Money Talks: The Economics of Repugnant Transactions

0:08Hello and welcome to Money Talks, where we talk to the most interesting people in the world about the most interesting subjects in the world. I'm Felix Salmon of Bloomberg and this week I am joined by Professor Alvin Roth. Al, welcome. So first of all, introduce yourself and tell us why you're here. I'm Al Roth. I'm a professor of economics at Stanford University, and I've written a book called Moral Economics. And like all good nonfiction books, it needs a subtitle. So what's the subtitle? The subtitle is From Prostitution to Organ Sales, What Controversial Transactions Tell Us About Markets.

0:54so we are going to talk about repugnant markets this is a term you devised which i love because what's a repugnant market and presumably it's a bad thing but we're going to interrogate when repugnant markets are good when they are bad and what the various considerations are with a special emphasis i should add on your own particular area of expertise which you've been working on for many years, which is kidney donations. So that is all coming up on Money Talks.

1:49You use your personal data plan, you hop on whatever Wi-Fi is around, but eventually you hit a turning point. You realize that your business is only as strong as your connection to your customers. I wish I'd prioritized a provider like AT &T Business from the start. They're built specifically for small businesses, for people who have too many tasks and not enough hours in the day. Having a connection you can actually trust makes the whole day feel a little later. It's one less fire you have to put out. Powered by AT &T Business, built to work. Get AT &T Business at business.att.com. Slate Money is brought to you by Charles Schwab.

2:20Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? Listen to Washington Wise, an original podcast for investors from Charles Schwab, to hear the stories making news in Washington right now. Host Mike Townsend, Charles Schwab's Managing Director for Legislative and Regulatory Affairs takes a nonpartisan look at the stories that matter most to investors, including policy initiatives for retirement savings, taxes, and trade, inflation concerns, the Federal Reserve, and how regulatory developments can affect companies, sectors, and even the entire market.

2:59Mike and his guests offer their perspective on how policy changes could affect what you do with your portfolio. Download the latest episode and follow at schwab.com slash Washington Wise or wherever you listen. Today's episode of Slate Money is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of funds, throw a couple flashy funds your way and call it a day, but not Vanguard. Vanguard bonds are institutional quality. It's a commitment to your clients.

3:42It's top grade products across the board. There's more than 80 bond funds. They're actively managed by a 200 person global squad of sector specialists, analysts and traders. Of course, this isn't about star portfolio managers. It's about active strategies that aren't locked away with one person that is shared across the team so that every client benefits from the collective brainpower. No one individual can really mentally encompass the bond market. It's way too complex. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio.

4:19That's Vanguard.com slash audio. All investing is subject to risk. Vanguard Marketing Corporation Distributor. So, Al, we'll start at the top. What is a repugnant market? Well, I call a transaction repugnant if some people would like to engage in it and other people think they shouldn't be allowed to without it being a transaction that in measurable ways harms the person who's objecting to it. So the objections I'm most interested in are made on moral or religious grounds. What's your favorite example of a repugnant transaction? Well, a prototypical example of a repugnant transaction is same-sex marriage.

4:59Two people want to marry each other, and there are other people who don't think they should be allowed to. And of course, in the United States and elsewhere, we've had long, heated political discussions of that over the years, which have now led to same-sex marriage being legalized throughout the United States and in many other places. You have a pretty long chapter on same-sex marriage in the book, where you go through the sort of legislative history, both in various states and in the country. And after like reading so much of the history of this, I would say like, this is slate. I'm going to just come out and say that 95 % plus of our listeners are perfectly fine with same-sex marriage.

5:40It seems perfectly normal to us. It's kind of hard for us to imagine why it was that we ever had a problem with it in the first place. But you went back, you were looking at a bunch of contemporaneous literature. Do you have a sort of a sympathy for the anti side of the debate? You see where they were coming from? Well, I think I see where they were coming from. I can do that without having necessarily a lot of sympathy for them. But they were tooled up quite early on. So for a long time in the United States, there were laws against sex that sometimes had the names unnatural acts in them. And in California, and I'm going to fudge the dates now, but sometime in the 1970s, long before there was any same-sex marriage, they decided that laws against same-sex sex violated the equal rights provisions of the California constitution.

6:28And so they changed them. They made those laws unconstitutional. And almost immediately after, like two years after, in the 1970s, the California legislature passed a law against same-sex marriage. That is, the people who were looking into the far future and thinking that they really hated same-sex marriage, had felt protected by the laws against consensual sex between adults of, you know, say, sodomy. And all of a sudden, they felt unprotected. So long before any same-sex marriage became legal in the United States, there started to be laws against it. Now, that's kind of wild. You're just sort of like cutting it off in the past.

7:05It's not legal anywhere. No one's even trying to make it legal. We're going to make it illegal just in case. And we saw that at the federal level as well. Absolutely. when the state of Massachusetts finally, when its courts finally legalized same-sex marriage in Massachusetts, the federal government passed a law called the Defense of Marriage Act, which was intended to defend marriage against same-sex marriage. So that's a really unusual state of affairs. And again, when I say that's a repugnant transaction, one of the things I emphasize in the book is I don't mean that I disapprove of it or that you should, but that some people do.

7:37And the long political fight makes it clear that the people who objected to it objected very strongly. I mean, I was around for a lot of these court cases and legislative moves, but even at the time, I didn't entirely understand where the opponents were coming from. So, is it mostly like a biblical thing? So, I think it's partly a religious thing, and some of that is biblical. There were some passages in the Hebrew Bible, even, that could be interpreted as disapproving of same-sex relations. And when you look back at the long history of humanity, there were lots of taboos about sex. And I think one way to think of them is for most of human history, sex between a man and a woman often resulted in pregnancy and pregnancy often resulted in a live birth in a baby.

