Taboo Trades
Taboo Trades
Blood and Repugnant Transactions with Nicola Lacetera & Mario Macis
Nico and Mario discuss their research on blood donation and attitudes toward taboo trades. I fail at zoom.
Mario Macis is a Professor of Economics at Johns Hopkins Carey Business School. His research interests include pro-social behavior, morally controversial transactions, global health, experimental economics, development economics, and labor economics.
Nico Lacetera is a Professor of Strategic Management at the Rotman School of Management at the University of Toronto. His research concerns the ethical constraints and social support to markets, the motivations for altruistic behavior, and various topics in industrial and innovation economics.
Lacetera, Nicola, Mario Macis, and Robert Slonim. "Will there be blood? Incentives and displacement effects in pro-social behavior." American Economic Journal: Economic Policy 4.1 (2012): 186-223.
Lacetera, Nicola, Mario Macis, and Robert Slonim. "Economic rewards to motivate blood donations." Science 340.6135 (2013): 927-928.
Lacetera, Nicola, Mario Macis, and Robert Slonim. "Rewarding volunteers: A field experiment." Management Science 60.5 (2014): 1107-1129.
Elías, Julio J., Nicola Lacetera, and Mario Macis. "Paying for kidneys? a randomized survey and choice experiment." American Economic Review 109.8 (2019): 2855-88.
Elias, Julio J., Nicola Lacetera, and Mario Macis. "Sacred values? The effect of information on attitudes toward payments for human organs." American Economic Review105.5 (2015): 361-65.
Compliance Policy Guide CPG Sec. 230.150: Blood Donor Classification Statement, Paid or Volunteer Donor, Guidance for FDA Staff
Dhingra, Neelam. "In defense of WHO's blood donation policy." Science 342.6159 (2013): 691-692.
I can't hear you.
SPEAKER_03:I was trying to figure out who was... Yeah, I can't hear a thing. I can't hear Nico. You can't hear... You can hear me?
SPEAKER_01:Okay. Yes. We can't hear Kim. Kim is muted, actually. Yes. Oh, you're muted, Kim. Okay. Keep your...
SPEAKER_03:Don't touch anything. Okay. Let's start over.
SPEAKER_00:Hey, hey, everybody. Welcome to the Taboo Trades podcast, a show about stuff we aren't supposed to sell, but do anyway. I'm your host, Kim Kravick. Okay, welcome everyone. It is a happy, happy day here at the Taboo Trades podcast because we have not one, but two amazing and talented researchers with us. My good friends, Nico Lecetera and Mario Machis. Mario is a professor of economics at Johns Hopkins Cary Business School. His research interests include pro-social behavior, morally controversial transactions, global health, experimental economics, development economics, and labor economics. Niko is a professor of strategic management at the Rotman School of Management at the University of Toronto, and his research concerns the ethical constraints and social support to markets, the motivations for altruistic behavior, and various topics in industrial and innovation economics. And together, they are part of what I think is fair to call small, but you guys correct me if I'm wrong, small but growing set of folks who are bringing high-quality empirical research to bear on a variety of taboo trades. And we're going to talk about some of that research today. So welcome, guys. It's great to see both of you. And thank you for doing this.
SPEAKER_03:Thank you so much. Thank you, Kim. It's great to be with you.
SPEAKER_00:Good. All right. So I want to start because you guys have an interesting story. If I recall correctly, you have known each other since you were kids. Is that right?
SPEAKER_01:Pretty much. We go way back. You know, I was thinking we are actually, I should send you flowers, Mario. We are celebrating our 25th anniversary. I think we met around these days in 1995. 1995,
SPEAKER_03:day one of college. Yep.
SPEAKER_01:Mid-September or something.
SPEAKER_00:So you didn't meet until you went to college. You met at Bocconi?
SPEAKER_01:Yeah, in Bocconi.
SPEAKER_00:Ah, but you're both from Sardinia? Are you both from Sardinia or no?
SPEAKER_01:Not yet. Just Mario.
SPEAKER_00:Ah, okay. Okay, so you met at college, and then did you, so tell me a little bit about, like, it's interesting that you knew each other, you know, before graduate school, and went to different grad schools grad programs and yet still developed this this these interests together and then came back together to to work together so how did that i mean when did you become interested in these topics and how did you sort of find out that you were both interested in it and wanted to to sort of you know do that with your career
SPEAKER_01:you want to take
SPEAKER_03:it so yeah so yeah we we go back you know 25 years and back in college, we worked together. We were part of the same study group and we also did a little bit of research together on health economics and management. That was our first joint work on the reorganization of the Italian health system. But then, you know, we went separate ways to grad school. I went to Chicago, Nico went to MIT. You know, different schools, different traditions. We, when we both, you know, finished graduate school, we started talking and we realized that our backgrounds, that there was a lot of potential, lots of complementarities, you know, coming from Chicago. Chicago is a school that emphasizes incentives and markets a lot. Nico had already an interest in altruistic behavior. Nico is a longtime blood donor. I was in the scouts, so I did a lot of volunteer work in my youth. So we had this in common. But again, Nico being from MIT, he, you know, a different school, different tradition, he brought a different set of sort of different points of view. And we realized that together we could tackle, you know, the question of, you know, how to organize, how to incentive device, altruistic behavior in a way that each of us on our own would have not done quite as well.
