Plasma compensation

Kerre McIvor over on Newstalk had a bit of a go at me on the issue of compensating plasma donors. She worried about that facilities paying for plasma would locate in and prey on poorer communities.

I think that gets things entirely backward, and is beside the point even if it didn't get things entirely backward.

It's beside the point because gaps in NZ's supply are currently made up from donations by compensated plasma donors in the United States. Prohibitions here just shift the location of the paid person, and if you have any reason to expect that whatever ethical checks there might be on practice around donors would be stricter here than there, then you should want it to happen here rather than there. Note that I have zero concerns about practices in the US either though. 

But more fundamentally, if your view of the world is that there are some people in such desperate circumstances that they'd turn to plasma donation as a last resort, and that they need to be protected against that somehow because the horrors of giving plasma are just too risky to be encouraged by anything as dirty as cash, I just have trouble understanding that whole line of argument. If someone's conditions are that bad, how can banning that person from accessing what they view to be their best option be in that person's interest? Surely the better answer is to find other things that might improve that person's circumstances. There aren't really that many cases where banning people from their best alternative really makes them better off. 

And plasma regenerates in two days. The ban doesn't prevent someone from going and doing some giant irreversible thing out of some desperate circumstance. It prevents them from making maybe $30 or $50 for spending an hour on a machine that takes some of their plasma. It's not like "Hey, I hear you're desperate. Can I have one of your eyes?" Plasma sorts itself out. And if you're the sort of person for whom plasma doesn't sort itself out, pretty unlikely you'd make it through the medical checks to be a donor (and you might even then find out about something that you need to find out about). 

If it's of any interest, here's one of the Canadian centres that pays for plasma. The payment structure is rather neat. Plasma regenerates after 2 days; they require at least 2 days between visits (no more than 2 visits per week) and pay more for the second donation. The whole structure is geared around encouraging repeat visits. Why would that make sense? There are going to be big onboarding costs with any new donor. They have to screen donors and go through a pile of health checks. After those are through, ongoing monitoring is easier. So the centre's costs will be sharply declining in the number of donations per donor. The worst thing would be dealing with a giant surge of one-off donors motivated by some publicity campaign. You want repeat donors. 

So here's the compensation structure:

First donation of the week: $30.

Second donation of the week: $50.

After your 25th donation: $25 lump sum bonus, and an extra $4 per donation.

After your 50th donation: $150 lump sum bonus, and an extra $5 per donation.

If you made 100 donations in a year - take two weeks off for holidays - you'd be on $4529 for the year for 150 hours' commitment. Better than $30/hour, for hanging out on a table catching up on your reading. 

I just don't get folks who'd consider that to be exploitative. It's an utterly alien mentality. If that's exploitative, what about someone desperate for money who takes any job that's riskier than donating plasma and pays way less? Is there anything that shouldn't be banned, if that's your view of exploitation? 

There are variants of this stuff that seem worth taking seriously. Mike Munger's discussions of voluntary versus euvoluntary exchange are fruitful. But banning compensating plasma donors because of invented concerns about coercion isn't that. 

Bloody Well Pay Them

Georgetown's Peter Jaworski's produced an excellent report on the need for compensation for blood plasma donors. The report was released yesterday by the Adam Smith Institute, in conjunction with the Niskanen Centre and the Australian Taxpayers' Alliance. 

I've covered it in this week's column at the Stuff newspapers. A snippet:

Despite New Zealand’s prohibition on donor compensation, or perhaps rather because of it, about an eighth of New Zealand’s needs for plasma therapy are filled by imported American supplies that rely on compensated donors. The New Zealand Blood Service’s May 2020 Annual Statement of Performance Expectations considered the annual increase in demand for immunoglobulin (an important plasma product) to be “not considered sustainable”; imports are expected to make up over 15 per cent of New Zealand’s needs by 2022.

Reliance on American blood plasma products is even heavier elsewhere: the report tells us that America now supplies about 70 per cent of global need for plasma product – in part because American companies have expertise unavailable in developing countries for providing safer products, but more fundamentally because donor compensation helps ensure sufficient supply.

Developed countries with no shortage of expertise also rely heavily on American plasma imports.

The report tells us that the United Kingdom, which prohibits donor compensation, relies almost entirely on American blood plasma products; imported American plasma product meets over 80 per cent of Canada’s need for plasma therapy – and over half of Australia’s.

In one sense, there may be nothing particularly wrong with this.

Some people, particularly medical ethicists, think it is fine to pay phlebotomists to collect blood but that it is wrong to pay the people providing the blood or plasma.

Those with such views get to be happy that policy accords with their sense of morality – so long as they don’t look too closely at where we wind up finding plasma products instead. And ability to access American markets where donors are compensated means that we in New Zealand are less likely to fall short despite our country’s ban on donor compensation. But there are other and worse consequences.

The ASI report argues that bans on donor compensation in places like the UK, Canada, Australia and New Zealand, which are perfectly capable of making their own immunoglobulin products, push up the price of plasma products for poorer countries without those capabilities.

 Prof Jaworski's report is well worth reading. 

Have you considered using prices?

Talk about an elephant in the room.

Radio New Zealand's story on unregulated informal sperm donor networks is a great chronicle of what happens when you ban payments for sperm donors, without once mentioning that the whole thing is consequence of a ban on payments for sperm donors. It's like a murder mystery where all the facts are laid out, but nobody has figured out who the obvious killer is. It really is the butler! Why hasn't anyone arrested the butler!

What do we find in this story?

• Waits at official fertility clinics of 18 months to two years (blamed in part on increased demand from single women);
• High costs at fertility clinics: $300 for an initial consultation, donor's testing costs of $1500...
• Men shunning clinics because donating at the clinic is costly to them: "The clinics, they just don't simplify the process. The donor has a life too. If I have to go through a clinic, I have to do a consultation and therapy and it takes six months to help one person. It's too much."

What don't we find in this story?

Section 13 of the Human Assisted Reproductive Technology Act 2004:

13 Commercial supply of human embryos or human gametes prohibited(1) No person may give or receive, or agree to give or receive, valuable consideration for the supply of a human embryo or human gamete.
(2) Every person commits an offence who contravenes subsection (1) and is liable on conviction to imprisonment for a term not exceeding 1 year or a fine not exceeding $100,000, or both.

If the clinics could pay the donors for the increased hassle they face in going through all of the rigamarole required for that process, supply would increase. If demand increased, clinics could up the offer price to encourage greater supply. There wouldn't be 18-month queues.

It isn't like not paying the donors saves the customers a lot of money. The clinics just get the money instead - though it is a puzzle that they haven't increased fees by even more: Simple AI is cited as (only) $1500 per cycle.

The article notes the risks in the informal sector (potential lack of disease testing, etc). Maybe, just maybe, if the clinics could pay the donor at least enough to cover the hassles they face in going to the clinic, things would change.

Previously:

• The most predictable thing ever
• Unintended consequences: Assisted reproductive technologies edition

Compensating organ donors

It is illegal to pay organ donors for their gift. Economists can easily explain the consequences: at a price of zero, you have a big shortage. This is particularly the case for live donors, where donors face real personal costs, both in the transplant process and in recuperation.

Chris Bishop's bill, which passed Third Reading in the House yesterday, will compensate live organ donors at 100% of their lost income, and makes sure they're not left out of pocket for costs.

Here's Chris's speech at third reading.

Kidney transplants save the government over $120k in dialysis costs, net of the cost of the transplant and ongoing care.

