life. Um for people waiting for a kidney they so the kidney performs this function uh the renal function is filtering impurities and toxins out of your out of your body out of your bloodstream. Well um they have to now be on dialysis the machine that does this for them. [clears throat] The number of hours they have to spend hooked up to the Dallas's machine varies depending on their degree of renal failure that they are suffering. So some just go for a couple of hours two to three days a week and some of our some of them are on dialysis a lot more. Um so banning the sale of organs was effectively uh setting a price ceiling at zero. So remember price ceilings from yesterday from Joe Serno's um talk. The expected result of a binding price ceiling would be a what?

[00:25:34]>> A shortage, right? And so a shortage is what we have. Um so no price controls are uh desirable or good. This one seems particularly nasty and pernicious to me though um [clears throat] uh because we have people suffering and uh often dying because of this of this price control. So often when um there's a price ceiling instituted and and Professor Soleno mentioned this yesterday, uh black markets will emerge.

[00:26:08]But in this case, when you're talking about cut me open and either take my kidney out or cut me open and put somebody else's kidney in, people are not as willing to submit to that under black market conditions, right? So um the shortage is getting worse. From 1990 to 2021, the percentage of people on the waiting list who received a kidney transplant declined from 55% in 1990, 55% of the people on the waiting list got a kidney transplant in 1990 to only 27% in 2021. So the gap is widening and instead of the most obvious solution um to a shortage and allowing markets to perform the function of allocating these transplantable organs, here's what's been suggested. So here are some some non-market solutions that people have said, "Oh, we should do this to alleviate the shortage." Um education campaigns to encourage people to sign donor cards. So, you sign on your a lot of times, I think, when you go get your driver's license, there's a place where you can indicate if I die in an accident, I'm willing to have you harvest my organs. Okay? There's been some stuff lately uh that I've read about in the last year or two. This is a bad idea because there is a definition of brain dead that is kind of loosey goosey. It's not a for sure thing. It requires some judgment on behalf of the surgeon there um in the in the ER. So um some people are saying I wasn't brain dead and they took whatever they took my kidney or my liver or whatever. Um also uh taxpayer funded reimbursement of explicit cost to living donors. So you say I have two kidneys. I can live with just one. My sister needs a kidney. I will donate my kidney to my sister, but you know that means I'm going to have to have time off work. I'm maybe have to travel to the state where my sister is.

[00:28:16]And um those are some real costs for me.

[00:28:19]And so the idea is let's raise the cost to the organ donors from negative from a negative um price their cost. Let's compensate for for that. So from negative to up to zero, make it flush so that they can do this. So to me, this sounds like they do agree with law of supply that it applies to organ donation as well, but they just won't allow it in this particular in this particular case.

[00:28:48]So um the next one is Ross market design and I want to talk about this a little bit more. So um his market design for a kidney exchange is basically a long uh complex chain of incompatible living donors and uh recipient pairs. So um for example, if you have two uh pairs of people A and B and C and D, person A is willing to donate a a kidney to his friend B and person C is willing to donate uh a kidney to uh their relative D. Okay.

[00:29:33]But what happens if they're not matches?

[00:29:36]If A's kidney does not match B and C's doesn't match D, Ross said we can create a chain where A matches D and uh donates a kidney thinking that C will then donate a kidney to B.

[00:29:55]Okay, so the problem is what if C's kidney doesn't match B? Now maybe B has to moonwalk to get a kidney. I don't know. So, uh, but Marsh, uh, my point is that Roth's market design here looks a lot like a double coincidence of wants, right? Uh, um, that's essentially what it is. But Ros's idea is we'll get more and more people, more and more of these unmatched pairs, incompatible pairs to contribute.

[00:30:26]The hope is that if you have one person who's willing to donate a kidney because you need one, eventually in the chain in this big pool of people, there will be somebody whose kidney would would match with yours. And by the way, Roth's whole market design is uh involving living donors where there's definitely some costs and risk to the donor giving them.