SPEAKER_00:Amazing. Nicola, did I cut you off?
SPEAKER_01:No, no, no. It helped that being friends, it's kind of fun to work together, and that's why we still do it. You know, it's a mix of work and leisure time when we work together, so we can't complain.
SPEAKER_00:No, and you're providing a service to the rest of us by producing this research. So I want to talk... I wanted to talk first about the blood studies of which you've done a couple of papers on that. And actually, I think that's how I first found you guys was through the papers on blood. And so many listeners are already going to be familiar probably with the famous Titmus work on paid blood donors, but for people who aren't, and you two correct or add to anything that I'm saying and describing the background here, his book, The Gift Relationship, I think I think it was published around 1970, and it compared the US, which at that time paid donors, with the UK, which at that time didn't pay donors, and concluded that paid blood was less safe than blood collected from altruists, among other things. He also argued that paying donors stamped out altruism, and then he had a number of other arguments against paid blood collection. So, again, correct or add to any of that that you want, but tell me a a little bit about why this topic interested you and what was the void that you felt needed to be filled when you decided to begin doing research on blood and in particular on compensating donors?
SPEAKER_01:So I guess if I can take it, as Mario said, we, just by our own upbringing and backgrounds, we had been involved in volunteering, blood donations or other activities. and and so we had an interest in you know context where people might respond to heterogeneous motivations and incentives as a consequence being them purely altruistic intrinsic as some say or more material or extrinsic like you know compensation or career concerns social image you can name it And so we thought this would be interesting and we started noticing, you know, almost in anecdotal way that different blood donor organizations around the world were providing different types of awards or incentives if you want. So the Red Cross in the US, that's where we did most of our studies, provided jackets, t-shirts, gift cards, you name it. In Italy, where we both come from, you get a day off, a paid day off work if you donate blood. And so I remember when I was a donor back in my hometown, I was a student, so I would get Two hours of school. It wasn't that bad, but people would get, I mean, I went to school for free, obviously, but people who are paid, you know, a full day, a paid day off, seems like it could be a good motivation. So we start, you know, with this, you know, really observational stuff, you know, anecdotals.
SPEAKER_03:Anecdotally, Nico, anecdotally. There are anecdotes that we're both aware of from people from Milan who would show up to the blood bank to give blood on a Friday morning with their family in their car, their skis on top. They would donate, take advantage of the day off and spend a long weekend in the Alps. Exactly.
SPEAKER_00:That's amazing. Did you go into these studies a bit skeptical of the TITMUS conclusions, or you weren't sure, or what?
SPEAKER_01:That's interesting. Then we said, okay, let's see what kind of literature is out there. Of course, TITMUS comes first on any search, even before Google Scholar. We started before Google Scholar even existed. Anyway, we almost independently, at that time, we were already, I think, faculty, both of us, assistant professor. We bought the book, which is even hard to find, you know, use copies and so on. It's not here. I think it's in the office.
SPEAKER_03:It's in my office as well.
SPEAKER_01:And so, you know, independently, we started reading it. We were like, listen, both of us, there are no data here. I mean, he's making this claim, but this is... let's call it theoretical or whatever else, ethical claim maybe. And so we said, well, there is a possibility here. And so that's where we started working with some observational data, especially in Italy. And for example, we've been studying the effect of this day off and we found, you know, people donate more on a Friday, especially if they are salaried workers because they are the ones who benefit from it. You know, if you are a student or if you are, I don't know, an entrepreneur, it doesn't really matter too much. And so we find this kind of effect. We were able to you know, make some argument. And while I was at Case Western Reserve University, which was my first workplace, there was a colleague of mine, Bob Sloney, who's now at the University of Sydney, is a professor there. He was already a pretty established experimental economist. Both Marga and I had very little, if no experience in, you know, running experiments. So it really went like this, you know, he brought He knocked on my door and said, hey, I like the kind of work you're doing. Why don't we think about doing a field experiment? And why don't we contact the Red Cross here in Cleveland? And so the three of us teamed up. And it turns out that on the other end of the phone at the Red Cross, someone answered and was very interested, was very motivated to help us. And so that's how we started, right?
SPEAKER_03:That's it. Yeah, no, that's it. And it did start from a dissatisfaction with, you know, the evidence that the Titmus book provided. I mean, 50, 40, 50 years ago, I mean, this is an extraordinary book we're talking about, very influential. So the problem is that that book keeps being cited as evidence, whereas, you know, that we would not characterize the empirical, you know, observations that are presented in that book as, you know, qualifying as evidence, you know, in which to base policy by today's standards.