For a long time, we were stuck in the worst of all worlds on this one. People don't like the idea of trade in organs and money being involved, and so governments made it illegal to pay anybody anything for an organ. Well, except for the surgeon, the nurse, the orderly, the person who mops the floor, the people running the kitchen at the hospital, the people making the equipment for the transplants - all of them, well, their choices are by definition uncorruptable and totally not based on coercive money being involved. Just the person who might donate an organ. That person had to be protected from coercive cash - and the consequence of a mandatory price of zero was a massive shortage in donor organs.

Most of the time, economists would just take this as example of the stupid that happens when people can't think clearly about prices and exchange.

Al Roth instead saw it as a constraint to work around, and came up with matching donors as a way of making things suck less given the constraint that money can't be involved.

And Chris Bishop, in an excellent bit of policy entrepreneurialism, saw the opportunity to save lives by repackaging things. The New Zealand system will compensate donors for their lost income for up to 12 weeks of recuperation. Gary Becker had estimated that you'd get an infinitely elastic supply of organs at around the $15k/kidney mark in the US. Compensation at the median wage for 12 weeks is just over $10k. That doesn't get us quite as far as would be ideal, but it is a massive improvement on the system as it was.

I like to think that we helped a bit in this. I've been blogging on this topic for a while now, and have pointed out the Israeli compensation system. The last honours project I assigned at Canterbury was running the CBA on live organ transplant. Bob Reed took over supervision of Liz Prasad's project as I left for the Initiative, then Liz turned it into a Masters with me helping a bit in the supervision.

When Chris's bill was drawn from the ballot, we quickly turned Liz's thesis into a research note and submitted on the bill. We didn't get all the changes we'd there have wanted - I still really like the Israeli priority system - but it was good. Donor compensation was strengthened from 80% of lost wages to 100%, and I like to think that our showing that the government still saves money on the deal helped in that.

Chris did all the hard yards on this one though. He built phenomenal cross-party support for a proposal that routes around one of the stupider constraints we've had in the system, and gets us a heck of a long way towards better outcomes. Huge kudos to Chris.

And this should be a lesson for the American system as well. Stop talking about buying and selling organs, start talking about letting insurers compensate donors for their lost wages while in recuperation. It ain't perfect, but it's a big step towards a better world.

UPDATE: On prompting by Ilya Somin, I've checked through the US law. I thought it was banned in the US as valuable consideration, but compensation for lost wages is allowed for. And yet it still is a substantive barrier to donation in the US: while it's allowed, it isn't done. In that case, as the public system there does fund a lot of transplants through medicare, I expect they'd just need an administrative decision to provide that compensation.

What Member's Bills are for

I'm really excited about this one.

Last year, Chris Bishop's Member's Bill on compensation for live organ donors was drawn from the ballot. New Zealand provided some small amount of compensation to donors for their lost income, but under ACC rules that come with strict caps on how much can be paid - for reasons that make sense for ACC but not for live organ transplant.

We submitted on the bill, based on our report showing that the government saves about $120,000 in costs for every kidney transplant. Our report, and our submission, are here. We recommended:

• strengthening the compensation regime from 80% of lost earnings to 100%, up to a cap in case, say, a bank CEO becomes a live donor;
• playing fairly to those not in employment by compensating them as though they were employed full time on the minimum wage;
• providing live donors with priority access to transplants should they ever need one later;
• compensation should be handled by MoH rather than through Work & Income, who were not doing a great job with the cases they were seeing.

The bill came back from committee yesterday. It:

• strengthens compensation to 100% of lost earnings;
• makes some provision for those donors not in employment, so that existing work rules on benefit receipt don't make a mess of things, and so those on benefits who are in some part-time employment are not disadvantaged, but doesn't quite go as far as we'd have liked;
• does not implement a priority system, but that would have been too substantial a change to add into the Bill in the committee process anyway (room for future improvement);
• runs compensation through MoH.

I'm really happy about this outcome. The bill had great cross-party support all the way through, and I expect it will be passed soon. It will do a lot of good, and save the government money in the process. There aren't many Pareto moves out there, but this is one. 

Our press release yesterday on it was here. 

This is exactly the kind of thing that the Member's Bill process is for. Chris has done a fantastic job here. 

The most predictable thing ever

Here's the Adam Smith Institute on New Zealand's sperm shortage.

The world simply will not make sense if you do not grasp the first and most basic thing you must know about economics. Which is that incentives matter.

What the incentive is, what the action or activity is, those are things which can all vary wildly. Whether something acts as an incentive or a disincentive can change too. But it really is crucial to understand that whatever else might be going on, incentives matter:

In 2004 the New Zealand government introduced legislation banning anonymous sperm donations and preventing donors from receiving any payment for their services.

Donors in New Zealand have minimal costs covered (such as travel to the clinic) but are not compensated for their time, which after rigorous medical testing and counselling, can be significant.

Under the new law, the sperm donor must also agree to being identified to any offspring when the child turns 18.

A decline in sperm donations following the introduction of the legislation coincided with a sharp rise in same-sex and single women applying for donated sperm.

It's not difficult to predict is it? On the application side the greater controls mean that fertility through donation is more desirable. On the production side the greater controls make production less desirable. Note that there's no money floating around this system but we've still got a change in demand and a change in supply.
And given that we've not got a price that can change to balance them we've got a mismatch.

We've covered the gamete-payment ban many times before here at Offsetting. But it is interesting how, in the same week that the Opposition is talking about wanting to get rid of the requirement that single mothers on benefits name the child's father (which lets the government collect support from the father), we're also talking about sperm shortages caused by not allowing payment or anonymity.

The 2004 Act is here. One night stand: legal. Prostitution: legal. Providing valuable consideration for provision of a human gamete: up to a year in jail, $100k fine, or both. Bit odd that whatever benefit is provided to the donor in a motivated one-night stand doesn't count as a valuable consideration.

One of our staffers here at the Initiative, who will remain nameless unless she wishes to be named, wondered whether there might yet be a market opportunity here. Business plans welcome in the comments: bridge the gap caused by the legislation, while not doing anything illegal in the process. I can kinda think of one, but y'all go first.

Update: the Herald reports that the Minister is considering allowing in foreign sperm. I wonder if Winston is worried. More seriously, think of the mental gymnastics required to think it ok to indirectly pay foreign donors via foreign clinics, but bad to allow domestic payment? Come on, National. Learn to liberalise for once. Do you have to keep everything dumb that Aunt Helen gave us?

Previously:

• Measures guaranteed to reduce supply
• Things I'd never considered: Talmudic law edition (the most fun)
• Wise investment ; A bargain at twice the price
• Gresham's seed (my favourite I think)
• Unintended consequences: assisted reproductive technologies edition

Whatever the problem, inequality's to blame

Man, the snake-oil salesmen of the 1800s had nothing on today's inequality campaigners. Turns out that inequality's to blame for New Zealand's low organ donation rates. Really?

Here's Eileen Goodwin at the ODT.

An "individualist new-right'' attitude that holds sway in New Zealand is holding back organ donation rates, a University of Otago biomedical ethics authority says.

Prof Grant Gillett was contacted for comment on a Ministry of Health consultation process that seeks to increase New Zealand's low rate of organ donation.

Prof Gillett supports a shift to an opt-off organ donation system that would involve families in the decision-making process.

He said the political ideology of the Ministry of Health and the Government hindered efforts to foster a different view of organ donation.

"The ministry's got quite an individualist new-right sort of agenda.

