Nobel Laureate Alvin Roth: Economics Can Save Lives
The work of American economist Alvin Roth is a direct response to those who believe that economics is more about mathematics than the real world. A professor at Stanford, he built his reputation by applying economic theory to concrete, everyday problems. A winner of the 2012 Nobel Prize with Lloyd Shapley, Roth has dedicated much of his research to what are known as “repugnant” markets – transactions that “some people would like to engage in while others, even if not directly affected, think they should not be allowed to do so.” One example is selling vital organs for transplant purposes, which is considered repugnant everywhere (or almost) in the world. However, Roth has studied issues related to the supply and demand for organs and has developed a model that allows matching between kidney donors and recipients. In a nutshell, his work has helped increase the number of kidney transplants and thus saved lives.
How would you define a “repugnant” market?
I can’t give a perfect definition, but when I speak about repugnant transactions, I think about transactions that some people would like to take part in and other people who are not directly affected by these transactions think they should not be allowed to. A repugnant market is a market of repugnant transactions.
Could you give us a few examples?
One example that I spoke about today was same-sex marriage. Two people would like to marry each other but other people think they maybe shouldn’t be allowed to. This has been a divisive political issue in Europe and in the United States, and different countries and states have reached different conclusions about it. (Currently, constitutional or statutory provisions prohibiting same-sex marriage exist in 13 US states, while it’s legal in the others).
You conception of the matching system to multiply transplantations. The purpose is to build a kidney-exchange chain. How does it works? And how does it cope with the repugnance factor?
Transplantation is not repugnant at all. Transplantation saves the life of someone who has kidney failure, for example, and I don’t think many people object to that. What’s repugnant is purchasing the kidney. Kidneys are special: people have two kidneys and can remain healthy with one, so you might be able to save the live of someone you love by giving them a kidney. But the law requires that these be gifts, not sales. Just about everywhere in the world that’s the law, with the exception of the Islamic Republic of Iran. As a result, there’s a shortage of organs for transplants. Many people die without getting a transplant because there aren’t enough organs for the people who need them, living donor organs included. Sometimes, you might love someone enough to give him a kidney but you can’t give a kidney to the person you love, because kidneys have to be very well-matched. Kidney exchange is a way of getting some transplants done, even when patients and their donors are not well matched.
Maybe you want to give a kidney to your sister and I want to give a kidney to my sister, but neither of us can do that because we’re not good matches for them. But maybe your sister could take my kidney and my sister could take your kidney and that way we get two more transplants and two lives saved. That’s the basic idea of kidney exchange.
How can your work on transplantations be useful on understanding other repugnant markets?
Partly the question with kidney exchange was to understand what was repugnant and how we could move forward to the larger goal without offending. In a kidney exchange, no one is paid. No one gets money, it’s a kidney for a kidney, and that turns out not to be repugnant. In the United States we were able to get the federal law changed to make clear that kidney exchange is not repugnant. The reasons that some people don’t like certain transactions can be different from the reasons other people want to engage in those transactions.
What are the ways around this repugnance? Are they necessarily to be found in regulation and law?
Just as markets need social support to work well, so do bans on markets. So making laws against markets doesn’t always make them go away, as we learn in the markets for illegal drugs or for prostitution, for example. Different countries and states in the US have different laws about those things. Another market I’ve talked about where there are different rules in different places are markets for things like parental surrogacy. In France, it’s illegal. In California, where I live, it’s legal. Making it illegal in France, however, has not stopped French couples who need a surrogate from getting them. Then you have to deal with how should the law treat the children who should have French citizenship and French parents and might possibly have no citizenship and no parents if the French law is applied too strictly (The French courts have softened the restrictions of the French law in such cases) ! Markets may be both hard to create, and hard to prevent.
How can the study of repugnant markets help regular legal markets?
Technology changes all markets and the opportunities of people in markets. For instance surrogacy was only possible after the invention of in vitro fertilization. This is true in other markets too. We now see financial markets where most of the trades are done by computers. That has changed the nature of the market and sometimes it changes the nature of rules that markets need to run well. I think that markets are a little bit like living organisms. We have to see how they evolve. When we think about how to make them work well, how markets should serve the participants and society, we sometimes have to change the rules by which they work.
Listen to Alvin Roth on Social Science Bites discuss ‘matching markets’
