Monday, November 25, 2013

Exotic and/or sinister

What can economists contribute to public policy discussions?  Job #1 would be to introduce markets and/or pricing where there isn't any.  Greg Mankiw's "Pigou Club" advances the idea but it has been around for a long time (at least since Pigou).  Countless papers and books argue for the pricing of road access, parking spaces, airport landing slots and any other facility where rationing by price is feasible.  If price does not ration something else will. The alternatives, crowding and congestion spring to mind, are usually frowned on. Teachers and textbook authors usually present the basic story with slam-dunk logic and finality.

If you do not like pricing administered this way, consider allowing markets where there aren't any and let them find a price.  Cap-and-trade have practically made it into mainstream discussions.

But it is not that simple.  look at portions of this op-ed from this morning's WSJ:
You know an agency has gone off the rails when its rules make the Ninth Circuit Court of Appeals look like a beacon of sanity. So it goes at the Department of Health and Human Services, where a proposed rule-making is seeking to override the court's decision to allow bone-marrow donors to be compensated for their donations.In 1984, Congress passed the National Organ Transplant Act banning the purchase or sale of organs like livers and lungs for transplants. The intention was to prevent the exploitation of poor donors or self-mutilation for profit (think drug addicts). Swept up in the ban was bone marrow, which produces blood cells and is critical to the immune system.Organs are unique and specialized groups of cells, but bone marrow is a connective tissue that regenerates naturally in a healthy body. In 1984 the typical bone marrow transplant was relatively complicated. Today, you can donate bone marrow through an outpatient procedure called apheresis. A donor receives a series of shots and then is hooked up to a machine that draws blood and collects marrow cells, much like blood donation.
The default non-price rationing here is death.  Many sick people die waiting for a donor.  Altruism is not enough (unfortunately) and introducing (permitting) markets will save lives.  
Here is the rest of the story:
In 2009, the Institute for Justice sued on behalf of Maine resident Doreen Flynn, whose three children have a disease called Fanconi anemia and will most likely need bone marrow transplants to survive. In 2012's Flynn v. Holder, the Ninth Circuit agreed, noting that new technology and the ease of marrow donation put the ban wholly out of step with the purpose of the organ donation law.The Justice Department petitioned for rehearing en banc, insisting that marrow transplants should "not be subject to market forces." When the Ninth Circuit declined to rehear the case, the Administration mobilized HHS, which has proposed a rule that would overturn the Ninth Circuit and define marrow extracted from the bloodstream as an organ. The purpose, says the rule, is to "ban the commodification" of bone marrow used in transplants, "encourage altruistic donations, and decrease the likelihood of disease transmission resulting from paid donations."
Market forces are viewed as exotic and/or sinister in some quarters. "Commodification" is how we get our food.  In fact, absent food "commodification", people starve.  That's been the case in all too many places where "food policy" has banned or discouraged markets.

In the bone marrow case, given the chance to let market forces save lives, the administration intervenes to try and stop them.