SPEAKER_00:Right, right. So I'm going to talk about your findings, which, of course, cast doubt on many of Titmuss' claims. But I've always been interested in how you guys hooked up with the Red Cross. And Nico told a little bit of that story just now. So when you approached them, they were quite receptive, right?
SPEAKER_01:Yes. I mean, and that's... you know the the beauty but also the the risk in doing this kind of field work and working with organizations you know most of the times people don't have time they are not interested sometimes they are not even they don't even want to know the result of any more systematic study because it could go against them right right but in this case we found especially two people there who had a number of you know reasons to help us and they really cared And that made a world of difference. That and the fact that on the basis of their help and some initial data analysis that we did with retrospective data, so they gave us data on many drives over a couple of years, I think, so we could at least- 14,000. Right, 14,000, that's right.
SPEAKER_00:14,000 drives.
SPEAKER_01:Good drives, yeah. Yes, yeah. And based on some initial results, we applied for an NSF grant. Because, of course, if you want to compensate donors and you want to do it in a sort of randomized, controlled way, you know, you need money. And we applied for a grant at the NSF, and despite being, yeah, academically speaking, two kids, we got it. And so the two things, the... you know, the goodwill and availability of people at the Red Cross in Cleveland and some financial support, you know, got us started, essentially.
SPEAKER_03:That's right. Management there was extremely receptive. Brent Bertram and Barbara Thiel, they were extremely open and helpful and were so grateful.
SPEAKER_00:That's amazing. And if I understood your description of the background from the papers, they had already been giving some of these or maybe all of the types of compensation that you guys offered, but they just weren't studying it in any systematic way. They just would periodically do it or not do it.
SPEAKER_03:it would periodically do it in about 40, 50% of blood drives. And they would do it, they would try to, they would do it you know, with the intention of motivating donors. So their goal was to increase blood donations, but at the same time, they wanted to be fair across blood rights sponsors. And so they would spread those incentives around, which, you know, gave us the opportunity to study the effect of, to estimate the effect of those incentives. If it had been the case instead that, you know, incentives would always go to the same drives or always go to drives where the Red Cross knew in advance that they would work, that would have been more problematic from a research point of view. But yes, there was an awareness, like a conscious use of purposeful use of those incentive items on the part of the Red Cross.
SPEAKER_00:Interesting. Okay. So can you just tell everybody what the incentive items were? I know they were gift cards, right? 5, 10, and 15. Did you also tell, I can't remember whether you also tested non sort of, I'm going to call those monetary rewards, even though I know that because they're gift cards, they're not considered, but did you also study t-shirts and that type of stuff?
SPEAKER_03:So we have two papers. We wrote two papers in collaboration with the Red Cross. The first one analyzed those 14,000 blood drives. So that was not an experimental study. We just analyzed the data. And then we- Is
SPEAKER_00:that Will There Be Blood?
SPEAKER_03:That's Will There Be Blood. Okay. Yeah. One of my favorite paper titles.
SPEAKER_00:It's a great title. I think that might be the first of your papers that I saw. I was like, what?
UNKNOWN:Yeah.
SPEAKER_03:Will there be blood?
SPEAKER_01:Yeah. Maybe an email exchange of like 150 emails maybe
SPEAKER_03:together. We had just seen the movie. There will be blood.
SPEAKER_00:That's a great movie.
SPEAKER_03:It is a great movie, yep. So that first paper analyzed those drives. And at those drives, so the direct crossover offered a variety of incentives ranging from pins to mugs, to t-shirts, jackets, coupons, gift cards, a variety of incentive items. And we did a study, we wrote a paper, we published a paper, that paper, you know, get inside it, it's a good study, but it had some limitations, like every study, right? Every study has limitations. That study in particular, so most of the incentive items had the Red Cross label on them. And so, although, again, I think we think we did a good job in the paper to distinguish the effect of the economic value of the incentives from the effect of the symbolic value of something that has the Red Cross logo on it, there remained a possibility that we didn't do that in a perfect way. And so when we ran our experiment, we removed the symbolic component completely because we offered gift cards for a variety of stores,$5,$10,$15, with no Red Cross logo on it, with just the economic value. So that was sort of one big innovation that we did with the experimental study.
SPEAKER_00:And so just to be clear, the symbolic value, is that signaling to other people, hey, I'm a good person? Or is it it just makes me feel good what is it exactly that's or or we don't know it's
SPEAKER_03:there you know you wear a red cross t-shirt in your home to remind yourself that you're a good person and that's all that's fine or you wear it you know outside to show off your generosity which is also nice i mean it's good um and then the other the other limitation of that paper is that, I mean, limitation, I mean, again, it's a good study.