"I think it's shared by the Government at large; I think that's the reason why we are encouraged to tolerate the inequalities [in society].''

"It's fundamental to neoliberalism that every individual should be able to be accountable for their own stuff, wrapped up in their own life, and not have dues to others.''

... Asked if countries with high economic inequality had lower organ donation rates, Prof Gillett said he did not know.

"To do that you would need to look carefully at Scandinavia.''

That second-last line's a kicker. Any evidence that MoH is actually a den of neoliberalism? No. Any evidence that inequality affects organ donation rates? No. Gillett knew inequality was to blame before he even opened up the data tables. Great stuff, but he's a biomedical ethics authority.

I'm grateful that Eileen Goodwin got in touch for a response. She quotes me below:

Contacted for a response, Dr Eric Crampton, head of research at right-wing think-tank The New Zealand Initiative, said the link between income equality and organ donation seemed "tenuous''.

"America's organ donation rate far exceeds Sweden's and New Zealand's, but Spain beats both. Inequality does not seem to enter into it. If we want more organ donation, we need better incentives around organ donation,'' Dr Crampton said.

Dr Crampton said New Zealand could follow Israel's lead and put willing donors at the front of the queue when they needed an organ themselves.

I ran some very very rough correlations using Wikipedia tables on deceased donation rates and World Fact Book tables on Gini: neither are great, but it was what I could grab in 15 minutes yesterday afternoon.

The very rough correlation coefficient between inequality and donation rates in a cross-section of European countries plus the US was about 0.07: slightly positive, but nothing that you could conclude anything from. I put zero stock in it, because doing it properly would require at least a panel study to pull out country-level fixed effects that could simultaneously drive inequality and organ donation, but at least on the face of it, there is no there there on inequality and organ donation.

Doing it even more properly would start with data on individualistic attitudes from the World Values Survey.

I should have pulled the Irodat data. Here's the table for deceased donation rates. If you can see any inequality pattern in there, your eyes are better than mine. France and the US have ballpark identical deceased donation rates. So do Ireland and Finland. And New Zealand's rate beats Greece's. Estonia is a poster-child for market-oriented reforms; its donation rates are higher than lefty Italy.

And here are the rates for live donors.

Amazing that the socialist transformation of man away from individualism in Venezuela still has their live organ donation rates lower than those in that every-man-for-himself dog-eat-dog Hong Kong, never mind the US. And Sweden is also lower there than the US.

Israel really shines in live donor rates with its combination of proper compensation for live donors and a guaranteed front-of-the-queue position if you're a live donor who later needs a transplant; effects on deceased donation haven't been as great as we'd have hoped. That's in part, it seems, due to perceived easy cheating on deceased priority where you get the priority card while you're alive, but somebody raises a religious objection and gets you out of it when you've died. That kind of cheating breaks reciprocity norms and erodes confidence in the system.

Eileen quoted me accurately. My full comments were below, but she took the right excerpt.

“If New Zealand wants to increase its organ donation rate, it needs to improve the compensation paid to live organ donors. Chris Bishop’s member’s bill will make progress on that front. Donors bear real costs when they take time out of work to help save a life and should not be out of pocket for having done so.”

“To increase donations from deceased donors, New Zealand should look to Israel’s example. In Israel, those who are willing to be donors have priority over those of similar medical need who are not willing to be donors. Family members affirming a loved one’s wish to be a donor should the time come also have priority. And live organ donors have priority so that they should never find themselves at the back of the queue that they already helped to shorten.”

“Countries with opt-out systems for organ donations have slightly organ donation rates than opt-in countries, but the benefits of switching can be overstated. Whether the New Zealand system were opt-in or opt-out, doctors believe themselves required to seek the family’s consent to any donation. So the real barrier then is in ensuring that people agree to be donors and that they inform their families about their wishes. Ensuring priority for donors can encourage people to be donors, and encourage families to respect the donor’s wish.”

“Links between income inequality and donation rates seem tenuous. America’s organ donation rate far exceeds Sweden’s and New Zealand’s, but Spain beats both. Sweden beats the UK, but the UK beats Denmark. Inequality does not seem to enter into it. If we want more organ donation, we need better incentives around organ donation.”

I've no particular problem with opt-out instead of opt-in but I have a hard time seeing big gains from it where the doctors would, regardless of opt-in or opt-out, go and ask the family for authorisation. Either way, final say is with any family member who might veto.

FWIW, I've signed my organ donor card. I'm also a member of LifeSharers and hope that my organs could be directed to another LifeSharers member should one be a suitable tissue match.

Elizabeth Prasad's report for the Initiative on the economics of organ donation is here.

My prior posts at Offsetting on the topic are indexed here.

Head Transplant

If I ever suffer massive brain trauma effectively killing me but not affecting the meat that carries me, I totally consent to being a donor for this kind of transplant.* I hope you'd do the same for me.

An Italian-Chinese medical team plan to perform the world's first head transplant in China, one of the surgeons said Friday, amid concerns over medical ethics in the country.

Ren Xiaoping, who along with Italian surgeon Sergio Canavero, hope to attempt the procedure within two years, but only if the preparatory research and tests go according to plan, Ren said.

"A lot of media have been saying we will definitely attempt the surgery by 2017, but that's only if every step before that proceeds smoothly," Ren told AFP.

Canavero, who leads the Turin Advanced Neuromodulation Group, first announced his project in 2013, saying at the time that such a procedure could be possible as soon as 2016.

I know nothing about the relevant biology. But if head transplants wind up working, are cyborgs closer than I'd thought? The rest of the meat is just a way of delivering oxygenated, cleansed, nutrient-rich blood to the brain, right? If we can couple heads to new-meat, is it that much harder to couple it to a machine able to provide that? Wouldn't it be simpler, as robot-body wouldn't reject the head? And there's always this inferior option:

In related news, I've a short op-ed in the Herald on compensating live organ donors.


* I specifically decline consent to anyone who caused the head injury resulting in the meat's becoming available.

Some simple maths of organ donation

We this week released Elisabeth Prasad's report running some of the numbers on whether compensating live kidney donors makes sense. She finds that the typical kidney transplant saves the Ministry of Health on net about $125,000 over the longer term: dialysis is expensive.

Chris Bishop's Member's bill passed first reading and is off to committee. It increases compensation to live donors for lost wages from the current amounts offered by Work & Income (which range to $350 per week for up to 12 weeks) to 80% of the donor's wage. The average wage in New Zealand is about $1000.

Compensating donors so that more can afford to make that gift makes sense, on a straight fiscal analysis, if it brings enough new organs into the system. If new nobody becomes a donor because of the increased payment, then we've likely still done the right thing in helping donors, but it won't save the government money.

So here's the very simple maths on it.

Suppose each new transplant saves the government $125,000 less the compensation paid to the donor. Suppose that, currently, compensation averages $300/week for donors and lasts 8 weeks. The government then is currently $122,600 better off with each transplant.

Suppose that we move to full compensation. On average, donors earn the average wage. If they also take 8 weeks at $1000/week, the government is then $117,000 better off with each transplant.

If the live donation rate doesn't change, the government is out $5600 per transplant as compared to the status quo. If there is at least one new transplant for every 21.9 existing transplants, then the move is fiscally neutral. There were 72 kidney transplants from living donors in 2014. So if three more people are able to donate a kidney thanks to the increase in compensation, the move saves lives and is fiscally neutral. If four more people are able to donate a kidney thanks to the increase in compensation, the move saves lives and saves money.

