Economics in Curb Your Enthusiasm: The Market for Kidneys
Richard Lewis wants a kidney but cannot buy one in the market
Curb Your Enthusiasm is in its 12th and final season this year. The series is funny, entertaining, and shows situations from real life. Many of these situations provide economic lessons. Each Friday during Curb Your Enthusiasm’s final season, I will discuss an economic lesson from the series, and we’ll also embed a video where you can watch the clips.
Catch the previous article here and video here on Angel Investing in Curb Your Enthusiasm.
The season 5 episode, Lewis Needs a Kidney, gives us a good sense to examine illegal markets, matching markets, and the implications of both. First, a short recap. Richard Lewis, Larry David’s good friend, gets bad news that he needs a kidney transplant. Naturally, he’s hoping he has friends or family that will donate one to him. Larry isn’t too excited about the idea of doing it, but does take a test that shows he would be a match.
This episode gives us a good opportunity to talk about a couple of key economic issues.
Prohibitions of Markets can Cause Major Issues
It is illegal to buy and sell kidneys in the United States, and in every country other than Iran. Within the episode, we see the problems this creates. Lewis is quite wealthy and could have afforded to buy a kidney on the open market. But he wasn’t able to do so. Larry didn’t really want to donate a kidney, and why would he want to? He wasn’t going to be paid anything to compensate him for the risks he was taking, the pain he would endure from donating the kidney, and the inconvenience from giving the kidney.
Within this episode, we see how the lack of a legal market to buy and sell kidneys causes problems, but what about in the real world? Unfortunately, the issues in the real world are devastating for some. The Kidney Donor Awareness Corporation estimates that about 13 people die daily in the US waiting for a kidney transplant, or almost 5,000 annually. Others who don’t die have the added stress of not knowing if they’ll get a kidney for days, weeks, or months, if ever.
The market for kidneys is like other markets in the US. There is a supply of people who are willing to donate kidneys and there is a demand for kidneys. If the market could operate without restrictions, we’d see an equilibrium price for kidneys in the market. But, with the market for kidneys, there is a price ceiling – or maximum price – that someone can earn selling a kidney – and that is zero. Under price ceilings in general, the quantity demanded is generally higher but fewer people are willing to supply a product. Given there is a prohibition on selling kidneys, the price ceiling on kidneys of $0, which has led to the shortage in the market and thousands of deaths annually.
What would happen if there was a market for kidneys? There would be people who’d be willing to donate a kidney if they were compensated, and therefore far fewer deaths annually from those waiting for a kidney.
To be honest, I find the idea of someone selling their kidney a bit disgusting. I think many of us do. But, I’m more disgusted that thousands of Americans are dying annually that don’t have to die. In America and across the world, there are markets that are illegal because society deems them repugnant. When that happens, economists can help make things better.
How matching markets help
When formal markets are illegal, and sometimes in other circumstances, matching markets can help. For kidneys, not only is it illegal to sell a kidney, but if someone who needs a kidney donated has a friend willing to donate, their kidney must be the appropriate type to be accepted. This often doesn’t happen. Here is where matching can help. If Richard Lewis needed a kidney and Larry is willing to provide it, but is the wrong type, a match could occur if there is another donor somewhere else in the country who needs the type of kidney Larry has who has a donor that match’s Richard’s type. That’s a simple match, but more complicated matches could have multiple groups of donors/recipients in a chain.
Economist Al Roth won the Nobel Prize in 2012 for his work on market design and helped develop a matching algorithm for kidney donations. Roth's work has helped increase transplants by matching donors to recipients who might not be as fortunate as Richard Lewis and do not have a compatible donor that they know. Essentially, it’s a kidney exchange market. There aren’t as many kidney exchanges as if there weren’t the prohibition on payments, but far more than without this system.
The challenges faced Richard Lewis in this Curb Your Enthusiasm episode are faced by thousands every day in the US. While the kidney exchanges developed have saved lives vs. the previous system, the prohibitions in place on payments are still resulting in unnecessary deaths vs. an open market.