The Question No One Asks:  Why Do We Have a Shortage of Transplant Kidneys?

If there is anything that all members of the transplant community agree on it is that there is a severe shortage of kidneys available for transplantation.  But almost no-one attempts to explain why we have such a shortage.  It is just accepted as a fact of life.

One thing is clear: we can’t blame Mother Nature.  Economics Nobel Laureate Gary Becker has pointed out that almost all of us are born with two kidneys but can live a healthy life with only one.  So society starts off with an enormous surplus of kidneys, not a shortage.  So how did we wind up with a shortage?  Why are more than 40,000 Americans who are diagnosed with kidney failure each year suffering on dialysis and dying  for want of a transplant kidney?

For all other goods in the economy, if some people are desperate to get the good and other people have extra ones, the people who need the  good would offer to purchase it from those who have a surplus.  That is, the two parties would enter into a voluntary exchange that would benefit both parties.  So why doesn’t that happen with kidneys?

For one simple reason:  it is against the law.

In 1984, the U.S. enacted the National Organ Transplant Act.  Section 301 of this act states:

(a) Prohibition.  It shall be unlawful for any person to knowingly acquire, receive, or otherwise transfer any human organ for valuable consideration for use in human transplantation if the transfer affects interstate commerce.

This innocuous sounding paragraph has had catastrophic consequences.  It effectively imposed a price ceiling of near-zero on the market for transplant kidneys.  And as explained in almost all introductory economics texts, a price ceiling below the market clearing price will cause a shortage.  And if the price ceiling is far below the market clearing price, the shortage will be very large.

That is the case with kidneys.  People who donate a kidney are offered compensation of only a few thousand dollars at most.  But we estimate the current market clearing price for kidneys is roughly $100,000.  The result is a huge shortage of transplant kidneys.  We estimate that each year more than 40,000 Americans diagnosed with kidney failure suffer on dialysis for an average of 4-5 years as their health steadily deteriorates until they die prematurely.

If the U.S. were so foolish as to pass a similar law prohibiting payments to farmers, we would soon have a colossal food shortage.

What can be done to end this catastrophe?  Find a way to compensate kidney donors enough to induce them to donate enough kidneys to save the lives of everyone who needs a transplant kidney.

One way to accomplish this is to have the government just get out of the way – stop trying to control the price of kidneys and allow people to freely engage in voluntary exchanges in the kidney market -- as they do in almost all other markets.  But this would cause many people who do not understand basic economics, and hence are hostile to free markets, to freak out.  So politically it is a non-starter. 

A much more politically acceptable approach to increasing compensation to kidney donors would be to have the government do the compensating.  A very important first step in this direction is a law that is currently being considered in Congress: the End Kidney Deaths Act (H.R. 2687).  It would establish an experimental trial to have the government offer non-directed kidney donors a tax credit of $10,000 per year for five years (for a total of $50,000).  Once it is shown that compensation increases kidney donation, the program could be expanded to offer all living donors about $100,000, which would end the kidney shortage and save more than 40,000 lives each year.

If anyone doubts that government price controls are the cause of the kidney shortage, and ending the controls would end the shortage, consider the market for blood plasma.  Most countries do not allow payment to blood plasma donors, and as a result they have a severe shortage of plasma.  A few countries, including the U.S., allow plasma donors to be paid, and these countries  produce enough plasma not only for their own needs, but also for the needs of the countries that prohibit payment.

Frank