Timothy Taylor has a great blog post summing up all the arguments for and against paying people to donate kidneys. On the positive side, kidney recipients will live longer, have a higher quality of life, and save money for society as a whole. On the negative side, there are fears that this new system will exploit the poor, pushing them to sacrifice their own health and well being in order to cope with the difficulties of having little money. Ideally, we would get enough voluntary donations to satisfy the medical need, but so far that has not happened in the past, and will be unlikely to get us to that point in the future.
My contribution to this debate is to argue that we should pay people a lot for donating their organs, but that we should delay paying them for about 5 years after the organ has been donated. Economists get a bad rap for putting a price on everything and transforming each transaction into an opportunity for profit. If both people are made better off from paying someone to donate their organs, then they should be able to do so, but the real question is whether both parties are actually made better off as a result of the paid donation. Part of the concern is just the distaste over putting a monetary value on our own organs, but I think the real concern is that rich people will exploit the short term financial needs of poor people in order to pressure them into making a donation that is not in their own best interest.
Behavioral economics would suggest there is reason to worry, where there is strong evidence showing that people substantially overweight costs and benefits that occur in the very short term, and substantially underweight costs and benefits that occur over the long term. If the medical system provides potential donors with a short term financial benefit but imposes long term health costs, then donors might be biased towards donating their kidneys even when it is not in their best interest to do so.
My solution to this problem is two fold. First, we should make sure donors get *a lot* of money for donating their organs. Kidney transplants save the health system tons of money and the donors who make this happen should be allowed to get a large portion of those benefits. I would say donors should get at least $25,000 to $50,000 for donating their organs, and perhaps even more depending on how much money it actually saves. Giving people a lot of money makes sure people do not pressured into giving up their organs for a price that is too low.
My second solution to this problem is to delay the payments for their organs by about 5 years. If we worry that people are subject to present bias, then they might be biased towards donating their organs if they are offered a significant financial benefit over the short term. They might be short on cash and have a big bill they need to pay, and then this short term need could potentially be exploited to convince them to donate their organs even when it is not in their best interests to do so. If, however, the payment did not arrive until 5 years later, then there would still be a strong financial incentive to donate, but this payment could not be used for an immediate short term problem or impulse buy, and would not be subject to the present bias that might motivate someone to donate their organs purely for short term financial benefit. If the payments were delayed for 5 years, then it could only be used for some long term, preplanned benefit that was a priority for the donor that would not be overweighted due to present bias, greatly reducing our fear of exploitation.
If we take away the fear exploitation by ensuring donors get a generous price and delaying the payment by 5 years, then a lot of our concerns about exploiting the poor go away as well. Once the public has greater assurances that the immediate short term financial needs of the poor will not be exploited and only long term considerations will be weighed when making the decision, then there will be less fear that present bias is driving the poor to do something not in their best interest. There will always be some distaste from turning organ donation into a financial transaction, but if both people do actually benefit from a paid donation, then people should be allowed to do so, and by making these changes to our system of organ donation then perhaps many lives could be saved in the process.
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