Suppose we only get one new donor. One. In that case the government pays $403,200 to donors who would have donated anyway and $8000 to a donor who wouldn't have for a total of $411,200 in compensation. The net cost to MoH is then $288,600 for that single kidney - because they've had to compensate all the other donors at a higher rate. The recipient gets, in the indicative case of a 50 year old male, an additional 7.6 quality-adjusted life-years. The cost to MoH is then just under $38,000 per QALY.

In the worst-case scenario, where zero new transplants happen, the government is out just over $400,000 and a pile of live organ donors who have helped to save others' lives enjoy better compensation for their time out of work. In the break-even scenario, for the government, three more lives are saved when three donors are able to make the gift. And each donation after that saves the government rather a bit of money - while saving lives and doing right by the donors.

And note that all of this is predicated on my preferred 100% compensation regime. The break-even point using Bishop's 80% figure will be lower. The break-even point will also be lower if people take only 4 weeks in recuperation rather than 8.

Elisabeth's report, and her Masters thesis on the topic, are here. I was on Radio NZ's Nights this week on the topic; you can listen here. And pick up a copy of this week's NBR for my article on it (a pre-pub here).

Singer on organ morals

Peter Singer argues that not only do we have a moral duty to be organ donors, we should also consider incentives for donation.

One of the key contributors to low donation rates is the fact up to 50 per cent of families, when asked, say "no" to a donation request. In our view, despite the difficult emotional circumstances, this is a gross ethical failing. When the cost to a person of performing some moral action is small, and the benefit to others is great, there is a duty of easy rescue to provide that benefit. When you can save a life with a unit of blood, you have a moral obligation to give that unit. Donating organs after death is the easiest rescue of all, because there is no cost to giving organs in these circumstances. We don't need them, and they will otherwise be buried or cremated. Because a single donor can provide organs and tissue that benefit up to 10 other people, to choose not to donate is to allow those individuals to unnecessarily die or continue to suffer. 

He recommends shifting to an opt-out system and allowing binding registries blocking family over-ride. But unless doctors also shift to then either not consulting with families or ignoring family objections, or unless doctors combine opt-out with fairly rigorous exhortation of donors' families to allow donation (as is the case in Spain), it won't do as much good as Singer and I might hope. There's also the risk that binding registries might do as much to block families from opting somebody in as they would to prevent families from opting you out.

I agree entirely with Singer here:

Third, we should consider providing incentives to individuals and families to encourage them to donate. Last year, a group of leading medical specialists, bioethicists, religious leaders, economists and others sent an open letter to United States President Barack Obama suggesting that pilot programs should test whether regulated benefits to living donors – including financial incentives such as payments into their superannuation funds – would increase the supply of kidneys in ways that safeguard the rights and health of donors. For deceased donors, incentives could include financial contributions to funeral expenses – just as many universities offer free ceremonies and cremation for those who donate their bodies to medical research.
Incentive policies could also be non-financial. One promising idea is offering prioritisation in the receipt of organs for those who sign up as donors without the possibility of family veto. Israel adopted such an approach in 2012, but it also exists in Singapore and the US (for living donors). Such an approach can operate on a points-based system – awarding additional points to willing donors, while still taking account of other factors, such as time on the waiting list and medical need. If this approach worked to increase supply, then everyone who needs an organ – even those who choose not to sign up – may benefit. A rising tide can lift all boats. 

Becker and Elias found that about $15,000 in compensation would provide the United States with as many live kidney donors as would be required to solve the shortage. And while results on Israel's priority system for cadaveric donation have been less than conclusive, giving live donors priority while providing them compensation seems to have increased donation rates.

Pay donors?

I chatted yesterday with Sean Plunkett at RadioLive about compensation for live organ donors. My former student Liz Prasad showed that paying donors would save lives, improve quality of life among transplant recipients, and save the public health system rather a lot of money.

National's Chris Bishop has a Member's Bill that's been drawn from the ballot that would increase compensation to live donors. If anything, I'd say his Bill could go even farther. In particular, the Israelis have done well by ensuring that live organ donors have priority access to organs should they ever need one. We could do that here as well, and provide a bit of added security for those giving that gift.

The audio of the interview is here.

Priority Organs

New Zealand's organ donor service doesn't seem to like Israel's priority system.

I was on with Paul Henry this morning talking about organ donation rates and pointed to the Israeli system as something that New Zealand should consider.

ODNZ put out a press release making much of single-year changes in deceased donor rates from 2013 to 2014 in Israel and NZ: Israeli rates dropped while New Zealand's rose.

They're right that New Zealand's organ donation rate in 2014 was higher than it was in 2013. The one-year jump from 2013 to 2014 to 10.2 brought New Zealand all the way back to the average deceased donors per million population rates that the country enjoyed on average in the decade 1995-2004. In the decade 2005-2014, it's been more like 8.4.

What ODNZ misses is the big jump in organ donor sign-ups under the priority scheme:

Increasing domestic donations is a special challenge in Israel, where religious factors have historically constrained the organ supply. Despite a 300-year-old rabbinical ruling that an autopsy—and by extension, any post-mortem surgery—can be performed to save a life, many observant Jews consider the body inviolate in death. Taboos against mutilation are less of an issue in other Western countries, where consent rates—the percentage of brain deaths that result in donation—frequently exceed 70 percent. For most of the 2000s, Israel’s hovered around 45 percent—among the lowest in the developed world.

Today, however, Israel’s consent rates have jumped, to 56 percent in 2013—still low, but a shift that demonstrates a real turnaround in public opinion surrounding organ donation. The change is largely due to the public debate surrounding brain death that followed the highly publicized decision by the family of the Israeli soccer star Avi Cohen to disregard his wishes to donate his organs after a 2010 motorcycle accident left him brain dead—and to Israel’s adoption of a unique allocation system for organs that rewards those willing to donate. At a time when waiting lists are growing everywhere, including in the United States, Israel’s success has implications for a global transplant landscape that is in dire need of innovation.

The priority law also encourages living donation by giving donors the security that they'd be at the front of the queue should their remaining kidney - or any other organ - go bung later on.

The whole article over at Tablet Mag is well worth reading if you're interested in the Israeli system. It's a bit more complicated than one-year changes.

I'm guessing that ODNZ is a bit tetchy because a binding organ donor registry is again in political play. I'm more ambivalent about how much good that could do - or at least on its own. Combined with stronger payment for living donors, defraying funeral costs for cadaveric donation, and a priority system like Israel's, well it could be pretty effective.

Update: Me on that last point in the Herald.

Blood Markets

Supply curves slope up, even for blood.

Sydney's Robert Slonim will be speaking at Canterbury on the use of economic incentives to improve supplies of blood. Slonim's work on encouraging blood donation through use of compensation has featured recently here at Offsetting.

From the blurb for Slonim's talk at Canterbury:

2014 NZEEL Distinguished Lecture:
Professor Robert Slonim
University of Sydney

The Science of Giving, Economics and Improving Blood Supply

When: Thursday, 18 September 2014, 5:00pm - 6:30pm
Where: Law 108 Lecture Theatre

Blood supply in most countries falls well short of meeting demand. This presentation highlights six scientific studies that Professor Slonim has conducted to better understand motives for volunteerism in general, and donating blood in particular. The studies combine naturally occurring data with natural field experiments. The results show that basic economic principles apply to blood supply (eg offering economic incentives increases supply), despite long-standing beliefs to the contrary, and that the market for blood can be improved using economic design mechanisms.