8:30And society has and had some interest in making sure that babies were taken care of And one way to do that is to say babies should be born into families and therefore, before people have sex, they should be married to each other. And so there were a whole set of taboos that might be thought of as society's way of trying to take care of babies. But, of course, technology changes and contraception, reliable contraception, means that it's possible to have sex without too much risk of a baby. In vitro fertilization, IVF, means that it's possible to have babies without sex. So all of a sudden, some of those barriers that may have seemed essential to the orderly running of society didn't seem so essential.

9:14And I think that opened up room for us to think more about who could have sex with whom and who could form a family with whom. And so a lot of these things happen around the same time that selling contraception or being able to access contraception is itself a repugnant transaction. In vitro fertilization is a repugnant transaction. There's a lot of things in that realm that you write about and all are part of this kind of repugnancy. And it seems that in almost all of the cases, there's a kind of arrow pointing with time. Like, there was a few, like, bumps in the road. But generally speaking, with time, more and more people have more and more access to more and more freedom.

9:58And these transactions become more common, more acceptable legally, and also more acceptable societally. So I think that has been true, certainly, about transactions involving sex and reproduction and families. But it's not always that things that used to be repugnant become less and less repugnant. It can go the other way, too. Which is exactly where I was going. So give me an example of increasing repugnancy. Well, we used to have markets for slaves in the United States. Now, slaves typically are not willing participants in the transaction. So a better example is indentured servitude. It used to be that you could legally sell yourself into temporary slavery, five-year contract.

10:39That was the most common way to buy passage across the Atlantic Ocean to get to the colonies when we were colonies. You would be there in Britain and you would want to cross the Atlantic and come to Boston and you didn't have the fare. And the ship captain would say, not a problem. Sign these articles of indenture. And when we get to Boston Harbor, I will sell your labor services unconditional for five years to the highest bidder. And you would essentially be a slave. You had some protections. You were supposed to come out alive from your experience. But if you escaped from your job, you could be captured and brought back.

11:12So it was very much a kind of slavery. And this was, people knew what they were getting themselves in for when they signed these contracts. So it's hard to imagine they fully understood what they were getting themselves into. They were in England, they were in dire straits, typically in England, if they were willing to do this, but they didn't know what they were getting into. And, you know, when we amended the constitution to say that involuntary servitude is no longer legal in the United States and its jurisdictions, it was understood that indentured servitude was included. And so incidentally, you know, one of the themes of the book is sometimes things that are forbidden develop workarounds.

11:48And so there are still plenty of labor contracts where you would like to work for someone and they would like to hire you, but they worry that you will be too temporary, that you won't work for them long enough. And you cannot, it's not a legal labor contract to say, I will work for you come what may for the next five years. But they can organize your compensation so that you don't get vested in your options until you've been there for five years, for instance. So sometimes you want to be able to commit. I will come work for you and I'll really work for you. I will be there when you need me for the foreseeable future.

12:21And you can sign a contract that allows that to happen but not one that guarantees that if you escape, they can capture you and bring you back. I mean, it strikes me that one of the big differences between what you're talking about with the indentured servitude and the four-year vesting cliff at a startup is that in a weird way, the payment in the former case is up front. You're basically being paid up front for your labor in the form of a ticket across the Atlantic. And then you paid that debt off over time. Whereas in the case of the options grant, yeah, you're being paid at the back end. Well, it's also whether if things really go sideways, whether you can quit.

13:00And that idea of making it illegal for someone to not be allowed to quit, that was abolished at the same time that slavery was abolished. Yes. And so that's now a repugnant transaction that I agree to work for you, come what may. That's not a legal labor contract. Incidentally, I'm a professor at Stanford and I have what's called indefinite tenure. And that means it's quite difficult for Stanford to fire me, but it's not difficult for me to quit. So that's the way legal labor contracts work in the United States now. So one of the things that fascinates me about the book is that we look at these things and we kind of nod along and we're like, yeah, you know, contraception, it used to be controversial and now it's fine.

13:41Okay, marriage or, and then like slavery, that used to be terrible and now it's illegal and that's better. And then it should serve it to you. And we kind of nod along that. This seems sensible. We look at it as everything sort of moving in the direction of our priors and our common sense. But one of the things I love about this book is that you just look around the world and you see so many differences between countries that there is no global consensus on any of this, basically, or even within the West. Absolutely. And we have a Supreme Court constituted now that recently revoked the Roe v. Wade rights to abortion.

14:19And Clarence Thomas, in his concurring opinion, said, now that we've corrected that mistake, we should also go back and correct the mistake about contraception to make that legal everywhere, and consensual sex between adults, and same-sex marriage. So Clarence Thomas, in his concurring opinion to giving abortion bans back to the states, thought that these other things should be raised also. So the whole question about intimate relations, lots of things are controversial, not in a consistent direction, right? So the fact that contraception is objected to means maybe women shouldn't have the right to avoid a pregnancy.

15:00The fact that IVF is objected to in many circles is that says maybe women shouldn't have the right to initiate a pregnancy. And of course, if abortion is going to be banned in Texas and Louisiana, it means maybe a woman shouldn't have the right to end a pregnancy. So it's not all natalist. It's not let's have more children. It's just let's object to everything that we can object to. One of the things that is illegal in almost all of the United States is prostitution. We never quite went that far with a couple of small exceptions. But you go to, I think you were mentioning this wonderful example of U.S.

