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Let Market Forces Solve Organ-Transplant Crisis – Article by Ron Paul

Let Market Forces Solve Organ-Transplant Crisis – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
July 16, 2013
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Ten-year-old cystic fibrosis patient Sarah Murnaghan captured the nation’s attention when federal bureaucrats imposed a de facto death sentence on her by refusing to modify the rules governing organ transplants. The rules in question forbid children under 12 from receiving transplants of adult organs. Even though Sarah’s own physician said she was an excellent candidate to receive an adult organ transplant, federal government officials refused to even consider modifying their rules.

Fortunately, a federal judge intervened so Sarah received the lung transplant. But the welcome decision in this case does not change the need to end government control of organ donations and repeal the federal ban on compensating organ donors.

Supporters of the current system claim that organ donation is too important to be left to the marketplace. But this is nonsensical: if we trust the market to deliver food, shelter, and all other necessities, why should we not trust it to deliver healthcare—including organs?

It is also argued that it is “uncompassionate” or “immoral” to allow patients or insurance companies to provide compensation to donors. But one of the reasons the waiting lists for transplants is so long, with many Americans dying before receiving a transplant, is because of a shortage of organs. If organ donors, or their heirs, where compensated for donating, more people would have an incentive to become organ donors.

Those who oppose allowing patients to purchase organs should ask themselves how compassionate is it to allow those people to die on the transplant waiting list who might otherwise have lived if they were able to obtain organs though private contracts.

Some are concerned that if organ donations were supplied via the market instead of through government regulation, those with lower incomes would be effectively denied access to donated organs. This ignores our current two-tier system for allocating organs, as the wealthy can travel overseas for transplants if they cannot receive a transplant in America. Allowing the free market to alleviate the shortage of organs and reduce the costs of medial procedures like transplants would benefit the middle class and the poor, not the wealthy.

The costs of obtaining organs would likely be covered by most health insurance plans, thus reducing the costs directly borne by individual patients. Furthermore, if current federal laws distorting the health care market are repealed, procedures such as transplants would be much more affordable. Expanded access to health savings accounts and flexible savings accounts, combined with generous individual tax deductions and credits, would also make it easier for people to afford health care procedures such as transplants.

There is also some hypocrisy in the argument against allowing market forces in organ transplants. Everyone else involved in organ transplantation procedures, including doctors, nurses, and even the hospital janitor, receives compensation. Not even the most extreme proponent of government-provided health care advocates forcing medical professionals to provide care without compensation. Hospitals and other private intuitions provide compensation for blood and plasma donations, and men and women are compensated for donations to fertility clinics, so why not allow compensation for organ donation?

Sarah Murnaghan’s case shows the fallacy in thinking that a free-market system for organ donations is less moral or less effective than a government-controlled system. It is only the bureaucrats who put adherence to arbitrary rules ahead of the life of a ten-year old child. It is time for Congress to wake up and see that markets work better in all aspects of health care, including organ donation, just as they work better in providing all other goods and services.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission.

Oklahoma: The Economic Storm – Article by David J. Hebert

Oklahoma: The Economic Storm – Article by David J. Hebert

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The New Renaissance Hat
David J. Hebert
May 25, 2013
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A tornado ravaged Oklahoma last week, destroying hundreds of homes, killing dozens, and injuring hundreds more. Unfortunately, it looks like the citizens of Oklahoma are about to be ravaged by another storm brought on by the Oklahoma Attorney General, Scott Pruitt.

According to ABC News, Mr. Pruitt and his staff began “aggressively combing the region for fraud just hours after the tornado … and immediately [found] businesses violating the law. ”

What laws were the businesses accused of violating?  Anti-price-gouging laws. Using powers granted by the Emergency Price Stabilization Act, Mr. Pruitt is hoping to help the people of Oklahoma by preventing businesses from profiting off of the suffering of the townspeople, many of whom just lost their homes. He goes so far as to say, “[the townspeople] never anticipate or expect that someone would take advantage of them right now, but this situation is what criminals prey upon. ”

While Mr. Pruitt no doubt intends to help the local citizens, his misunderstanding of the workings of the price mechanism will lead only to folly and the prolonged suffering of the very people that he is trying to help. What he is effectively arguing for is a price ceiling on basic commodities, such as water (which is reportedly being sold for $40 per case today as opposed to only $3-$4 just a few weeks ago).