SPEAKER_00:Yes. Emphasize that. It is a very good study.
SPEAKER_03:It's that the value of a T-shirt to me might be different than the value of the same T-shirt to you, Kim, or to Nico. Whereas, you know, a$5 gift card for, say, Target, or a$10 gift card that you can spend on Amazon, for example, that was not part of our study. But the idea is that It's$10, it's$5, you can buy whatever you want. And so the value is the same for, you know, it's more similar, you know, because it's a monetary value. And so that's the other limitation that we overcome in the experimental studies.
SPEAKER_01:It was the gift card that where, you know, we couldn't use cash and, you know, we can make a conversation about whether things would be different for, you know, with sort of cash. But we tried to get as close as possible to isolate the economic value, Mario was saying, and also to make it as comparable among individuals. Because in this case, we have also individual data, which is another aspect we didn't have in the Will There Be Blood, which was at the drive level data. And so we chose gift cards. I think it was Walmart, Target, gas cards.
SPEAKER_03:And Buellers.
SPEAKER_01:Yeah, exactly. Exactly. So very... you know, stuff that people are going to spend. And in fact, we were able to track. There was another fun thing, you know, the spending of these cars using, you know, the ID or whatever. Oh, that's
SPEAKER_00:amazing.
SPEAKER_01:People spent the money,
SPEAKER_03:remember? 95%, something like that, in a matter of weeks. Yeah, those cars were used.
SPEAKER_00:That's amazing that you were able to, how clever, right? So did people get to pick which gift card they received or was it random? They could pick. Okay. So making it as close to money as you could get it in some ways.
SPEAKER_01:$5. So a$15 incentive meant that you could choose up to three cards and you could mix and match any way you wanted.
SPEAKER_03:So this might be of interest to your listeners, Kim. So the reason why we went with gift cards. So initially, we had suggested prepaid debit cards. Because we wanted, again, like Nico said, we wanted the incentives to be as close to cash or liquid, as liquid as possible. But prepaid gift cards were not okay from the Red Cross's point of view. Because FDA regulations, if the reward... can be, if there's a market for the reward, if the reward can be transferred, then it counts as a payment. And if that's the case, then the blood needs to be labeled as coming from paid donor as opposed to coming from a volunteer donor.
SPEAKER_00:Which of course they didn't want to do. They didn't want
SPEAKER_03:to
SPEAKER_00:do. But so what's the rationale here? So the debit card would count as payment, right? but gift cards to a merchant wouldn't? This sounds like a kind of strange distinction. Is this a Red Cross rule, a state law?
SPEAKER_03:FDA. FDA. It's a federal
SPEAKER_00:regulation. The FDA specifically makes the distinction between debit cards and merchant gift cards.
SPEAKER_03:We can make available a link to the regulation.
SPEAKER_00:Oh, that would be great. Yeah, thank you. And I'll put it in the show notes along with links to your papers. That would be great.
SPEAKER_01:Regulation on these things is, I think, bound to be, I mean, questionable, right? You know, that's where perhaps also ethical consideration, perhaps even a little bit of hypocrisy comes into the picture. Like, yeah, don't give cash. Yeah, gift cards, you know, maybe they have the logo of the store. So it's not that you can use a Target gift card. go and get gas or a snack or whatever. You have to go to Target, right? Of course, you can sell it.
SPEAKER_00:I was going to say, gift card granny, gift card granny.
SPEAKER_03:There's a market for that, for unused gift cards, of course.
SPEAKER_01:Sure.
SPEAKER_00:Amazing. Okay, so let's talk a little bit then about what you found. Right. So first of all, you found that people were incentivized to donate more with compensation and it increased, I mean, as it would be, as you would expect, right? It's not, so 15 people were more motivated by$15 than 10 and were more motivated by 10 than five. Is that right? Is that right? Okay. And you also found that those increases, you observed those increases, but did not observe increases in, I forget what the term is you use, deferrals of people who show, in other words, you were interested not just in the amount of blood collected, but the quality of the blood collected. So can you talk about that a little bit more and sort of what you did to try to measure that?