15:40and Germany, where the U.S. – now, where was it? I'm talking Berlin. Yeah. And I was talking about controversial markets and repugnant transactions. And I focused on three examples, prostitution, surrogacy, and kidney exchange. And the reason these were good topics for an American to talk about in Berlin is the German laws are just the opposite of ours. They were then anyway. The only one of those three that's legal in Germany is prostitution. And that's the only one that's illegal in the US where we have legal commercial surrogacy and legal kidney exchange. So it's not that there's consensus around the world.

16:17It's also not that things are illegal, places where people hate them and legal otherwise, because my colleague Stephanie Wong and I did a survey of over a number of countries of structured representative samples of the public in Germany, for example. And what we find is that in Germany, where surrogacy and kidney exchange were illegal, they nevertheless had great popular support. And although prostitution is legal in Germany, it had much less support. And so prostitution gets only very mixed support, both where it's legal and where it's not. And kidney exchange and surrogacy get widespread support even where they're illegal.

16:54So it's not that things are illegal because the public hates them. So it's not some deep sort of atavistic democracy at play here, making kidney exchange illegal in Germany. What then, is it just kind of laws move very slowly and there's not a lot of obvious way to make it happen? Well, that's part of it. So as we speak, the German Ministry of Health is pressing forward with legislation that amends the German transplant law to allow kidney exchange. Right now, the German transplant law says that I can't give you a kidney and you can't give me a kidney. You can only get a kidney from a member of your family.

17:31So kidney exchange is allowed within families. Well, you typically don't need kidney exchange within families. You get direct donation. Kidney donation is allowed within families. And presumably you can be perfectly fine for a dead person to donate a kidney. Yes, yes. Or even two. That's right. But absolutely, dead people donate two kidneys. So let me take a step back and say a word or two about kidneys because transplantation is the treatment of choice. It's the best treatment for kidney failure. and it is also the cheapest treatment for kidney failure because dialysis is much more expensive than transplantation.

18:04And is that true everywhere? I think it's pretty much true everywhere. Loosely speaking, kidney transplant costs about as much as a year of dialysis in many places. But after a year of dialysis, you need another year of dialysis. Of course, the average survival time on dialysis is about five years. So transplant is also life-saving as well as taxpayer dollars-saving. Oh, and kidneys, as you say, can be donated by deceased donors, but also by living donors because healthy people have two kidneys and can remain healthy with one. But we have a big shortage of kidney transplants. So in the United States, the incidence of kidney failure is about 130 ,000 people suffer from kidney failure, new kidney failure each year.

18:46But we only do fewer than 30 ,000 transplants each year. So most people who might benefit from a transplant die without receiving one. So why aren't there more kidneys available for transplant, given that healthy people have two kidneys and can remain healthy with one? Well, one is not everyone is interested in giving a kidney. Not everyone has someone they love who needs a kidney. But many, many people who have someone they love who needs a kidney are willing. But it's not always possible to give a kidney to someone you love, even if you're healthy enough to give a kidney and remain healthy yourself, because kidneys have to be well-matched to the recipient.

19:21And what kidney exchange does is it allows each, in an exchange, it allows each recipient to receive a compatible kidney from another patient's intended donor. And so the idea is supposing I love someone enough to give them a kidney and I'm healthy enough to give a kidney to someone, but I can't give it to the person I love because our kidneys don't match, our metabolisms don't match, and you're in the same situation, maybe I could give a kidney to your patient and you could give a kidney to my patient. And to be clear, it's actually really rare that two people are matched in terms of kidneys.

19:53It's 2-3%. Well, I think it's more than 50%. But one of the things that happens to be rare is mothers have trouble getting kidneys from their husband, if he's the father, and their children. Because during childbirth, the mother's immune system can be exposed to the paternal antigens, to the proteins from dad. And if so, then it's going to be difficult for the mother to get a kidney either from her husband or from her children. So one natural place where kidney exchange occurs is when families are incompatible, when the mom has antibodies to her family's kidneys. So you help to really institutionalize these chains of kidney donation, which can go on pretty much indefinitely.

20:37If you just have one… Non-directed donor. Non-directed, but there's just one philanthropic individual who's like, I will give a kidney to save a life and it's not any particular life I need to save. Then that chain can go on for like dozens of people and dozens of people can wind up getting kidney assistive as well. That's right. So when you have a chain that's initiated by a non-directed donor, you can set it up so that every patient donor pair waiting for kidney exchange can receive a kidney before they give one. So the non-directed donor gives to some patient in a patient-donor pair that's waiting for kidney exchange.

21:15And the donor in that pair passes it forward to another pair who can pass it forward to another pair. And so we sometimes have very long chains. And there are somewhat more than 500 non-directed donors a year now in the United States. And they account for a lot more than 500 transplants. And again, every deceased donor is also a non-directed donor. Yes. So we are just starting to experiment with chains begun by a deceased donor that pass through the kidney exchange pool and then end with a donation to someone waiting for a deceased donor kidney but who gets a living donor kidney, which is better, from the last donor in the chain.

21:55And of course, someone on the, well, the people in kidney exchange are also on the deceased donor waiting list, but they have an intended donor who's willing to pass it forward. Someone who can be on the deceased donor waiting list without having a willing living donor. And so the chain ends with a gift to someone on the waiting list. So these kidney chains, these exchange chains seem so wonderful and so positive sum for everyone involved. like the, as you say, like the healthcare costs go down because it's much cheaper to transplant than it is to put someone on dialysis. You're saving lives. People don't die when they would otherwise die.