[00:30:54]So we all agree that markets are the best way to allocate scarce resources even for something like kidneys. Let's look at what do we think this market would actually look like. And this is something where we're going to have to use our imagination, right? We haven't seen this, but remember uh you know 20 years ago in many of your lifetimes, you know, marijuana sales were not legal and now they are. And so we can use our imag imagination and try to think and consider what would this market look like maybe. So um [clears throat] first I want to specify that I'm talking about uh catabaric kidneys. These are kidneys out of dead bodies. A lot of times these are from people who died accidents. Um they didn't suffer from cancer for a long time and so their body had uh chemotherapy and all that. know these are usually from people who died tragically young um and so [clears throat] they have healthy organs.

[00:31:56]So um I'm going to be talking about cataric kidneys but of course this was also work for living donors as well. Um but some people believe that if we allow the sale of cataric kidneys then the need for any living donors would go away. um that they would that it could all be satisfied by uh kidneys from dead people. So uh we should note that the demand for kidneys is a derived demand.

[00:32:26]It's a factor of production in the um [clears throat] in the transplant operation. And so um the what we're really demanding is the improved health that we get uh from having functioning uh kidneys that um will perform for us. So that is what we're really demanding and the kidney is derived from that demand. Okay. So we expect the demand for kidneys cataic kidneys is probably very inelastic probably very inelastic. Um two reasons.

[00:33:02]One is there are really no close substitutes for for the vital function that your kidneys perform. There is dialysis but diialysis is not as great as having a kidney that when you wake up in the morning, you get out of bed, wherever you go, your kidneys go with you, right? So diialysis, you have to be hooked to a machine. You sit in a recliner next to the machine, takes your blood out into the machine, performs a function, puts the blood back in you. So not as good of a not a great substitute.

[00:33:32]Um also there are um [clears throat] uh there are risks of infection, high rates of depression with uh for people on diialysis. Uh the other reason is that renal function is a necessity right if we don't have if we don't have it then we get sick and we and and can die actually from kidney failure. So that's two reasons why we expect that the demand for the demand for kidneys caveraric kidneys would probably be fairly inelastic. Now that means inelastic means that uh when the price rises the price can rise a whole lot and your quin demanded is only going to change a tiny bit right or maybe not at all even with a huge rise in price. Now, you may look at that and you say, "Sandy, these people are suffering. They have very inelastic demand. You're going to allow markets in this where these people could just be completely taken advantage of, right? They're in a desperate situation. You want to make them pay for their kidney." Well, yes, because then they have a better chance of getting a kidney. But the reason why uh the the key why this market would would work is because we think supply is probably very elastic. Very elastic meaning that with a small increase in price we can get a big response in the quantity of a small increase in price give us a big increase in the quantity supplied of cataric kidneys. Now uh Murray Rothbart he took a total revenues approach to um elasticity. He said elasticity supply is not a meaningful concept because whenever the price rises total revenue is going to go in the same direction. Um I'm using it in this case here just saying that we expect that people would be very responsive to a change in price and they would inc there would be a huge increase in the number of kidneys supplied to the market um when there is an uh when the price is allowed to rise from zero to whatever the the market price would be. Okay. So why do we think that the supply of kidneys of cataric kidneys would be very elastic? Why do we believe it'd be very elastic? Well, first um surveys have been done of families who show uh families of accident victims and um you know what would you have thought if you had been asked would you have been willing to allow the ER doctors to harvest the kidneys or other organs uh out of your loved ones body and families indicated they would have been willing and so the question is well why weren't the organs harvested did. And maybe it's that there was no financial incentive for somebody to go in there to do the hard job of asking, right? Because can you imagine that's your job? And in a market, we think there would be somebody who could do this in a tasteful way, but you know, their 9-year-old son was riding his bike. He just got hit by a car. And now I have to go in and not only say, "I'm sorry, he didn't make it." And now can we take his kidneys? that would just be the worst thing. But anyway, uh but if there's some financial incentive to do so and to ask in the right way, um then maybe that would be done. Also, uh excess capacity. We have a large number of of transplantable organs that are just being buried with the cadaavver and the body's completely intact. So it would be uh very easy at a low cost to um to start um harvesting [clears throat] some of those for um for transplant. So entrepreneurs have an incentive to facilitate the mutually beneficial exchange of kidneys in a in creative and innovative ways. Right? We don't know what the market would look like but again we can imagine um third party organ third third-party organ procurement firms maybe would uh would arise. We would have people who specialize in their division the division of labor. They specialize in being able to ask they're trained in grief counseling. They know how to approach the families in this you know the worst day of their life. uh they know how to approach the family in a uh tasteful way. Um there could be both forward markets where some of your grandparents or maybe your parents have already done this. They've done they've got their funeral already planned.