SPEAKER_01:Yeah. So, um, you know, the TITMUS hypothesis or multiple hypothesis is that, uh, there could, you know, uh, any form of compensation would attract, uh, people who are not supposed to donate and maybe, you know, assuming there is a correlation, for example, between low income status. So, you know, the value of five, 10 or$15 is higher and, uh, perhaps exposure to some disease or certain risky behavior and so on. And the other argument was that the fact itself of putting some material value on an otherwise intrinsically motivated activity might actually dissuade some people to donate because now the way they see this activity is different, so they might go and do something else. Which is, by the way, something we can test in multiple ways, and I'll come to that in a moment. So what we find is an increase. So at the drives that we're offering these rewards, we see an increase in donation. And we can attribute it to the rewards quite precisely, I think, because in some cases, actually the Red Cross sent these flyers every month telling people about all the... drives occurring in that you know coming month in their county and we were able in some cases to send two types of flyers to people so each individual each receiver will get either a version that reported that indicated that the particular drive there would be a reward and the other half will get the same flyers but with no information about the reward at a particular drive they would get it if they presented to donate we had to give it to everybody obviously but they would than no. And so we could even see within the same drive at the same time whether it's more likely than one type of people as opposed to the other type of people are likely to come. So we had this kind of control and we find the difference. uh what is interesting also so we find this we don't find any effect on the further rates uh okay so in percentage terms uh people were asked not to donate when you show up at the drive you need to fill out the questionnaire you ask some questions about you know whether you have some diseases whether you went through for example surgery or travel to certain places and so if you know, some of the condition check, then you are asked not to donate, to come back at another time. We don't see any difference in the share of potential donors who are deferred. And so there is an increase both in show up and in the quantity of blood collected, which is what's more relevant, obviously. And also we actually see another couple of effects, which both we think are, speak to the impact of these incentives, but also raises some interesting policy questions. One effect is that it turns out that even those who didn't receive information about the reward, especially when the reward was$15, were more likely to show up than other people that were not informed at all, where no one at that particular drive was informed that they would receive a reward. And so there is an additional positive effect in the form of social spillover of some form. So people talk to each other and they say, hey, you know, there is, you know,$15 gift cards. Why don't you come along? Oh, I didn't see it on my flyer. I must have missed it or something like that. Probably they didn't see it at all because it wasn't And so we see this additional effect. We see also another interesting effect, which is displacement in some sense. So we see that people who usually go to a drive where we didn't give an incentive move to donating to a drive where there was an incentive. So on the one hand, as I was saying, this speaks to the impact of incentives, but it also speaks raises some concern in terms, you know, we want the total quantity of blood to increase, not just a substitution from one location to another. The net effect is positive, so good.
SPEAKER_00:So even leaving, so the increase was still there, but just not as high a magnitude as what we would think it was if we didn't take substitution or displacement. Particularly
SPEAKER_03:for the$15 gift card. That$15 gift card generated that displacement effect that Nico was talking about. And that's when I learned the expression, robbing Peter to pay Paul, which is something you don't want to do. But the lesson there for the organization was to... think about how to allocate incentives across the various blood drives to avoid this type of donor stealing effects.
SPEAKER_01:Given that they have limited resources and they will probably never give incentives to all drives, at least they can geographically think about that. This, by the way, speaks also to the TITMUS hypothesis because You know, if there really was, you know, strong crowding out, so people being scared away somehow from incentives, you would see more donation in the place without
SPEAKER_03:it. Direction,
SPEAKER_01:yeah. So we say, okay, I normally go to this drive where, you know, but this time they give this gift card. I don't like the idea. I might as well go like two kilometers away, two miles away and donate where there is no incentive so I feel better with myself or something. But we don't see any of that.
SPEAKER_03:There was one more type of displacement, which is intertemporal displacement, meaning that the incentive induces people to donate today here at the blood drive with incentives instead of giving next month or two months from now. That is a type of displacement that is good, however, because there is a certain seasonality in blood donations in the US and in other countries as well donations being abundant you know sorry being depressed you know around holidays thanksgiving christmas and so knowing that you can use incentives to move donations away from times of the year when they're abundant and towards your times when they are more scarce for seasonal reasons that that is valuable it's a type of this displacement that is actually valuable
SPEAKER_00:Unlike
SPEAKER_03:the displacement that Nico talked about, which is on net, it's not.
SPEAKER_00:Right. I mean, I guess unless, although maybe not with the ability to ship blood, so it just wouldn't matter, right? But I mean, I guess I can... imagine a scenario where there's a shortage in a particular place. And so displacement might not, geographic displacement might not always be bad, even if as a general rule, we want to avoid it.
SPEAKER_03:I think that's a good point. Yes.
SPEAKER_01:We have relatively local levels of Northern Ohio. So, I mean, it's not that one place will need a lot of blood and one place, I mean, it's easy to try. Yes. In general, that's a good point.
SPEAKER_00:Right. Right. So can you guys talk a little bit about efficiency, if you know. I can't remember whether, I do think this was in the paper, but now I can't remember. Like, I think it's worth noting, as you guys already know, I don't need to tell you that, I mean, generating altruism is costly, right? It's not, you know, it's not as if people just show, it's not as if the Red Cross doesn't have to pay anything for all these altruists to show up. So do these incentives pay for themselves ultimately, or, you know, so sort of what's the efficiency? I mean, we want to increase donations, but presumably not at all costs, right?
