Many thanks, Atul, for your last letter, which forces the debate forward in a constructive fashion. But once again I think you move too quickly to the themes of irrationality and exploitation and spend too little time working through the particulars of this situation.
First, I am not impressed with the global attack that claims to find serious inadequacies in a libertarian worldview. The point just cuts too deeply. The broad arguments that you make on cognitive dissonance, the inability to make probability calculations, and the tyranny of anecdotes would shut down every employment and financial market in the entire world. And what it misses is how organized markets cope with these problems. One solution is to have only skilled individuals play in certain games, which is why I do not trade futures for a living. That approach won't help with organ donations, which are inevitably a personal decision. But another approach--using informed intermediaries as agents--could eliminate a lot of confusion and ignorance on these matters. And those people cannot operate in an environment in which the basic transactions are branded as illegal. So the current law does a good deal to block the conditions under which sensible voluntary transactions take place. Remove the ban and the entire structure of the market changes.
More concretely, Atul, we'll put aside the question of cadaveric organs. There is a real question of who owns those organs after death, and it is just that question that has thwarted the emergence of a strong market in voluntary donations. A single family member who protests can veto the operation, and the more people who take an interest in the case the more difficult it is to secure unanimous consent. So here the difficulty you point to is as important for ordinary donations (which I would, of course, encourage) as it is for sale transactions.
So it is back to live donations, and here again we have to ask a similar question: Why is it that we should allow and encourage voluntary donations but not allow voluntary sale transactions? The truth of the matter is that I am often horrified by donations: They have the same physical properties as sales--individuals are cut up and mutilated in order to harvest their organs. In some cases there are cognitive barriers against the correct judgments, there is often an insufficient appreciation of the relevant risks, and in many cases there could be sustained forms of family pressures that go unrecorded within the legal system, and for which a cash payment (or purchase of an insurance policy) could afford some protection. The puzzle for you, Atul, is to explain why you allow gifts of organs, where the benefits flow in one direction, but want to ban the sale of organs, where the gains are divided between the two parties.
Your answer is, I think, sophisticated, but incorrect. Start with the example of the $1,000 glass of water. That is a classic case of sales under condition of necessity. But necessity here does not mean that you need water to live. That is true all the time. Rather, necessity means that there is only one supplier of water, and he holds out for a very high price. Even here we do not require that the water be given for free, but only that the price charged be related to its cost, not to its holdout potential. This is a very nice theoretical problem that underlies most of our concerns with common carriers, regulated industries, and natural monopolies. But it's irrelevant here. Here there is no single seller or single buyer. This market may have difficulties, but they are not the structural difficulty of having only one source of supply.
I think that your argument is more relevant when you ask about the question of exploitation. Here you note correctly that we evaluate mutual gains from transactions by looking both to our background understandings of human practices and to the particulars of the individual case. In Mortal Peril I used just that argument to explain why we should maintain the traditional prohibition against murder but think about the legalization of physician-assisted suicide and voluntary euthanasia. In the murder case, our background probabilities are so powerful that we would not believe the individual evidence of consent, especially when the decedent is not there to give an account of his or her actions. But in the terminal illness case, the background probabilities are no longer so heavily skewed in one direction, so we have to take into account the possibility that hastened death is the preferred alternative of the individual patient. At this point, we cannot rely on broad condemnations of exploitation. What we must do is ask whether there is too much abuse to the process. And in most instances, a set of sensible institutional arrangements should drive out the Kevorkians from the field, and leave these decentralized decisions to more responsible decision makers.
My position is that organ transfers are more like physician-assisted suicide and less like garden-variety murder. We can see the ultimate gain from having 200 people alive with one kidney each, even if we recoil at the thought of 100 people giving up a kidney in exchange. Cash is what lubricates those transactions and saves those lives, or so one could argue. Of course, I don't like this process; it is just that I like certain death even less. My concerns are more with the victims of disease than with the condition of the givers of organs. To put it most simply, suppose we could avoid this horrible situation by breeding animals with compatible kidneys. Then we could solve the shortage problem. Who would be made better off by this? First and foremost those people who suffer from kidney disease. But perhaps some potential organ donor would lament the loss of his market. We could take that into account and still come up with the obvious conclusion that from behind the veil of ignorance we are all better off having a secure animal supply than with experimenting with sales of human organs. But that hardly counts as an indictment against voluntary transactions in the world as it now exists. Once the animal supplies become certain we can be equally positive that voluntary donations will not be used either. But for the moment we have to take technology as given and human motivations as they exist. I would rather take my chances with increasing the supply than with increasing the death rates. Your concerns are valid ones and we have to be sure that some intermediate institutions are available for counseling and advice. But you leap too quickly from the identification of practical difficulties to the endorsement of the ban. We can find some middle position that permits the sales and avoids the most serious mistakes, not all the time, but most of the time. And with human institutions, we don't want the best to become the enemy of the good.