Robert Slonim is a Professor in the School of Economics at the University of Sydney. Professor Slonim completed his undergraduate and MBA studies at U.C. Berkeley and received his PhD from Duke University in 1995. He was a postdoctural student the University of Pittsburgh from 1996 to 1998 and then joined the Department of Economics at Case Western Reserve University as an Assistant Professor. After being promoted to Associate Professor, Robert Slonim moved to the University of Sydney in 2008 as a chaired professor.

Professor Slonim has published papers in leading journals on a wide range of topics primarily using experimental economics methodology. He has studied the effects of learning in games, endogenous determinants of preferences and conducted an evaluation of an educational natural experiment on economic decision making. He has been very innovative in his use of experimental methods that have both theoretical importance and have also represented important findings for matters of public policy. He is currently working with the Red Cross and blood donation centers around the world to better understand blood donation motivation and behavior.

Professor Slonim has been awarded over a dozen competitive grants including two National Science Foundation grants for his research. He recently received a five year Australian Research Council discovery grant for his investigation of determinants of prosocial behavior in the context of blood donations. He is an Advisory Editor at Journal of Risk and Uncertainty and has been recently appointed the Editor of Journal of Economic Science Association. He has published over 30 articles in prestigious international journals, includingScience and Econometrica. 


Contact: For further information regarding this event, please contact Maros Servatka, email:maros.servatka@canterbury.ac.nz or phone +64 3 3642631

RSVP: We invite you to RSVP to this lecture by registering online

Link to the UC Events Calendar: www.canterbury.ac.nz/events/EventDisplay.aspx?ItemId=5069

For more on this topic, hit the organ markets tag...

Priorities

Free riding kills voluntary contributions in public good games. When individuals see that free-riders are able to do well, and where there's no way of excluding those free-riders from the benefits of contibutions, or of punishing them, they lower their likelihood of contributing.

And so organ donation rates are pretty low. Donors provide a public good: they increase everyone else's chance of getting an organ if they need one, but don't get much out of it other than the knowledge that they're potentially helping others. Non-donors have equal access to organs should they need one. It's a sharing club that doesn't punish members for failing to share; takers gonna take.

Israel's solution: the Priority Law. Organ donors get extra points in the priority queue should they ever need an organ transplant. And they had to navigate a lot of the same ethical issues that New Zealand faces. Consider the parallels here to certain aspects of Maori concerns around tapu:

Orthodox Israelis opposed to organ harvesting on religious grounds have called the system discriminatory. But Lavee argues that the willingness of those same people to accept donated organs ultimately dissuaded potential donors from participating in the organ pool. “There was a dismay among the Israeli population that there were many, many free riders,” he explained. “Why should people donate if their organs would go to people who would never donate themselves?”

It isn't a full no-give-no-take system. Instead, donors simply get priority over non-donors. And, beautifully, the families of donors also get priority.

Launched in April 2012, the new Israeli system grants first priority for transplants to living donors and the family members of donors—who, in the event of brain death, make the ultimate decision whether to donate their kin’s organs. Registered donors of three years or more receive second priority; family members of registered donors receive a third tier of priority.

The system confers an advantage to candidates in the same tier of need; it never enables transplant candidates to supersede needier counterparts. Priority can’t catapult Status 2 recipients into the heart-transplant Status 1 list, but it can take them to the top of Status 2. With other organs, like kidneys, where a point system assigns values weighing age, waiting time, and compatibility create a 0 to 18 score, signing up as a donor can add a 1- to 5-point boost.

Results?

In 2013, the first full year of the new system, there were a record number of transplants in Israel; meanwhile, transplants received by Israeli patients abroad fell to a quarter of their 2007 peak. Most of what continues is the result of lawful allocations many nations offer foreign transplant candidates. Another feature of the 2008 Organ Transplant Act—full reimbursement to living donors for lost work time, and health and life insurance for five years—has helped spur donations of kidneys, and lobes of liver and lungs. Between 2011 and 2013, the number of Israeli living organ donors increased by 67 percent over the preceding three-year period, and the Israeli transplant waiting list contracted in 2013.

It certainly hasn't abolished the waiting list. But it's helped. New Zealand could well save a lot of lives by following the Israeli example. Otago University hand-wringers prefer deaths to incentives; it would be nice if Parliament could pay a bit less attention to them.

Previously:

• Al Roth and Finn the Human
• Israel as example: Organ donations
• Coercion everywhere: organs edition
• Some evidence on the effects of compensation for blood donation
• The Price of Marrow
• Organ supply
• Compensate cadaveric organ donors with free funerals. It's odd that Otago can cover a cremation subsidy for those leaving their bodies to science, but we can't compensate organ donors for similar donations.
• Encourage LifeSharers as a way of boosting donation rates rather than try to stomp on it [see also here]. 
• Consider the other steps taken by Israel: priority access to donated organs for those signing on as organ donors. See here and here.
• Small steps towards a better world
• Organ incentives
• Organ nudges
• Organ rights
• Free funerals
• Talkin' 'bout organs
• Overcome your repugnance
• Feisty comments on organs
• Encouraging news
• Misleading?
• Reasonable nudge
• Price seems high: organ prices edition
• The moral case for kidney markets
• Al Roth's Nobel

Hit the "Organ Markets" tab for all the prior posts on the topic.

Al the Human

Whenever I watch Finn's quest to implement Pareto-improving moves despite the incompatibility of others' wants and the downright misanthropy of some actors, I, like you, can't help but think of Al Roth.

Economists know that we could save lives if we allowed markets in human organs. Because many people who do not need organs, and some who do, find such markets repugnant, they would oppose political candidates who would change the laws to allow these markets to exist. Transplant surgeons and medical ethicists loudly oppose such moves. Because politicians wish to be elected, they also oppose policies that would save lives but that many voters oppose. And so we cannot have nice things.

Most of us spend our time yelling about how people should be different and that they should stop banning other people from doing things that don't affect them. Al Roth instead finds moves that work despite the stupid-people problem, and rightly won the Nobel for it.

Becker & Elias have updated their prior work on the number of lives that could be saved if we had market incentives encouraging organ supply. Al Roth comments on it here.

So, the arguments that they repeat have gotten stronger over time: the shortage of organs is costly in every sense, and could likely be relieved by allowing kidneys to be bought and sold by live donors, and allowing the purchase of organs from deceased potential donors, i.e. by repealing the part of the 1984 National Organ Transplant Act that makes such sales a felony in the United States. (Similar laws exist in most of the developed world: the only country that seems to have an explicitly legal market for kidneys is Iran, although many black and grey markets exist.)

So, why hasn't this argument made any headway, either in the U.S. or overseas? Is patient repetition of the argument the best way to make the case? I don't know the answers, but I think that the repugnance of organ sales is a subject worth studying, not just for science but also for those who might like to influence policy.

He further points to work with Stephen Leider looking at public opinion around organ markets. They find that a majority of the public support some forms of organ markets, and that this is consistent with prior survey evidence. They also note prior evidence that transplant specialists and physicians are far more opposed to donor compensation than are other members of the public. There's greatest support for compensation where compensation is paid by the insurance system or the government rather than by the person needing the kidney.

We find majority approval of each kidney market, though a majority supports legality only for markets with the government or insurance companies as purchaser. This suggests that monetary compensation to donors by institutional intermediaries could receive public support. Both general disapproval of body-related markets and disapproval of market encroachment on traditionally non-market spheres contribute to disapproval of kidney markets; however we find no evidence that generally negative attitudes towards markets drive this repugnance. Social conservatism and being a religiously active Christian also predict of kidney market disapproval, though largely as proxies for general disapproval for body-related markets. Furthermore, disapproval for kidney markets seems driven by concerns about repugnant transactions at least as much as sensitivity to specific policy details. Unless proposals engage these fundamental concerns, perhaps by addressing the long-term welfare of kidney providers, they will fail to address the objections of a substantial minority. 