SPEAKER_03:Yeah, no, in fact, that's sort of one of the premises of our work is that there isn't enough blood. So in the US, again, the shortages tend to be seasonal, but there are shortages. And even though they're predictable, that doesn't mean that they're not felt. And so one aspect to this, the inefficiency in the market for blood is that the demand for blood is steady. Unlike 60, 70, 80 years ago when blood would be needed mainly in case of emergencies, like in case of trauma, accidents and things like that, today hospitals can predict the amount of blood they need every day, every week. And most of it is for procedures, surgeries, treatment of certain types of patients and so on. So the demand is very stable. And in the face of that sort of stable demand, we need a steady supply. And so the seasonality creates issues, particularly because blood expires. Hospitals can store it only for a few weeks. After that they need to, it needs to be discarded. And so, you know, ensuring, using rewards to make sure that the supply is plentiful and stable is important. It can contribute to the overall efficiency, to the overall efficiency of the system. From the other aspect, again, the other premise to our work is that, you know, why is it the case that we see shortages? And again, in the U.S. those are seasonal, but elsewhere they're chronic. And you said it, Kim, that giving blood is costly. uh in terms of time and in terms of discomfort and so you know we do have uh altruistic donors and that's great so that they're willing to willing to supply blood uh you know altruistically but that supply is insufficient. And so the idea of using incentives, that's where it comes from really. If we had a plentiful supply of blood from altruistic donors who don't need to be incentivized, that would be fantastic, but we don't have that. And the shortages, the scarcity has costs.
SPEAKER_01:Right. So we found out that our incentives overall were cost-effective, right? So, yeah, so we, you know, one might ask, sure, more people show up, but how many and is it worth it? There are two considerations to make. We were able to work on one. We don't think the other is a big problem, but we can talk about it. So, you know, suppose, let's Let's put it this way. Suppose there is a drug that normally gets 30 people to donate. Let's make this example. Then you give incentives and now 35 people show up. Okay, so that's a considerable increase. Now, in order to get five more units of blood, now you have to pay, compensate, sorry, 35 people, right? Even those who would come anyway, without incentives, not that you reward only those five. So, you know, the cost, you know, goes up to get a marginal, as we say, increase. So we were able to do those calculation, giving some, you know, imputing some value to a unit of blood, looking at the reimbursement rates in the US and so on. And overall, you know, the small amount that we, you know, we gave and it was effective enough to make it also cost effective the other issue that would that might arise that suppose the the award are extremely uh popular and so there would be congestion uh so long lines people waiting uh you need more personnel more stuff and so on that could be an issue in fact there is an anecdote here
SPEAKER_03:that's why i'm smiling
SPEAKER_01:So before we run the experiment, we ran a couple of pilots, right? So we chose, you know, there was no statistical value there. It was, you know, just, you know, right, slightly above an anecdote. So we selected four drives, I think, and to two of them, we assigned five, two, only two? No, no, no, 20. Exactly. To two of them, we gave five, and to the other two, we gave 20. And so,
SPEAKER_02:yeah,
SPEAKER_01:yeah, yeah. Brent,$20 gift card. So Brent said, I don't know, guys, I think it's a little too much. You know, I expect a lot of people would come. We said, okay, let's try. We can always sort of find you. And actually I went undercover to one of them in this town on Lake Erie. I was living in Cleveland. So we went on a family day trip with my wife and daughter. And so I went to see the drive and there was this ridiculous line. So I know I played the... I go inside and say, what's happening here? Why is there this long line? Oh, well, some anonymous benefactor, you know, giving this$20 gift card. Oh, that's great. And so then I leave and it turns out that, you know, they collected all the, so they went from 30 to 90, I think.
SPEAKER_03:Yeah, we were the anonymous benefactor.
SPEAKER_01:Yeah. Yeah. And so we realized, okay, that's probably too much and that's going to be also expensive for us. So let's fine tune it back. That's just to say that perhaps too much could increase, could lead to additional costs that, you know, we didn't factor it because for the kind of increase we had, there wasn't any need for additional stuff or crowding of any sort.
SPEAKER_00:Was there one of the amounts of the five and 10 and 15 that were sort of optimal from a, you know, generating the, was it 15, which generated the most? No, what was it?
SPEAKER_03:Well, 15, yes, 15 generated the most, the highest, you know, increase in donations. You got to pay everybody. It also generated the highest displacement effects, like that donor stealing from other drives that we mentioned earlier.
SPEAKER_00:Yeah,
SPEAKER_03:yeah. If I remember correctly, the$10 reward had the highest net effect.
UNKNOWN:That's right.
SPEAKER_03:The most cost effective.