22:36And there just doesn't seem to be a lot of downside to them. And yet you travel the world and you find yourself faced with really quite vehement opposition to them. And because this is the part of the book that you're most familiar with, and you've probably experienced more personal opposition to this than you have to virtually anything else in the book. So having experienced that opposition for so many years, do you understand it? Do you understand what they're saying? Well, I hear what they're saying, and some of what they're saying is quite hard to hear, as you say. So I've been accused in print of being an organ trafficker.

23:11But there are two things that people worry about with kidney exchange. And one is crossing borders. And the other is being generous to donors. So much of the transplant community, including the World Health Organization, thinks that countries should be self-sufficient in transplants. So you shouldn't cross borders, or not very much, or not between rich countries and poor countries. You shouldn't cross borders. and you shouldn't incentivize people to donate a kidney or families to permit the deceased donation of a next of kin. And some of that opposition is quite vehement, but it's changing. So one of the interesting things and one reason for me to write a book that includes discussion of this now is the transplant community is becoming more open to the idea that both of those things might change.

24:00And when you talk about kidney exchange, it's particularly important to be able to cross borders because you need a thick market. You need a big pool of patient-donor pairs in order to be able to find exchanges that include hard-to-match pairs. Now, what makes pairs hard to match typically is that the intended recipient has a lot of antibodies to human proteins. And the way you try to find a match is you look at big pools of intended donors in order to find threading a needle through the haystack in order to find someone who doesn't have any of the proteins that the patient has antibodies to. And so you need big pools.

24:39So one of the first international exchanges that I've been involved in during COVID, I went to the United Arab Emirates for the first kidney exchange between the UAE and Israel. There have been more since. And both the UAE and the United Arab Emirates and Israel have populations about 10 million. And that's just not big enough to find – reliably find a match for someone who has a lot of antibodies to human proteins. So this first kidney exchange that went on between Israel and the UAE involved three pairs. The patient in the pair was in each case a mother who was sensitized, had antibodies to the family's proteins.

25:20the proteins that the children inherit from their dad. You get half your proteins from mom and half from dad. And it was very non-denominational. There was a Muslim Arab Israeli husband and wife. There was a Jewish Israeli mother and daughter. And there was a mother and daughter in the UAE who only want to be identified as Arab residents of the UAE. And a kidney was flown across. It was carried by the director of the Israel Transplant Organization, a lady named Tamara Ashkenazi. And she flew back with another kidney. And all three of those ladies got kidneys. So it was a great success. And it makes a lot of sense that small countries should cooperate with each other.

26:00So I was, just this past November, I was asked to chair a working group on international cooperation in transplantation. The conference took place in Cairo, Egypt. and we're now in the process of turning the recommendations we made, the consensus recommendations that were made at this big conference, into papers that can be transmitted through the transplant community. And we'll see how that goes. But I think that we're about to seriously modify the injunction against crossing borders. This injunction existed when you did this UAE-Israel exchange. So presumably there were WHO types who frowned upon it And they didn't think it was a big success.

26:41They thought it was like taboo violating. Or yeah, did you run into opposition to it when you did it? Well, so most of the opposition that I've run into, we sometimes invite foreign patient donor pairs who can't get kidney exchange in their own country into the United States. And some of those have been pairs from poor countries, from the Philippines, from Mexico. Not terribly poor countries, but middle-income countries. And that's where I've been accused of being an organ trafficker because there are people who think that countries are supposed to be self-sufficient and that somehow maybe – I'm now putting words in their mouth.

27:15Maybe these patients are sort of the property of their country's medical system and you're subverting their medical system which could use their deaths to have political capital to improve medicine in their country. And that's not completely crazy in the sense that one of the things you want to do when you invite people from countries that don't have a lot of kidney exchange to participate in American kidney exchange is to invite their nephrologists and invite their surgeons to participate. And we do that. So when we reached a number of consensus statements about this in Cairo, we included a lot of statements both about protecting donors and making sure there's really good informed consent and things like that, but also about helping to build medical infrastructure in countries that don't now have it.

28:02So it's going to be a sea change. And the fact that I was invited to chair this working group means that not everyone in the transplant community thinks of me as an organ trafficker. Well, I mean, the fact that they invited you to Cherik makes it clear where they want this to end up because it's clear where you want it to end up. So that's right. So when you say they, I think what's happening is there's a schism developing in the transplant community. Oh, really? And it's a little bit generational. So it's – I like to joke with my young colleagues that it's us young people on one side. And we'll see.

28:31There's a general statement about science that science precedes one funeral at a time. And what it means is when you have big disagreements, which don't have to be morally contested disagreements, but just disagreements even about science, you sometimes never convince your peers whose intuition is very different from yours. But you hope that their graduate students will start to work on things that are more productive. When I reviewed your book, I quoted, I think it's Jonathan Swift, as saying that a man cannot be argued out of a position that he wasn't argued into. And it strikes me that a lot of these debates are not really debates.

29:09You're up against people who have an opinion that they don't really have a sort of argued reason for the opinion. But now that they have it and it's a deep part of their priors, they're not just going to change it because if you said something. And remember, transplants have, since their beginning, always been scarce. So the first successful transplant is from the 1950s. And, you know, we've been playing catch up ever since. And I think there are people who are comfortable with scarcity. today. They just think that's the way transplants are. They're always so scarce that most people who need them won't get them, and that's okay.

29:41We're going to take a quick break, and then when we come back, we're going to talk about selling kidneys, selling blood plasma, legalizing prostitution, all manner of juicy stuff.

