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Friday, September 8, 2006

Welcome and Announcements

CHAIRMAN PELLEGRINO:  Good morning.  Good morning.  Thank you very much for joining us on time to provide an opportunity for everyone who wishes to speak to speak.

I would like to start out first by stepping out of the agenda for one second, and it won't take very long, and asking Professor Eberstadt to give us a report on a question that was posed to him yesterday by Dr. George having to do with the economic literature.  Dr. Eberstadt?

DR. EBERSTADT:  Thank you very much, Dr. Pellegrino.

I wasn't prepared for Robby's friendly interrogatory about the state of the economics literature yesterday.  And so I don't think I was as informative as I could be to fellow Council members.

I went back last night to do a little bit of homework on this as I guess your sometime economist on the Council.  And I can report very briefly to you the state of the literature.

As I mentioned, there are indeed only about a literal handful of professional studies on questions bearing on organ donation or organ transplants.  However, that handful of studies has been offered by a very high quality of economist.  Of the maybe half a dozen studies I came across, two were by Nobel Laureates in economics.  A third is by a winner of the John Bates Clark prize, which is the prize that's given to the most promising economist under 40 years of age every 4 years.

Not all of the work was on the question of marketization or commoditization of donor markets.  Some of the work was on trying to quantify, for example, what the impact of presumed consent laws might be by looking at European data.  Like those laws or not, the conclusion of that work, the suggestion of that work was that this would substantially increase the supply of cadaveric organs.

Other work was analyzing the disparate impact or the disparities in areas with respect to waiting lines and other things under existing situations.  But I suppose the study which I would bring to your most immediate attention here was one by Gary Becker at the University of Chicago, not known, like Richard Epstein, as a famous libertarian, a person, very eminent economist, associated with work in human capital and crime and the family and many other areas.

He has attempted to model the impact of marketizing.  It's somewhat speculative, but he has attempted to estimate the impacts of marketizing organ donations, organ transplants.

In his approach, he comes up with the suggestion or the quantified hypothesis that an equilibrium price of about $30,000 might be expected for a market in human kidneys in the United States.  Now, how does he arrive at this conclusion?  He draws upon a literature in economics, so-called cost of life literature.

To many of us, the idea that you would put a price on human life may seem offensive or repulsive, but this, of course, happens all the time in the insurance industry and in many walks of life.

By drawing upon some findings in this cost of human life literature, he goes about the speculation which ends up with this suggested equilibrium price.

I am certainly no Nobel Laureate in economics.  It looks to me as if he is equating the marginal cost of a human kidney in the sense of the risk to a donor plus hospital expenses as being equal to its marginal price.  There is a different sort of economic perspective that might suggest that people have what economists call a reservation price, not just simply a marginal cost, for organ donations.  This shows the beginning of the work that is being done in this area.

I would also bring your attention to a popularized article that Steve Levitt, the winner of the John Bates Clark Medal and the author of the best-selling book, Freakonomics, did in the New York Times last summer.  It's a popular article, not a scholarly one.

He makes the observation that there is no serious economist who would agree with the way that the U.S. current organ donation arrangements are working.  And he mentions work being done by — he does, however, at the same time acknowledge what he calls the repugnance factor in what one would think about the somewhat ghoulish aspect of a market in human organs and brings attention to work that is being done at Harvard University and in New England by an economist named Roth, who is simulating some of the effects of a market through a kidney exchange program, the New England Kidney Exchange Program, thus reported.

CHAIRMAN PELLEGRINO:  Thank you very much.

Could I make you a request?  Would you submit that in writing so all of us can take a look at it and think about it?  It was very, very appropriate to our comments yesterday.  We do not have time to discuss.

Moving to the first part of the agenda, which — welcome, Paul, delighted to have you back.

DR. McHUGH:  There was some bomb package that delayed me getting here this morning.

CHAIRMAN PELLEGRINO:  Delighted to have you.


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