[00:38:17]They're living, they're well, they're totally fine, not expecting to die today, but they've already bought and taken care of all the funeral arrangements. Right? The same could be where you enter into a contract with some procurement firm and say when I die you're you can take my my organs for for transplant or there could also be uh not or and they could also be uh spot markets where um just on the spot then they go in the the young child dies and they go in an accident and they go and talk to the families uh to ask them if they would allow the organs to be harvested. But it's reasonable to expect that a person would be willing to enter into a contract to accept compensation for the removal of your kidney at the time of your death. Right? That's reasonable to expect that. Yeah. Pay me 50 bucks now, 500 bucks now. I don't know what it would be. Pay that now and then when I die, y'all can have my kidneys because I'm not going to need them then. Right. That seems like uh that would be a reasonable thing to expect that people are willing to do. So it may end up that the price of the cataric kidneys may be well within the reach of what your church could raise for you in a rumage sale or you could get your friends to donate in a GoFundMe. So uh where is this being done? Currently we have uh mortgage for kidneys in Iran. Now this is not where the first place we think of I want to emulate their economic policies, right?

[00:39:47]That's not what we think of necessarily with Iran. In this case, in this case, they have some good ideas. So, Iran's kidney market is very regulated. It's far from perfect, but still we can um see how's it working. Would this work here? Um big one. First of all, they have no waiting list. No waiting list.

[00:40:10]Um uh it says a kidney market. Uh this is from a study in journal of medicine philosophies is uh Hippen said a kidney market with payment eliminates shortages and Iranian the Iranian model proves it.

[00:40:24]Um it appears that even a small monetary incentive would lead to substantial increase in the procurement rates of cataric kidneys and other organs.

[00:40:36]So we're convinced that a market for kidneys could work um economically. It just sounds like it just sounds like a good idea. So, um, uh, Mark Thornton, as I said, has done a lot of work in this.

[00:40:50]He has a a book called Economics of Prohibition where he did all of this for drugs. And he argues for the legalization of not just marijuana, but also cocaine and heroin. And argues that when these things are produced in a legal market, not in a black market, when it's produced in a legal market, then they're going to be uh the drugs are going to be safer, right? It's going to be a uh producing uh producing market setting where people consumers have an expectation of safety on the part of the um on the part of the on the from the good that they consume. And so they'll have some recourse against the seller uh in a legal market where in a black market where are you going if you get some bad weed? Who are you going to report and say, you know, that you're not going to the Better Bure Business Bureau and saying, "Hey, you know, this weed had some other bad stuff in it, made me really sick and I spent time in the hospital, almost died." You have no recourse like you would in a legal market. So, um, what are conclusions we can draw from this then? Um first of all Austrian welfare economics we say our main conclusion is that voluntary transactions the ones that are absent coercion are at least exante mutually beneficial. People enter into transa into exchanges because they expect to benefit. I'm giving up something I value less and I'm getting back something I value more. Um, if the legal framework considers transplantable organs as the doctor's private property, then we can analyze exchange of organs just like we could any other exchanges.

[00:42:39][clears throat] And if some or even most market participants find the transactions morally objectionable or repugnant, then the supply or the demand uh or both will both supply and demand will be very thin. But so what who it's not a problem if there are small number of buyers and sellers we don't need some arbitrarily determined number of buyers arbitrarily number of arbitrarily determined number of sellers. Um there are some interesting empirical features of the kidney market. Um like the the the the uh idea that we think the um supply is probably pretty elastic and pretty responsive to a change in price. Um but more generally um repugnance is just another form of subjective preference.

[00:43:33]Right? we we think this is great, this is beautiful, these things are gross and detestable, blah, right? U that's just subjective preference and repugnance is a part of it. Um [clears throat] that that that's all factored into the economic actor's subjective value scales, right? So this is not a form of market failure. Repugnance is not a market failure and repugnance is not even an actionable externality, right?

[00:44:02]there are no property rights issues in externalities. So we don't need special complex market designs um for these transactions. We can allow the beautiful elegant workings of the price system to allocate these scarce resources and we'll just allow it the chance. Okay.

[00:44:22]Thank you. [applause]