MARKETS FOR ORGANS: THE QUESTION OF SUPPLY

I. INTRODUCTION A shortage of cadaveric human organs for transplantation has existed from the time that such organs were first used for that purpose. That shortage has grown progressively worse over the past two decades as the demand for transplants has increased in response to technological advances in immunosuppressive therapy and expansion of third-party payment to previously uncovered organs. The United Network for Organ Sharing (UNOS Bulletin, 1997) estimates that the inadequacy of supply of cadaveric organs causes over 4,000 deaths per year as patients requiring transplants are unable to obtain the needed organs in time. In addition, close to 250,000 renal patients are currently forced to undergo relatively expensive and debilitating dialysis treatments. In the absence of a shortage, many of these patients (perhaps half) might receive more cost-effective and remedial kidney transplants. The consequences of this shortage, then, are death, suffering, and inflated medical costs, all of which could be avoided by increasing the number of cadaveric organs made available for transplantation. Recognizing correctly that this shortage is the outcome of a flawed public policy that proscribes the purchase or sale of human organs for transplantation (even cadaveric organs), Blair and Kaserman (1991), Barnett and Kaserman (1992), Peters (1991), and Hansmann (1989), among others, have recommended alternative policies that rely on market forces to increase the number of organs supplied. The proposed policies differ along a number of dimensions (e.g., who would be assigned property rights, whether an administratively fixed level of compensation would be specified or market forces would be allowed to determine price, etc.). Despite these nontrivial institutional differences, however, a common thread that binds many of these proposals together is the use of some sort of financial incentive to call forth the additional organs supplied. As a result, a crucial question pertaining to all such proposals is how the number of cadaveric organs made available for transplantation is likely to respond to the stimulus of a financial incentive. That is, the success of any policy that relies on financial incentives turns directly on the question of supply. At present, however, there is no empirical information pertaining to this extremely important question. While various authors (e.g., Hansmann, 1989; Blair and Kaserman, 1991; Evans, 1993; Cohen, 1989) have speculated about the likely slope (or elasticity) and possible shifts in the intercept of the supply curve of cadaveric organs, the present authors are unaware of any empirical estimates of these crucial parameters. The reason for this complete absence of evidence, of course, is the fact that observable market transactions for cadaveric human organs have never taken place. In fact, since passage of the National Organ Transplant Act of 1984, such transactions have been legally proscribed. As a result, to say that knowledge of the likely responsiveness of organ supply to the provision of financial incentives (i.e., positive prices) is extremely limited is an understatement. Virtually nothing is currently known about this crucially important policy issue. This paper reports the first empirical evidence on this important topic. The authors admit at the outset that the information presented is imperfect. In particular, these data suffer two major shortcomings. First, they are drawn from a survey instead of observed market transactions. Second, the sample is not representative of the population of potential organ suppliers. While several adjustments are made to at least attempt to correct for the likely effects of these problems, nothing can be done to ensure unbiased results at this point. As a result, the following empirical results should be viewed as preliminary estimates and taken with a grain of salt. Nonetheless, some (albeit imperfect) empirical information is better than none, particularly given the gravity of the subject. …