A Pareto Efficient allocation can be described as one where “there is no way to make some individual better-off without making someone else worse-off”. Efficiency is a desirable property of any allocation, but unfortunately there are many situations in which the allocation is far from efficient.
One of them is the donation of kidneys. Although it is well documented that people can live healthy lives with only one kidney, thousands and thousands of people around the world die every year waiting for a kidney transplant. This is clearly a situation where it is possible to make the ones that need a kidney better-off without making the donators worse-off and, thus, an inefficient situation.
With this in mind, several economists have been arguing for the abolition of the laws that prohibit the sell of human organs, in order to create a legal market for kidneys. Their main argument is that these laws constraint the supply of organs and therefore do not allow markets to clear. Given that markets usually led to efficient outcomes, why a market for kidneys has not yet been created?
In practice the question is not so straightforward and the critics of this propose have two major arguments: (i) wealthy people who need a kidney would bip up the prices and so poor people would be ‘priced-out’ of the market and (ii) only poor individuals would sell kidneys and such sales would be coercive in nature, which is morally outrageous.
Regarding the former argument, Adams, Barnett, and Kaserman (1999) suggested that “market-clearing price per organ would be quite low substantially less than $1,000 per organ”. Moreover, several authors sustain that a combination of a free market for kidneys with governments acting as a third-party payer-of-last-resort can eliminate the need to ration kidneys and, thus, everyone who need a kidney (poor or rich) could get one.
With respect to the latter argument, the main defense is that people have the right to choose what they think it is better for their well-being, instead of being treated like they were incapable to do so, just because they are poor.
However, rather than just discussing in theoretical grounds it is worthwhile to provide some evidence about the only country that legally allows kidney vending: Iran. Since 1988, selling kidneys is allowed in Iran and, nowadays, vendors receive from the Iranian Government a fixed compensation of $1.200 plus a compensation from the recipient between $2.300 and $4.500.
The results achieved in Iran are remarkable: since 1999, Iran has had no waiting list for kidneys transplant. According to Hippen (2008), “a sucess [that] no other country can claim”.
Competitive markets are not a panacea for all the inefficient situations in the world but, in some cases, and specially in kidney’s one, they can help to achieve more efficient situations, which in this case would mean saving thousands of lives every year.
 See: Barnett, Saliba and Walker (2001) and Barnett, Blair and Kaserman (1996).
 For more about Iranian System, see Hippen (2008).
Miguel Bandeira da Silva
Adams, Frank A.; Barnett, Andy H. & Kaserman, David L. (1999). “Markets for Organs: The Question of Supply”. Comtemporary Economic Policy 17(2), 147-155.
Barnett II, William; Saliba, Michael & Deborah Walker (2001). “A Free Market in Kidneys: Efficient and Equitable”. Independent Review 5(2), 373-385.
Barnett II, William; Saliba, Michael & Deborah Walker (2003). “We Favor a Freer Market in Kidneys”. Independent Review 7(4), 595-598.
Barnett, Andy H.; Kaserman, David L. & Blair, Roger D. (1996). “A Market for Organs”. Society 33(6), 8-17.
Hippen, Benjamin E. (2008). “Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran”. Policy Analysis, No. 614.
Kathryn Shelton, Richard B. McKenzie, “How Free-Market Kidney Sales Can Save Lives—And Lower the Total Cost of Kidney Transplants.” March 5, 2012. Library of Economics and Liberty. 30 September 2012.<http://www.econlib.org/library/Columns/y2012/SheltonMcKenziekidney.html>.