30:03Slight Money is sponsored by Quince. Hey guys, so I just want to talk to you about summer clothes. We all know the best things in summer are the things you end up wearing on repeat. They're comfortable, they're cool, they're bright for almost every occasion. That's why I really like Quince. So basically, Quince gave us hosts like a little gift certificate kind of a thing. And I went there and there was just so much to choose from. Tops, bottoms, dresses. There's a dress I have my eye on. But what I did was I bought some pants. These are 100 % European linen wide leg pants that I bought. And they're just these sort of like billowing summer light pants, drawstring waist.

30:46I just wore them to like a low key fancy day thing. I really like them and I recommend it. I recommend the pants. I recommend going to Quince. I recommend reading ads on podcasts to get free gift certificates. It's just an idea. Make your summer wardrobe feel easier. Go to quince.com slash money for free shipping on your order and 365 day returns. Now available in Canada too. That's quince.com slash money for free shipping and 365 day returns. Quince.com slash money.

31:22Slate Money is sponsored this week by Upwork. If you have a business, one of the biggest growth hacks is realizing you don't have to do it all yourself. You can grow faster if you can outsource work. Upwork makes it easy to bring in the right freelancer when you need them. So you can stay focused on what you do best and you can get really qualified people to do what they do best, which is probably not what you do best. Teamwork makes the dream work. If you have Business Plus, you can access the top 1 % of talent on Upwork. And with AI-powered shortlisting, you'll get matched to the right freelancer in under six hours.

31:59No endless searching. Thousands of growing businesses already trust Upwork to hire flexible, high-quality freelance talent for everything from one-off projects to ongoing support. It's free to sign up, and posting a job is easy. So visit upwork.com right now and post your job for free. That is Upwork.com to connect with top talent ready to help your business grow. That's U-P-W-O-R-K dot com. Upwork.com.

32:34If we are making these visible steps towards making transplants more common and therefore saving lots of lives and money that way, You're quite open about the fact that the next step is to actually pay people who are donating kidneys. I'm certainly willing to consider that. I think we have to consider it very carefully. One of the concerns is that we might get inappropriate donors, donors who aren't really willing or who are coerced in some sense. And that's something to pay attention to. And one reason I also talk about blood and plasma donation is that's a parallel set of arguments. So in the 1970s, there was widespread view that plasma donation and blood donation should also be unpaid and countries should be self-sufficient, which is the current dogma for kidney transplants.

33:26But that didn't catch on in the United States the way it did in much of Europe and Britain for that matter. And so the World Health Organization and the European Parliament, there are many organizations that still think that blood plasma should be recovered domestically from unpaid donors and domestically, so countries should be self-sufficient. But it turns out that no countries that only get plasma from unpaid donors can get enough of what they need now that plasma has become an essential medicine. So the World Health Organization, incidentally, has a list of essential medicines and plasma products are among them.

34:01And that means that if you wanted to start a hospital anywhere in the world, they want you to have available blood plasma and its various pharmaceutical derivatives. But they insist that you get them from unpaid donors. And nobody has been able to do that. There are a few countries, among which is the United States, that pay for plasma. And the reason there isn't a giant shortage of plasma in at least the relatively wealthy world is if you don't allow plasma donors in your country to be paid, then you don't have enough plasma. But you can always buy it from the United States. We turn out to be the Saudi Arabia of blood plasma and we export 70 % of the world's plasma, often collected on our shores or in the United States at plasma centers that are run by subsidiaries of biopharmaceutical companies in countries where they don't allow plasma to be paid.

34:50So I think the moral position is it's immoral to pay for blood plasma and you don't have to pay for it because you can always get it from the United States. This is another one which is just fascinating to me. To the US, which has always had this pretty strong strain of morality in legislation, it's the one that is kind of off to one side. It's pretty much the only major country that allows blood plasma donors to be compensated. Is that just because there was never a law against it and they just kind of like grew up and then no one was able to articulate a reason to ban it? Well, I think there was never a law against it.

35:27In 1970, a British sociologist whose family name is Titmuss wrote a very influential book saying that his reading of comparative studies of paid and unpaid American blood had more hepatitis in the paid blood supply than in the unpaid blood supply. And in 1970, there was no test for hepatitis in the blood supply. So that was a real concern. And it looked like – he argued and it looked like he might be right that the future of blood donation and blood banks was going to be unpaid donation. But that never quite happened in the US. The Food and Drug Administration required whole blood to be labeled as either voluntary or non-voluntary paid.

36:08And as a result, most whole blood donation in the United States is unpaid. We still get most of our blood from unpaid donation. But it didn't require that for plasma. and pretty soon we became a big source of plasma around the world. And in 1971, not long after Titmuss' argument, a test for hepatitis in the blood supply developed. Now, we weren't done then, you know, because in 1980 there was AIDS and it wasn't until 1985 that HIV was identified as the cause of AIDS. So it became apparent that it was being transmitted in the blood but it wasn't clear what to do about it, both paid and unpaid blood supplies, both in the U.S.

36:44where there was paid plasma and in Britain and Western Europe where there was not. There were lots of court cases and disputes about contaminated blood and how carefully the government protected the public. But since 1985, when techniques to get viruses out of the blood supply have been very much improved, U.S. plasma has been safe. And Titmuss, who was a British sociologist, would have been very surprised when mad cow disease, Cushfield-Jacob syndrome, there was a worry it would enter the British blood supply. And so, Britain suspended domestic collection of plasma and simply started to buy plasma from the United States.