SPEAKER_00:Amazing. So what do you guys think of how to phrase this? I mean, what do you think are the policy payouts from what you found here? I know sometimes empiricists don't like to sort of, you know, to sort of project to the broader world about what what. But you guys. are involved in policy discussions frequently, I think. And so, I mean, what do you think are the lessons from this series of studies that you did? I
SPEAKER_03:mean, this is, of course, you know, a conversation that we can have. And I'll start with one, what I think is one policy implication, one of the policy implications that in this context, appropriately framed economic rewards can help. they shouldn't be discarded a priori as it happens often. The WHO and other health agencies around the world, they have policies that are kind of, you know, strict policies that warn against adopting, using economic rewards to encourage blood donations. What our evidence shows is that those certain types of rewards that have clear economic value. They encourage blood donations without causing quality issues. They don't seem to be incompatible with altruism. In fact, we find our effects across the board, including among long-time donors, including among high-frequency donors. One could argue they are more intrinsically motivated than infrequent donors or more recent donors. And so that to me is one of the broader policy implications of our work.
SPEAKER_01:I guess another one, it's not policy implications per se, but collect data, experiment, try and see what works. I mean, rely to the extent possible on and methodologies that allow you to say, something close to causal is going to help, at least to have a starting point. And that's where perhaps, I think it connects well to the other line of research that we've developed in recent years, because after we did these two papers, we also published, speaking of policy, a policy forum article on science, describing a little bit how the evidence has evolved on providing incentives to uh to blood donors and what the implications were which you know it's pretty much what you know what mario said uh and you know science being science that you know there is typically a lot of you know media attention and so we started receiving you know calls to give interview you know newspapers magazines radio stuff and so uh and also uh has been science, people responded, sent letters to science. And in particular, there was a letter from someone working at the WHO. And, you know, the more we were reading that, I mean, it was very interesting. We engaged in a, you know, back and forth that was published as well as science. The more we started realizing that there was something more than just perhaps criticizing our evidence or any other evidence. And that's also where policy probably we think in this context should explore. There were moral considerations essentially. And it was also interesting during a radio interview I had with the radio here in Nova Scotia in Canada, you know, I described the study and then there were some callers calling. And interestingly, one said, you know, I totally believe the results. I mean, you know, it's to be expected that, you know, blood donation would go up, but I don't feel like it's the right thing. Right. So that's, you know, again, anecdotes, observations. When we started thinking and maybe both when it comes to research and when we come to policies, when there are these sort of, you know, taboo traits or morally controversial traits, maybe it's time we start asking people. what they think about. Because just like you can make a claim, an unsubstantiated claim that, you know, compensation reduces donation, you can easily make a claim that people feel morally averse or, you know, repelled by incentives. And let me, you know, in a sense, one other strong argument of TITMUS, which has gone, in my opinion, quite... you know, sort of overlooked in some sense, was that he really made a strong moral argument. I mean, compensation for these activities will ruin society, will disgregate society because we need to believe that there are some things that you do regardless of any material reward. And one of these is donating blood. It may be others, but we need to keep this going, right? And as much as it's interesting, I guess this could be put, you know, to empirical scrutiny and maybe Mario may describe what we did, but I want to read, I unearthed a quote. People talk about the TITMUS paper, but there were two incredibly interesting responses, paper book actually, two incredibly insightful responses to the book by two Nobel Prize winning economists, Ken Arrow and Bob Solow. They're extremely interesting. Bob Solow in particular is not only a super brilliant economist, obviously one of the most important of the last century, but he's also an amazing writer. So this is how he concludes his article. He says something like, I have it in front of me. There is a slight, rather typically Fabian, authoritarian streak in Titmuss. He seems to believe that ordinary people ought to be happy to have many decisions made for them by professional experts who will, fortunately, often turn out to be moderately well-born Englishmen. That's
SPEAKER_00:brilliant.
SPEAKER_01:Two reactions were like 1970 and 1971. So there was a debate among, you know, extremely prominent scholars and intellectuals about this. And then, you know, we took inspiration from that, and of course, from another Nobel Prize-winning economist, who is Al Roth, and his work called Repugnance. Maybe, Mario, you can go on with this.
SPEAKER_03:I can, yeah, no, absolutely. We had already started sort of to think about, you know, the ethics of compensating blood donors and plasma donors, particularly thanks to Al Roth's, inspired by Al Roth's work. But like Nico said, when we received that comment from the WHO officer in response to our science policy forum article, and we can put up a link to that too, because that letter is very clear. Let's very clear. The letter says, yes, you know, perhaps, you know, your incentives might work. They might, you know, generate more donations, but we need to be concerned about the ethics. That's what sort of the argument was because of the possibility that vulnerable populations might be exploited or unduly pressured into, into donating blood and, And that's when we, you know, we decided, okay, this is now, you know, we cannot ignore these type of issues and reactions, even though, you know, most economists, with a few exceptions, had sort of in practice, you know, neglected to engage with those arguments. We thought that that letter sort of, you know, gave us the motivation to pursue, like Nico said, with an empirical approach that side of obviously an important side to this whole issue.