If New Zealand voters are similar to those in the States, then the policy recommendation would be payments from the government to live donors, payments from the government to cadaveric donors, and a guarantee that live kidney or liver donors get priority queueing should they ever need a kidney or liver. It also suggests that public opposition could be far less fierce than we might have thought if we only listened to the transplantation ethicists.

Roth continues:

Judd Kessler and I have a paper forthcoming in the American Economic Review papers and proceedings (May 2014) called "Getting More Organs for Transplantation," in which we summarize the issue this way:

"Kidney sales are often the leading example of a repugnant transaction cited by those who would put stricter limits on markets in general (e.g. Sandel 2012, 2013), because of their sense that such sales arouse widespread opposition. A representative sample survey of Americans conducted by Leider and Roth (2010) suggests that disapproval of kidney sales correlates with other socially conservative attitudes, but that it does not rise to the level of disapproval of other repugnant transactions such as prostitution. In addition, there is evidence that the manner of the payment to an organ donor may mitigate some of the repugnance concerns. Niederle and Roth (forthcoming 2014) find that payments to non-directed kidney donors are deemed more acceptable when they arise as a reward for heroism and public service than when they are viewed as a payment for kidneys."

That paper closes with this thought on the presently available options: 
"While these potential donors could save thousands of additional lives, at current rates of medical need, these donors alone would not be able to supply all the demand. Consequently, we must continue working on numerous fronts to solve this growing problem. "

In summary, the issue of whether and how organ donors might be compensated is an important policy issue that also touches on an important and still poorly understood social science phenomenon. Repetition of the basic arguments may move the discussion forward as the background facts become more severe, and it's great to see the issue addressed in such a public forum as the WSJ. But it may also be that repetition of arguments is not enough. To make progress in the face of opposition, it seems likely to be useful to understand better the nature of the opposition.

 I wonder whether there's any New Zealand survey data.

Organ nudges

It's hard to tell what's a nudge.

Recall the basic thesis of Thaler and Sunstein's libertarian paternalism: the choice of defaults couldn't help but influence choices, so give some thought to the default chosen.

In New Zealand, and many other countries, you're not an organ donor unless you make an explicit choice to become one: you have to choose to sign your organ donor card. Because thinking about death is unpleasant, there will be some people who would wish to sign their card but haven't gotten around to it. The default has affected the number of people signed up. Flip the default around to presumed consent, where those who do not wish to be donors have to opt out, and you'll have higher donation rates. And indeed, that's what's found in most countries running presumed consent systems.

Can we call this a nudge though? A team of researchers running an international comparative study of nudge policies think so.

In early July the passage of the Human Transplantation (Wales) Bill through the Assembly made Wales the first UK nation to adopt a presumed consent system for organ donation.

The Bill, which comes into effect in 2015, should undoubtedly be celebrated: it will lead to far more people being on the Organ Donor Register in Wales, as presumed consent systems have in other countries where they have been introduced, and it will save lives.

The historic significance of the Bill, however, lies not only in the lifesaving difference it will make, but in fact that it is the most discussed aspect of a broader shift in systems of government in Wales and the UK.

This shift is characterised by the increasing use of psychological insights about the nature of human behaviour within the design of public policy.

Commonly referred to as “nudge” policies, these new ways of governing are based on the principles of soft paternalism, or the idea that governments should use policies to make it easier for people in act in ways that support their own, and the broader public’s, best interests.

Nudge policies are clearly in vogue.

It seems like a nudge. Flip in default position? Check. Easy opt-out? Check. But wait:

Bad idea “@ideas42: Wales has become the first country in the Uk to adopt an opt-out policy for organ donation: http://t.co/Cy3gg9uhUO”
— Richard H Thaler (@R_Thaler) September 25, 2013

Bad idea? Why?

To be clear I prefer prompted choice for organ donation. Wales "soft opt out" where families are asked is esp bad since no opt in list.
— Richard H Thaler (@R_Thaler) September 26, 2013

I agree with Thaler that there's nothing wrong with a prompted choice system.

I don't know enough about the system in Wales. New Zealand's opt-in system doesn't really have a list; families are asked whether or not the donor has ticked the box on the driver's licence. If they're moving in Wales from a system that never asks families while presuming you're out absent having signed an organ donor card to one where you're presumed in but your family can veto, then that does impose burden on the families. The change imposes a burden, and that burden counts:

@leemovic @ideas42 opt out puts burden on family members who have no clue of donor's wishes. I prefer prompted choice as in Illinois and CA
— Richard H Thaler (@R_Thaler) September 25, 2013

Policy has to be very specially crafted to count as a nudge, following Thaler's setup. Thaler entirely disavows any connection between the UK's internet porn filter and his nudge prescriptions because of the burden the opt-in regime imposes on families who might prefer not to have to have explicit conversations about such things. Just because something is opt-out doesn't make it a nudge, in Thaler's view. And yet Wales's 'opt-out plus bother the family' system is being sold as a nudge.

Now, a few folks, a few years ago, were just a bit worried that the policy application of Sunstein and Thaler's insights would be rather more hamfisted and that opening up this whole nudge project would yield a pile of things that Thaler would view as shoves. Thaler dismissed those worries as variety of bathmophobia: the fear of slopes of the slippery kind.

But it isn't just the politicos who get things wrong. Here's how the research team working on the international nudge comparison project sees things:

Beyond organ donation, we can now find nudge-type policies in a range of policy areas. The default setting has been changed on company pension schemes in the UK so now it is assumed that employees want to enrol. There are also new plans to change the default setting for domestic access to internet pornography, with households having to opt in to getting access to such sites.

It's always worth keeping half an eye out for how one's bright ideas might be mangled in policy application. Whitehead et al, the research team funded by the Economic and Social Research Council to run the international comparison of nudge policies, have a few insights. While definitely counting the porn filter as a nudge, they also have a worry:

What is most concerning is that I don’t hear any researchers offering alternative viewpoints on the political value of the Nudge theory. Rather, they seem busy trying to get onto the advisory boards of various Behaviour Change research networks, centres and institutes – perhaps in order to fulfil their duties to serve policy-makers in their research and to secure research ‘impact’ – now a pre-requisite of almost any research funding in an increasingly competitive funding environment.

They perhaps could read the Cato Unbound symposium on Nudge - the one where Thaler dismissed his critics' fears as paranoid - for a few alternative viewpoints on the political value of Nudge theory.

Afternoon roundup

Today's afternoon news roundup.

Item the first: NZ's organ donor rate remains low; the kidney waiting list in particular remains long. Andy Tookey again suggests compensating cadaveric organ donors with subsidised funerals to encourage donation. I agree.

Item the second: if you're a small country, and the US ignores a WTO ruling in your favour, your options are pretty limited. Antigua gets points for creativity. HT: Susan.