37:23Now, during COVID, when it became clear that international supply chains were fragile, Britain started to start some domestic plasma collection again. But almost all countries that don't pay the plasma donors get at least half of their plasma by buying it from the United States. In those countries, and this is pretty much every country that isn't in the United States, is the stated reason why they don't want to pay plasma donors precisely this one that they reckon that the plasma would be lower quality if they did? So sometimes they say that. And sometimes they say that it's wrong to pay for plasma.

38:03It commodifies blood. It exploits poor people. Even though they are paying for plasma. Even though they are. That's right. So I think the moral principle at play is out of sight, out of mind. It's okay to pay for plasma just as long as it's Americans who are being paid. Well, I think they don't finish the sentence that way. They say it's immoral to pay donors for plasma. And besides, it's commercially available on the global market. My favorite fact from the book is there is one country where people can be paid for donating a kidney. And it's probably not the country you're thinking of. Right.

38:37It's the Islamic Republic of Iran. And incidentally, there are other countries where you can be paid but in black markets run by criminals. So the nice thing – not everyone thinks it's a nice thing – but the nice thing about the Iranian market for kidneys, which has a lot of problems. I don't think it's a model for how we should be generous to donors in the United States. But the surgeries that are done both for the donors and for the recipients are done in high-class hospitals by real doctors in sterile conditions. And European observers have been impressed with the quality of the medicine. Whereas the illegal black markets, which are often driven out of the standard medical institutions because they're illegal and run by criminals, are run under poor circumstances, sometimes not even in sterile environments.

39:23So when I was in the UAE, I talked to some nephrologists who said things like this. They said before it became illegal around the world to pay for kidneys, some of our patients used to go to Pakistan when they needed a transplant. And they would come back with a kidney transplant. And it's our understanding that they probably paid for it and that the donor was paid. But they came back from real hospitals with full reports about the health and physical situation of the donor and about what had been done with them and photographs of the kidneys and of the surgery and the medications. And so it was easy to smoothly continue their medical care when they came back to the UAE, they said.

40:02But now they go to Pakistan. They come back with a kidney. There's no report from a hospital, nothing about the donor, nothing about the transplant. And often they have very dangerous opportunistic infections. That is, they got very low quality medical care and they now are suffering in ways that they wouldn't be if they'd been in a first class medical institution. And what changed in Pakistan? What changed in Pakistan was at least some of the illegal, now illegal transplants were driven outside of hospitals and were being done in apartments and villas and other places that aren't hospitals. And that makes it harder to do.

40:41So I have seen a video of a transplant in which the surgeons are not wearing masks and gowns. Wow. And this is another theme that runs through your book is this idea, and we see this in a lot of other areas of jurisprudence too, not just repugnant transactions. But certainly in this book, we often run into this idea that if we make something illegal, that it won't stop. It will keep on happening and it will keep on happening in an unregulated and more dangerous way, which would be worse. And legalizing something allows you to regulate it and allows you to make it safer. And this applies mutatis mutandis to drugs, to prostitution, to a lot of other things as well.

41:24So I think that's often the case. And the way I put it in the book is that to work well, markets require social support. And the same can be said about bans on markets. They require social support. And one of the questions I ask in the book is why is it so easy to buy drugs and so hard to hire a hitman? and one of the reasons has to do with the social support for the bans on drugs and hitmen and and the way i like to explain it is if i were to say to you do you know where i could buy some heroin on my way up my hotel this evening you might not know and even if you knew you wouldn't tell me and later when you talk to some of our mutual friends you'd say the interview took such an odd turn with with al today but that would be the end of it but if i said to you you look to me like the fellow who would know where I can hire a hitman because I want to, you know, I've discovered that some professor who lives in New York has rejected one of my papers and I can't take it anymore.

42:17You know, I want him dead. Now, when you talk to our mutual friend about the unusual turn in the interview, she would say to you, you know, you should call the police. And that would make a lot of sense. You should call the police. And when you called the police, they would listen to you with attention and they would say to you, call Al back and tell him you know where he can hire a hitman and tell him to go with$5 ,000 in 20s to some bar, you know, and ask for Irving. And Irving will take care of him. And Irving would take care of me and would be an undercover policeman. But if you called and said, this professor I know asked where he could buy heroin, they'd say, why are you calling us?

42:52We're a police department. We're busy. So part of it is you would react differently. The police would react differently if I wanted to hire a hitman. And indeed, we have a ban on commercial killing in the United States that is very successful. And when we find people trying to violate it, we put them in jail as long as we can. And we treat drug dealing the same way. But our prisons are full of drug dealers. Our streets are full of heroin. And we have lots of overdose deaths every year, many more than we have homicides of any sort, let alone commercial killing. So my feeling is the ban on hitmen is working.

43:27We should keep it up. We all support it. It's working. Let's, when we catch them, put them in jail as long as we can. But the ban on heroin is not working so well. We have a lot of heroin. We have a lot of deaths. We have a lot of addicts. And maybe it's not a moral obligation to just treat them like criminals. Maybe we could start to try to learn from the places that treat them more like patients how to do that. Although, to be fair, in places that have just decriminalized public drug use, it sometimes makes cities unlivable, less livable. and so that's not a good solution either. So this is a case where I say the fact that we don't know how to handle it is a call for more experimentation, not less.

