Why markets fail — and how to fix them (ft. Nobel economist Alvin Roth)

Well, people, people think it is.

Some, some people think some problems are inappropriate to solve with market.

I already indicated that it's against the law in the United States to pay someone to give you a kidney.

So it doesn't surprise economists that kidneys are in short supply.

You know, you can't use prices-

Right

... to increase supply.

Kidneys have to be a gift.

The price has to be zero.

You mentioned Iran earlier as the, as the one place where there is a market, and I assume the wait times there are not so high or lower than in-

So I think that's right, but it's very hard to tell because I know much less about, and there's much less data about what's the incidence of diabetes and of kidney failure and things like that.

So I don't have all the comparative stuff.

Uh, it's controversial in Iran too.

Before COVID, I went to give a talk in Berlin about controversial markets, and I talked about kidney exchange and surrogacy and prostitution, and the reason those were three good markets for me to talk about in Germany, three controversial markets, is that the German laws are exactly the opposite of the American laws.

In Germany, the only one of those three that's legal is prostitution, and surrogacy and kidney exchange are not legal, although kidney exchange, there's legislation moving forward.

Uh, so there isn't kidney exchange in Germany, and there's not surrogacy in Germany, but of course surrogacy is legal in California and in New York and in Massachusetts.

So German couples that need a surrogate can come to the United States, and then the German courts have to figure out how to repatriate the baby who is not legally recognized as belonging to this couple.

But what the courts have had to do is figure out how to let the German couple adopt their own baby, which, you know, constitutional courts think of high-level things.

You know, is this something we want to support as a society? But family courts have to think about who takes home the baby, and one good answer is, how about the baby's parents? So, uh, so it turns out, just like markets need social support, bans on markets need social support, otherwise they'll be subverted by people who need surrogate help to start their family, for instance.

And, and you know, remember, we're all descended from long lines of people who never in any generation forgot to have children.

So the urge can be very strong, right? Making it against the law to have children, the only way you might be able to, doesn't always stop people from having children that way.

So what, what my new book is about is about controversial markets and, and morally contested transactions.

You know, what happens when you, when you start to try to design these markets and sometimes inadvertently design the black market that, that replaces them.

So, so let's, let's talk about, uh, moral economics a little bit.

What would you say are some of the key themes or a, a favorite story from it that you think would resonate with the audience?