There are now over 300,000 Americans on dialysis.
Every year, about 60,000 die. Kidney transplants are hard to get, but hundreds of millions
of Americans have a kidney to spare. The numbers are heavily in our favor. The tragedy goes
on year after year. Almost nobody wants to do surgery to help a total stranger for free.
And selling your kidney is illegal. Voters, and the politicians they elect, have
banned the trading of cash for kidneys. Why? Because they underrate the social benefits
of markets. They suffer from what I call anti-market bias. People who have never studied economics
often equate greedy intentions with bad results. Economists share a standard objection to this
bias. Thanks to competition, the surest way to get rich is to make your customers happy.
As the eighteenth-century economist Adam Smith put it, It is not from the benevolence of
the butcher, the brewer, or the baker that we expect our dinner, but from their regard
for their own self-interest. Think about reviews on websites like Yelp.
If you give your customers good value, they’ll come back and tell others to do the same.
If you rip your customers off, they go elsewhere next time and tell others to do the same.
When customers are free to choose, firms can’t put profits before people. If they do, they
lose their people and their profits. Economists=appreciation for markets leads
us to unconventional solutions to all sorts of problems. Take the kidney shortage. Most
people would shrug that there are no more kidneys available. But that’s false. If just
one person in a thousand donated a kidney, everyone on dialysis could get one. There’s just one problem. Asking someone to
give you a kidney is a huge favor, the kind of favor that only people who know and love
you will agree to do. Love already saves a lot of lives, but it’s clearly not enough.
So why not legalize a market for human kidneys, where people who desperately need kidneys
could buy one from a willing donor? Regardless of their politics, almost no one
who isn’t an economist sees merit to this idea, and almost everyone who is an economist
does. Some worry that low-income people would be first in line to sell. But what’s wrong
with making poor people rich, and sick people well? This doesn’t mean that economists always favor
unregulated markets. Unlike a typical voter, though, economists rarely complain because
business is making money by solving a problem. Economists complain when business isn’t making
money by solving a problem. When a market visibly isn’t working, economists
try to figure out ways to jump start markets. In many cases, slightly different government
policies would do the trick. Take air pollution. Many economists turn to
government because they can’t figure out how a person could make money by cleaning the
air. But that doesn’t mean you can’t have market. Liberal economist Alan Blinder promotes tradable
pollution permits to cut the cost of reducing pollution. Instead of telling firms how to
cut emissions, government could cap their total emissions, then let firms with spare
pollution permits sell them to other firms that are over their quota. Blinder says this
would reduce the cost of cleanup by at least 50 percent. When firms can sell their spare
permits, they have a strong incentive to find cheaper ways to clean the air. If markets can slash the cost of cleanup,
why do voters resist the idea? Blinder blames anti-market bias. The public seems to recoil
in horror at the idea of selling the right to pollute, as if even a small emission of
a pollutant were immoral. There’s always going to be some pollution. As Blinder says, to
think otherwise, is not to think. When you can’t imagine a way for business
to make money solving a problem, it’s tempting to conclude that no one will ever think of
a way for business to make money solving a problem. Even economists, who pride themselves
in their appreciation of markets, make this mistake. If you went back in time to 1985 and described
the Internet, most economists would have rolled their eyes millions of free websites providing
everything from directions to histories of Germany. It’ll never happen. Most economists
would have been wrong, not because they had too much faith in markets, but because they
had too little faith in human imagination.