44:07We should be looking at Switzerland and Portugal and places that have tried to do a lot of harm reduction and see what works for them and what doesn't and we should keep trying until we can get a better outcome as we did after prohibition of alcohol. You will not be able to convince me that the American system of regulating alcohol makes any sense at all But I do agree that it makes more sense than just blanket prohibition. So legalizing alcohol after prohibition didn't solve the problems of alcohol. There's still alcoholism and drunk driving. But you can no longer buy moonshine whiskey from gangsters, right?

44:44They've been outcompeted by the Scotch whiskey market. So we have Alcoholics Anonymous. We have licensing laws for restaurants. We have minimum age laws for drinkers. We have a lot of things, none of which work perfectly. Alcohol is still a problem that we wish we could deal with better. But we like the way we're dealing with it now better than we liked the gangsters who grew up and supplied alcohol in plenty during prohibition. So your solution to these gnarly issues around things like alcohol, drugs, prostitution, and many other sort of cases where you can see harm but you think that harm could be minimized with regulation and legalization is basically an empirical one.

45:30And you're saying, well, let's experiment. Let's see what works empirically. Let's measure, you know, for instance, does legalizing prostitution increase or decrease human trafficking? And if it increases it, that's bad. And if it decreases it, that's good. And it's a sign that we should do it. But again, on this, going back to this idea that you can't argue someone else or something they were argued into, like, I feel like this kind of empiricism when it comes to such things is not particularly popular or it's not something that people will sort of, well, no one's going to change their mind when they see like a double, you know, a careful, you know, regression analysis in the paper.

46:09So remember, many people don't feel strongly about this. One reason why in countries like Germany, where the population supports surrogacy, but the laws don't, I think one reason is that the people who are against surrogacy are very strongly against it. And people who don't themselves need surrogates to help them start their family are favorably inclined towards it, but there are political issues they think are more important. So in the United States, I don't see anyone soon adding a platform to their presidential campaign that says, you know, I think we should try to have more donated kidneys by being more generous to donors and paying some of them.

46:46And indeed, there's legislation always under consideration, but so far unsuccessfully that says, let's experiment a little bit. Right now, there's a bill trying to make its way through Congress called the End Kidney Deaths Act, a fancy name. But what it says is, let's give a tax credit to non-directed donors. So right now, we have 500 some odd non-directed donors in the United States. If we could get it up to 700 by being nicer to them, that would both save a lot of lives and show that a little change in how we treat non-directed donors could have a big effect. Maybe we should expand it. It's the kind of experiment I would like to see.

47:21And we'll see. Maybe it'll get support this year. But in previous years, it's been hard to do. And part of that is because there are some people who will think you're committing a crime against humanity if you support that. And others are more concerned about the price of gasoline than they are about kidneys. So I think that what we have to do is we'll never convince the people who think it's a crime against humanity to be too generous to donors. But maybe we can form coalitions of people who think that it might be a good idea to be generous to donors and get legislation passed that doesn't allow the group of people who have a non-consequentialist reason for opposing it to veto it.

47:58And with prostitution, which you mentioned, I think that's a good case to talk about it because we don't help voluntary sex workers by making them criminals. In fact, we make their dangerous job even more dangerous by making it hard for them to get help from law enforcement when something bad happens to them. So prostitution is a very dangerous job. But it's not just voluntary sex workers we have to worry about because they've also trafficked women and children. And so a lot of the politics about should prostitution be legal comes from the fact that some people think that legalizing prostitution would necessarily increase trafficking.

48:34And other people aren't so sure. So one of the things I talk about in my book in a market design way is a proposal made in part by my economist colleague Petra Pearson at Stanford. And she looks at the experiments we can see in the Netherlands where they sometimes license prostitutes and in Norway and Sweden, the Nordic countries, where they've moved the burden of criminality away from selling sex, which has been decriminalized, to buying sex, which has been criminalized. And that doesn't work so well, incidentally, because one of the things that makes prostitution, especially streetwalking solicitation on the street, so dangerous to sex workers is that some customers are crazy.

49:17And one of the ways you defend yourself if you're a sex worker on a street corner is you talk to the customers. You flirt and you try figuring out whether this is a crazy person or not. But if the conversation is criminal, if the Johns are committing a crime, they don't want to kibbutz. They don't want to stand around talking. They want you to quickly get in the car and that adds to the danger. So what Professor Pearson and her colleague propose is that we have some kind of hybrid Dutch-Swedish mechanism. in which we would license voluntary sex workers and try to make sure they were voluntary.

49:53And that would allow more health care and more contractual protections, ordinary civilian protections to sex workers. They would not be criminals now. They could, if someone was extorting them or harming them, they could go to the police. So make it legal to patronize licensed sex workers, but make it a crime to patronize unlicensed sex workers. And the idea is to, on the one hand, to make it safer for sex workers and to shrink the market for trafficked women and children. And this is an experiment that could be conducted, for instance, in Las Vegas. Already in some counties in Nevada, prostitution is legal, not Las Vegas County.

50:31But you could start to see whether it would work. And that's what I mean by experimenting and by empiricism. and we could see whether we cut down on sexual assaults, on sexually transmitted diseases, both among sex workers and among the general population, where there's some evidence that legalizing prostitution does cut down on sexually transmitted diseases and sexual assaults. As an economist, you love looking for natural experiments all over the world, and this is what economists do. Obviously, what you're proposing is like a deliberate, empirical, you know, designed experiment. And I think this is a great idea, but I'm interested, is that something that anyone has actually done in any of the areas that you've written about in your book?