This has very predictable results: a shortage.

When prices are held below their market value, the effect is that there will be a large number of people who are willing to purchase water at that price but very few sellers willing to sell the water at that price. This means that people will compete on non-price margins to acquire water, that is, they will queue, sometimes for hours on end. The time that they spend waiting in line, however, is a deadweight cost as it is value that is forgone but is not captured by anyone. So now, instead of contributing towards the reconstruction of the town, the people are stuck waiting in line for water.

The beauty of the price mechanism is what it accomplishes in situations like this, assuming, of course, officials allow it to function properly. In this situation, demand in Oklahoma rises and producers, seeing an opportunity to profit, reroute trucks/planes to Oklahoma, thus increasing the quantity of water supplied in the area that needs it most.

Absent the rise in price, we would have to rely on the benevolence of these companies to help the people in need (and assume that they knew what the people of Oklahoma wanted to begin with).

This isn’t in and of itself terrible. Obviously companies DO send extra water to places that experience disasters, and the Red Cross DOES send volunteers and such. But notice that nothing in the preceding analysis precludes this benevolence. Why rely merely on benevolence when we can also rely on self-interest? If the goal is to help people get clean drinking water, it stands to reason that we ought to incentivize producers as many ways as possible, be they other-regarding, self-regarding or both.

David Hebert is a Ph.D. Fellow at the Mercatus Center at George Mason University.

This article was originally published by The Foundation for Economic Education.

In Praise of Price Gouging – Article by Ron Paul

In Praise of Price Gouging – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
November 12, 2012
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As the northeastern United States continues to recover from Hurricane Sandy, we hear the usual outcry against individuals and companies who dare to charge market prices for goods such as gasoline. The normal market response of rising prices in the wake of a natural disaster and resulting supply disruptions is redefined as “price gouging.” The federal government and some state governments on the East Coast claim that price gouging is the charging of ruinous or exploitative prices for goods in short supply in the wake of a disaster and is a heinous crime  But does this reflect economic reality, or merely political posturing to capitalize on raw emotions?

In the wake of Hurricane Sandy, the supply of gasoline was greatly disrupted. Many gas stations were unable to pump gas due to a lack of electricity, thus greatly reducing the supply.  At the same time demand for gasoline spiked due to the widespread use of generators. Because gas stations were forbidden from raising their prices to meet the increased demand, miles-long lines developed and stations were forced to start limiting the amount of gasoline that individuals could purchase. New Jersey gas stations began to look like Soviet grocery stores.

Had gas stations been allowed to raise their prices to reflect the increased demand for gasoline, only those most in need of gasoline would have purchased gas, while everyone would have economized on their existing supply. But because prices remained lower than they should have been, no one sought to conserve gas.  Low prices signaled that gas was in abundant supply, while reality was exactly the opposite, and only those fortunate enough to be at the front of gas lines were able to purchase gas before it sold out.  Not surprisingly, a thriving black market developed, with gas offered for up to $20 per gallon.

With price controls in effect, supply shortages were exacerbated.  If prices had been allowed to increase to market levels, the profit opportunity would have brought in new supplies from outside the region.  As supplies increased, prices gradually would have decreased as supply and demand returned to equilibrium. But with price controls in effect, what company would want to deal with the hassle of shipping gas to a disaster-stricken area with downed power lines and flooded highways when the same profit could be made elsewhere?  So instead of gas shipments flooding into the disaster zones, what little gas supply is left is rapidly sold and consumed.

Many governments fail to understand that prices are not just random numbers. Prices perform an important role in providing information, coordinating supply and demand, and enabling economic calculation. When government interferes with the price mechanism, economic calamity ensues. Price controls on gasoline led to the infamous gas lines of the 1970s, yet politicians today repeat those same failed mistakes. Instituting price caps at a below-market price will always lead to shortages. No act of any legislature can reverse the laws of supply and demand.

History shows us that the quickest path to economic recovery is to abolish all price controls. If governments really want to aid recovery, they would abolish their “price-gouging” legislation and allow the free market to function.

Representative Ron Paul (R – TX), MD, was a three-time Republican candidate for U. S. President. See his Congressional webpage and his official campaign website. 

This article has been released by Dr. Paul into the public domain and may be republished by anyone in any manner.