Item the third: the National Business Review reprinted a couple of my posts this past weekend; here's cost-benefit analysis and banning cats. Their comment pool is a bit different from the one we have here. I'll be talking with Jim Mora and Radio New Zealand's The Panel on the topic around 4:15 this afternoon. [Update:  embedded below]


Item the fourth: American crime rates seem more sensitive to number of police on the streets rather than number of people in jail; the policy recommendation is to spend less on imprisoning people and spend more instead on community policing. A small portion of this effect is may be due to that crimes committed by police may be less likely to show up in the crime rates. The Bridgeport, Ct. police officers filmed stomping on the head of an immobilized and tazered individual are on desk duty rather than under arrest, at least so far. At least the guy who filmed them is unlikely to be arrested; had it happened in another state results could have been different. But I do agree with the overall policy recommendation - so much the more so if it could be done by diverting police resources away from victimless crimes.

Item the fifth: SciBlogs is running a survey on scientific literacy. I got a perfect score on it, but only because I lied a little bit about one of my answers. One question asks what makes a scientific result most credible: peer review, reputation of the research team, or a couple of other options. I knew the right answer was peer review. But I often put a lot more weight on researcher reputation. Things are so infrequently replicated, and results so often fragile when replicated, that I far more typically weigh a bundle of researcher reputation, publication, and topic. A new working paper from somebody who's credible is just worth more to me than a published piece from somebody who has a bit of a reputation for results that are fragile to specification search.

Item the sixth: +Jeet Sheth rightly wonders whether this is inconsistent with our usual assumptions around transitional gains traps. I'd think of it more in terms of a Peltzman regulatory model. In New Zealand, older used cars must undergo a basic safety inspection every six months while newer ones only need it every year - the Warrant of Fitness. They don't seem to be a profit centre for most garages except inasmuch as they give garages the opportunity to sell other (hopefully needed) services to those getting inspected; some garages specialise in only doing WoF checks on a quick while-you-wait basis. The national government proposed moving to annual inspections for vehicles first registered in 2000 or later. Recall that in the Peltzman model, regulation always balances the public interest with that of the regulated party; that balance changes as technology changes. The mechanics' trade association lobbied against the change, painting it as a road safety issue; the Automobile Association lobbied in favour of it despite also providing WoF checks. While dedicated WoF stations could have been earning some rents from the regulations, free entry into providing WoFs would have meant those rents would not have been huge. It's better viewed in a Peltzman model where deregulation (or a loosening of regulations) can emerge when a technological shock makes the regulation less beneficial to the regulated and to customers. Here, mechanics who weren't WoF specialists would have been seeing less benefit from the regulation as car manufacturing standards improved over time (and so potential gains from on-selling other services were smaller); the regulation's incidence was also pretty obvious to car owners.

Item the seventh: having this particular lotto number selection strategy isn't clever, it's just a way of increasing your winnings if your main numbers happen to come up. It's a bit nuts to purport that any number selection strategy is more clever than any other. It's a random draw guys. Random.

Item the eighth: Andrea Marchesetti points to a nice little story perhaps illustrating Caplan's rational irrationality model. Recall that in Caplan's model, when beliefs are of low cost, you'd indulge your bliss belief; when beliefs contrary to truth become expensive, you scale back demand for them. The Wall Street Journal reports that "haunted" homes in Hong Kong no longer trade at much of a discount; the property boom has pushed prices up. Entrepreneur Ng Goon Lau buys up at discount houses where an unnatural death has occurred, rents them out to expats who don't believe in ghosts, then later sells them - presumably with reports from the renters showing there to be no ghosts. It's unclear from the story whether the Hong Kong boom has brought in sufficient expats that haunted houses were bid up to standard prices without locals changing their beliefs, or whether the absolute increase in housing costs induced locals to put up with spooky ghost problems.

So concludeth the closing of the browser tabs.

Kidney Counsels of Despair

I love the contrast between Steve Landsburg and Virginia Postrel on the Roth Nobel.

They're both completely right.

Says Landsburg:

So Alvin Roth wins the Nobel Prize for, among other things, figuring out the best way to allocate kidneys subject to the constraint that you’re too damned dumb to use the price system.

Next up: A Nobel prize in medicine for figuring out the best way to prolong your life while repeatedly shooting yourself in the head.

Says Postrel:

Imagine a parallel universe in which federal law prohibited Americans from paying anyone to care for their children, whether in cash or in some other “valuable consideration,” and where paid child care was similarly repugnant and illegal throughout most of the world.

In this alternate reality, family bonds would simply be deemed too sacred and children too precious to permit the taint of commercial transactions.Some desperate parents would risk arrest to pay under the table. Parents with a lot of friends and family would help each other out. People with small social networks or loved ones in poor health would be out of luck. A lot of parents would stay home with the kids when they’d prefer to go out, whether to a romantic dinner or a regular job.

The intellectual consequences are equally predictable. Michael Sandel would use child care to demonstrate to his Harvard University classes that there are some things money just shouldn’t buy. The Cato Institute would issue reports showing how the prohibition hurts poor people who would like to be nannies and noting that the law makes an unfair exception for school teachers. Economists would calculate how much higher labor force participation and gross domestic product would be if parents could pay someone else to watch their children. Feminists would debate whether paid child care would liberate women or subject yet another aspect of women’s lives to the brutality of the marketplace.

Meanwhile, Alvin E. Roth, who shared this year’s Nobel Prize in Economic Sciences, would be figuring out how to make it as easy as possible for parents to trade off taking care of each other’s children.

Back in grad school at Mason, the harder core libertarians used to debate these kinds of questions. Roth makes the interventionist world suck less than it otherwise would and has definitely saved lives. In doing so, he has arguably reduced potential pressure for broader changes to the system that would do even more good, although equally convincing cases could be made that he is incrementally helping to make a full market system more palatable to those with strong visceral reactions against any kind of kidney exchanges.

When I attended the Rothbard Graduate Seminar at the Mises Institute, I made the case for free immigration in a session run by Hans Hermann Hoppe. He warned that we couldn't do it while the welfare system remained in place. I reminded him that a big influx of people demanding welfare would be the quickest way to generate real reform moving back to private alternatives, if he really wanted to be rid of welfare anyway. He countered, "But that is a counsel of despair!"

David Henderson criticises Roth for failing to explicitly support full markets in kidneys. If Roth does support them, though, he likely can't say it. If he does, then his system gets tossed out as an incrementalist path towards something some voters find repugnant.

Optimisation constrained by ridiculously harmful voter preferences is a lot harder than unconstrained optimisation. The best we can hope to do is make things suck less. And so Roth has done much good.

Update: Mike Giberson agrees. So does Paul Walker.

Coercion everywhere: organs edition

I had an awfully fun time a few weeks back guest-lecturing in an honours health ethics course in  Canterbury's Health Sciences programme. They wanted to know how an economist approached ethical issues around organ donation. It was pretty clear pretty quickly that the grad students there hadn't been exposed to economic arguments before; they were, on the whole, remarkably receptive. The lecturer, a bit less so. And so it was great fun.

I started by explaining how economists go about estimating the value of a statistical life, the importance of such estimates in drawing the appropriate balance between policies that mitigate risk and those that enhance the quality of life, and the importance of individual risk assessments in deriving those estimate. I moved then to compare the risk of workplace death in various industries with the risk of death from voluntary live kidney donation - live kidney donation is pretty safe. If we're prepared to let people accept cash for risky things like working on a fishing boat, why aren't we prepared to let people accept cash for risky things like donating organs?

The lecturer worried a lot about coercion. I yesterday noted the distinction between voluntary and euvoluntary exchanges as highlighted by Mike Munger. I noted it there too. Sales of organs seem pretty likely to fail the euvoluntary test - income pressures could drive a lot of donation decisions. But that's also true of decisions to work on a fishing boat or to take a lot of other unpleasant and risky jobs. What makes the "coercion of being poor" so much worse for the decision to sell a kidney than for the decision to take a job on a fishing boat if the risks of death or other adverse health consequence from the two decisions are roughly comparable?