51:12Absolutely. I mean, in the United States, the states are the laboratories of democracy. And so think about surrogacy, commercial surrogacy. Commercial surrogacy has never been illegal in California. Gestational surrogacy, where the surrogate is not genetically related to the baby, only became possible after in vitro fertilization became possible. So in California, there started to be surrogacy. And inevitably, some of the cases ended in disputes that went to court. And the California court said, these are contract disputes. We know how to adjudicate contract disputes. And over time, experience developed about how the contract should be written so that there'd be fewer disputes.

51:47But it was never illegal to employ a surrogate in California. Whereas in New York and New Jersey, there was a very controversial early surrogacy case that was messy in many dimensions, kidnapping and the baby was in flux for a while. And so New York and New Jersey said, well, we're never going to let that happen again. And they made commercial surrogacy illegal. But over time, of course, banning something in New York that's legal in California doesn't prevent New Yorkers who need a surrogate from going to California. So New York is one of the last states in the United States to legalize commercial surrogacy.

52:25And this happened quite recently. And New York's law was able to take advantage of looking at a lot of the court cases and experiences that had happened elsewhere in the United States. So incidentally, I should mention that the controversy in New York was feminists against feminists and progressives against progressives since there's no one else in New York. And the feminist argument against commercial surrogacy was this commodifies women's bodies. It's undignified. We shouldn't do that. and the feminist argument for commercial surrogacy was bearing a baby is women's work. Of course, you don't want to pay for it.

53:00You never want to pay for women's work. And the progressive argument, if you like, was one of the New York Assembly sponsors was an assemblyman who, with his husband, had surrogate children in California. And they sort of say, why should New Yorkers have to go to California? So the New York law, though, is an interesting sort of constitution, a bill of rights for parties to surrogacy. And it says – and I'm not a lawyer, so I'm not licensed to practice law in the United States. But loosely speaking, it says decisions about the pregnancy, the final decider is the surrogate, the woman who's bearing the baby.

53:35And decisions once birth takes place, the final deciders are the parents. And of course, I think in the law – but I'm not sure how they write this. But of course, it's a good idea for the intended parents and the surrogate to agree in advance on how they feel about abortion if the child is going to be severely damaged, things like that. So that's a case where the New York law already has written into it a lot of things that came out of court cases in places like California. Yeah. So like New York comes along. They know – the legislators know that the stakes are relatively low because anyone in New York can go and find a surrogate in the state next door.

54:14But if we're going to do it, we're going to do it right, and we're going to put together the best law we can. And so you look at the experiences in all of the other states and the natural experiments in the other states, and you try and create the best law that you can. I guess my question was more, has anyone passed a law in the spirit of experimentation rather than in the spirit of this is the best we can do? Right. So experimentation turns out to be a controversial word. So it may well be that no one has. That is, if you say we want to experiment, people sometimes get riled up about that. Why are you experimenting with people's lives, with whatever?

54:51But for instance, Portland, Oregon decriminalized a lot of public drug use and recently recriminalized it. So they didn't say when they passed the initial law, if we don't like the way this is going, we can change the law. But of course, they simply are unable to handcuff themselves that way. Of course they can change the law. So they did. And now they've once again recriminalized some public use. So I like to think that the war on drugs is a war that we're losing. But it didn't accept Portland's surrender, right? Because it turns out there's real costs to legalizing street use of drugs. So we need to experiment.

55:28We need to experiment with some combination of law enforcement and medical care. And maybe we're also going to have to include ways to help alleviate homelessness and mental illness, right? because drug use is a really complicated social problem. But I don't think we're free to just fill our prisons with drug dealers in our streets with overdose deaths. I do want to just finish by asking you, are we at the end of a sort of historically liberal or liberalizing period where things basically became more permitted generally? And you were mentioning the Supreme Court with abortion and Portland recriminalizing drugs.

56:11Do you think now that the pendulum is swinging back a bit or is it too early to tell? So I don't know the answer to that. I think that everyone should remember to vote whenever they have the opportunity because I think there's a danger that the pendulum is swinging in a 1920s, 1930s direction and that would be bad for democracy and bad for the world. On which depressing note, Al Roth, thank you so much for coming on. It's been absolutely wonderful having you on the show. We could talk about this for hours. We didn't even begin to talk about all of the other amazing stuff that you have worked on of your career.

56:48But maybe next time you're in New York, you can come back and we'll do that. All right, let's think about that. And so, yeah, thank you for coming on. Thanks for emailing us on sleepmoneyatsleep.com. And many thanks to Jessamyn Molly and Merritt Jacob who produced this show. We will be back on Saturday with a regular Slate Money.

57:34Say you want to know which top performers are at risk of leaving. Just ask Rippling AI and get an instant report with supporting data such as comp ratios, recent performance reviews, tenure trends, and more. Then it can turn those insights into real action. It might recommend a 10 % spot bonus to retain a top performer based on the data. All you have to do is review the recommendation, top confirm, and the bonus is added to the next payroll run. Rippling AI understands your workforce, systems, and workflows, helping you make faster, more informed decisions across your business. Don't settle for AI that's all talk.

58:12Head to rippling.ai slash slate and get AI that turns insight into action. That's R-I-P-P-L-I-N-G dot A-I slash slate. Sign up for exclusive access today.

58:30Think of a toilet as just an everyday object? Your entire perspective shifts the moment you experience a Kohler smart toilet. Design changes everything, transforming a basic routine into something extraordinary. With standout aesthetics and intuitive controls, these are functional works of art. Stunning design that never sacrifices performance. Enjoy customizable features for elevated comfort and convenience. It's more than a fixture. It's a cleaner routine and a more refined space. Experience the difference of Kohler smart toilets. Find more at Kohler.com.