Bone Marrow Transplants and Stigler

In this recent column from Bloomberg, the article detailed the story of Amit Gupta who was in need of a bone marrow transplant. Unfortunately for him, bone marrow transplants require very close genetic matches so the odds of finding a match were about 1 in 20,000. Thus, a close friend offered $10,000 to someone who would be a match and donate to Amit. A second friend also offered this same amount, bringing the total “reward” for a bone marrow transplant up to $20,000. However, it turns out these offers were illegal under the National Organ Transplant Act of 1984. The law’s intent was to minimize corruption within the system that could lead to a lower social marginal benefit. However, as the article points out, there could also be possible positive social marginal benefits to money being offered in exchange for bone marrow donations. Most obviously, more people would probably be tested for matches to bone marrow thus increasing both the possibility of the bone marrow receiver finding a match as well as the possibility that additional other people could take advantage of these cells too. In other words, as the article quotes, “there are huge positive externalities in the bone marrow context to allowing rich people to post big bounties.

It seems that Stigler’s theory of economic regulation may not hold perfectly in this case. In the case of bone marrow transplants, it would seem that potentially both the medical industry as well as the bone marrow receivers themselves would not favor the regulation that is currently in place. If, as the article says, there were indeed more bone marrow testings (and consequently, more procedures) that would begin to take place as the economic incentive rises to be tested then it would seem that the medical industry would be in favor of this regulation being lifted—as well as the bone marrow seekers themselves. Stigler argues that firms are in favor of regulations because it is the same as if the government wasn’t present and they had a monopoly. However, in this case, it is not the same for the medical industry. It seems the only thing this regulation benefits is what Stigler offered as one of the alternative views: that regulation is for the benefit of society (in this case, minimizing potential corruption) and contributing to come common good. But, this “common good” seems to have much greater social costs than benefits.