The students seemed pretty happy with the notion that if we let poor people trade risk for income on fishing boats, it's a bit odd to ban them from taking roughly the same level of risk for income from selling a kidney, especially as the latter can save lives. The lecturer wasn't as keen on the idea. But I really couldn't pin down just what made the two kinds of decisions different except for that one involved organs, despite rather a bit of pressing. At one point she was backed into the (to me) clearly untenable position that workers on commercial fishing boats take the job not for the income but because they love fishing, then denying people were taking money in exchange for risk. 

I'm still puzzled about why it's obvious to many people that transactions around organs are inherently coercive but those involving very comparable levels of risk or unpleasantness that don't involve organs aren't. Bans on trade based around inarticulable squeemishness concerns do have effects. The National Business Review reports that New Zealand has imported human tissues from RTI Biologics' subsidiary Tutogen [paid link - get a subscription!]; Tutogen has gotten into a bit of trouble about how it sources its parts. Caleb Allison at NBR points to the ICIJ report that shows how pretty much everybody in the system, and especially the companies trading in tissues, are able to profit from individuals' uncompensated donation decisions. Banning trade in such things here, where we could be pretty confident that harvested tissues could be registered and traced back to source, just pushes the problem to places where the regulatory regime may well be less sound. We would have fewer problems in sourcing organs and tissues domestically were we able to compensate donors. 

I'd love to hear a comprehensible reason why we ban compensation in this area but allow it for taking risky jobs in mining, logging, and fishing.

Update: do read EuvoluntaryExchange - the pdf above-linked has the in-one-place version, but the blog is where the argument lives. 

NBER roundup [updated]

The late-night NZ-time twitter feed occasionally brings American morning delights. Tonight, it's the new NBER working papers. In the queue for when I'm back on campus and can read the NBER subscription papers:*

• Callison and Kaestner find tobacco consumption less price sensitive than previously thought; they reckon it would take a 100% tax increase to get a 5% drop in consumption. This would be estimated around American tax levels, which are rather below NZ ones; I'd need to back that out into price elasticity estimates to translate it into effects of NZ tax increases. From the abstract:
  

  ...we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference-in-differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease adult smoking by as much as 5%.

  If that's right, Turia's tax increases are more regressive than we'd expected.
  
  Update: Oh wow. Read this bit from the full paper:

  Using this method, we found that for adult smokers ages 18 to 74, a 10% tax increase is associated with between a 0.3% to a 0.6% decrease in smoking participation and a 0.3% to a 0.4% decrease in smoking intensity. More surprisingly, given past research suggesting that youth smoking is more sensitive to taxes and prices, we find very little difference by age in the association between cigarette taxes and cigarette consumption. A 10% increase in state cigarette tax is associated with: between a 0.3% to a 0.7% decrease in smoking participation for those ages 18 to 34; between a 0.2% to a 0.4% decrease in smoking participation for those ages 35 to 54; and between a 0.3% to a 0.6% decrease in smoking participation for those ages 55 to 74. Similarly a 10% increase in state cigarette tax is associated with: between a 0.3% and a 0.5% decrease in smoking intensity for those ages 18 to 34; a 0.3% decrease in smoking intensity for those ages 35 to 54; and between a 0.3% and a 0.4% decrease in smoking intensity for those ages 55 to 74. Finally, standard errors of estimates are of a magnitude that rule out cigarette tax elasticities with respect to smoking participation (intensity) among adults greater (more negative) than -0.12 (-0.13).
  ...
  It is notable that estimates in Table 3 provide no evidence to support the hypothesis that smoking behavior is more responsive to taxes (prices) among younger persons than older persons.

  There may be effects in encouraging kids younger than 18 to avoid starting smoking; the analysis here is restricted to adults. But if this is right, it means that whatever benefits come from Turia's Tax will be over a very long time horizon while the costs on low decile households through reduced net-of-smoking disposable income will be very large for a rather long time. I probably ought to pull this up to being its own post. There are rather a few careful controls in here that need more discussion.


• Reyes gives more evidence that banning leaded gasoline, and other restrictions on environmental lead, was a very good idea. From the abstract:

  The paper finds that elevated levels of blood lead in early childhood adversely impact standardized test performance, even when controlling for community and school characteristics. The results imply that public health policy that reduced childhood lead levels in the 1990s was responsible for modest but statistically significant improvements in test performance in the 2000s, lowering the share of children scoring unsatisfactory on standardized tests by 1 to 2 percentage points. Public health policy targeting lead thus has clear potential to improve academic performance, with particular promise for children in low income communities.

  Reyes previously estimated that reductions in environmental lead can account for a 56% reduction in violent crime in the 1990s.
  
  Update: The paper gives some nice benchmarking of the effects of lead reduction: the improvement in test scores that came of the reduction in the proportion of low income kids with high blood lead concentrations would be comparable to the improvement in test scores you'd expect if per capita incomes improved by 15% in low income communities - a rather substantial effect.


• Hastings et al provide more evidence that kids winning lotteries allowing them to attend the school of their choice enjoy better outcomes. 


• Fergusson, Robinson, Torvik and Vargas set up a model testing an Orwellian idea: that leaders whose power is augmented by warmaking have little incentive to let the war end. They test against Colombian data. From the abstract:

  We find that after the three largest victories against the FARC rebel group, the government reduced its efforts to eliminate the group and did so differentially in politically salient municipalities. Our results therefore support the notion that such politicians need enemies to maintain their political advantage and act so as to keep the enemy alive.

  War is the health of the state...


• And, finally, Lacetera et al on compensation for marrow and organ donation. The abstract:

  In an attempt to alleviate the shortfall in organs and bone marrow available for transplants, many U.S. states passed legislation providing leave to organ and bone marrow donors and/or tax benefits for live and deceased organ and bone marrow donations and to employers of donors. We exploit cross-state variation in the timing and passage of such legislation to analyze its impact on organ donations by living and deceased persons, on measures of the quality of the organs transplanted, and on the number of bone marrow donations. We find that these provisions did not have a significant impact on the quantity of organs donated. The leave legislation, however, did have a positive impact on bone marrow donations. We also find some evidence of a positive impact on the quality of organ transplants, measured by post-transplant survival rates. Our results suggest that these types of legislation work for moderately invasive procedures such as bone marrow donation, but may be too low for organ donation, which is riskier and more burdensome to the donor.

  Becker and Elias reckoned it would take about $15k in compensation to encourage kidney donation. If the tax benefits added up to less than that, it would have been surprising if there had been large effects on live donation rates. The data appendices (free access; the article is gated) shows no state provided more than $10k as tax deduction. Note that a $10k tax deduction isn't $10k in hand: it's $10k that you get to remove from your taxable income total. So it's only worth $10k times your marginal tax rate - in other words, very unlikely to motivate donation from the cohorts more likely otherwise there to be price sensitive.
  
  Update: A few neat bits on seeing the paper rather than just the abstract:
  • Where some worry that paying for organs worsens quality, the authors found instead weak evidence of quality improvement.
  • The authors seem to have reached the same conclusion: the payment levels via tax deductions are likely below the reservation price for live kidney donation.

* I've only caught the abstracts of these thus far; if there are grievous errors in method that aren't obvious from the abstracts, my apologies.