SPEAKER_00:Well, I always take that as one of the lessons from Al's early paper, Repugnance as a Constraint on Markets, which is the first one of his papers on repugnance that I read anyway. And I always take it, to go to Mario's point, as part of what he's saying is, you know, economists typically ignore these, you know, they sort of do a cost-benefit analysis and say, look, this makes sense. Why aren't you people coming along, right? And it's really in some ways a call to economists to say, look, you These are serious limitations on the ways in which we structure markets and economists have something to add to our understanding of that. And you guys really took up that mantle and have been doing that. So kudos to you. I
SPEAKER_01:now wrote quotes ready as well, which says, we need to understand better and engage more with the phenomenon of repugnant transactions. As economists, we have to understand folk ideas about what we can do in the market better than we do. So folk ideas is like the key expression here. I mean, we should listen to people, right? I remember an early presentation I did. I think we didn't even have a paper back then, just a design with some economists. And they were saying, why are we doing this? I mean, people who think you shouldn't give incentives are just crazy, are just stupid. And I'm like, no, you're doing the same, you know, fallacy and stithmus in deciding, you know, what people should think. Let's just go and, you know, in a systematic way, you know, et cetera, et cetera, try to understand.
SPEAKER_03:One first step that we took was... you know, I mean, one percent, it's part of our motivation was to try and make the trade-offs between sort of societal options and choices more transparent and explicit. And, you know, individuals like people like, you know, they can make up their own mind, but if they, but when they do that, you know, with full information, with being fully aware of what each policy option implies, I mean, those decisions are much more informed and that's sort of a situational scenario that's much more desirable than when people just decide based on instinct or sort of, you know, incorrect beliefs or misinformed perceptions.
SPEAKER_00:So this is a good segue then into the papers that you have done sort of looking at what are people's perceptions about the morality or ethics of various types of exchanges. And you've done several. I mean, the one that I actually read over the weekend is your AER, which paper from 2019. And that's a survey of, it looked like about 2,600 U.S. residents. And we can talk you know, some more about some of the, about many of the interesting things that you found. But to me, the thing that jumped out is that most respondents were in favor of paying organ donors. I mean, is, you know, that it was, I forget what the percentage was. I mean, it varied a little bit based on conditions, but overall, I mean, that was, did that surprise you or you expected that?
SPEAKER_03:we had some idea of what that percentage would look like from a prior study. So our very first survey experiment on this topic was a very simple one. And again, that study got published and is getting cited, but it had limitations. And with the subsequent studies, particularly the study that you're mentioning, King, joined with Julio Elias, all of these sort of second set of studies are joined with Julio. Elias was an economist at the Universidad del Sema in Buenos Aires, in Argentina, and Julio was a co-author of Gary Becker's and is very much influenced by Becker's ideas. So the very first study, we asked a simple question, you know, what happens if we tell people about the shortage of kidneys for transplantation in the United States. And if we tell them that some economists and activists have suggested that kidney donors should be compensated, what happens if we tell them that currently kidney donor compensation is prohibited, that people go to jail, you know? And so we did that first study where we, again with US residents, and we randomized this information treatment. And what we found was that in the control group, where we just collected people's opinion about whether or not kidney donors should be compensated without providing any additional background or context or information, that 50%, roughly 50% of our respondents were in favor and 50% against, obviously. But then when we, in the treatment group, when we provided that information that I described, the proportion of individuals in favor of compensating kidney donors jumped to 70%. And so that 70% was also, you know, when we did the survey study that you mentioned, we were not terribly surprised that certain types of incentives generated that type of support.
SPEAKER_00:Interesting.
SPEAKER_03:Sorry,
SPEAKER_00:go ahead.
SPEAKER_03:Yeah, now there was also another prior study by Al Roth and Steve Leiter, a survey. It was a part of a broader survey collecting opinions of Americans about other transactions that were morally contested transactions. They found that the percentage of Americans in favor of compensating kidney donors was about 60%. So that was sort of, you know, the ballpark.
SPEAKER_00:I feel like there must be very few law professors in these samples because I, I do not feel like most of the audiences that I talk to, that 60% of them are in agreement with many of my ideas. It seems more like one.
SPEAKER_03:We were very intrigued by the findings from that first study, that the proportion of people in favor jumping from 50% to 70%. And we explore alternative hypotheses in additional sort of little experiments that to Iran. One idea was, look, we're looking, we're studying Americans and look, the US, you know, markets are everywhere and there's, you know, a strong sort of, you know, belief that the market works. I mean, lately that belief has been eroded, but we thought maybe this is just because, you know, Americans are in favor of markets more broadly, maybe because, you know, they learn the economics 101 mantra that, you know, markets are efficient and of course you need to pay people to obtain things that you value. But it turns out that that was not really the case. So in one of these auxiliary experiments that we ran, we pretty much literally reminded people of the Economics 101. We took, I believe it was from Greg Mankiw's textbook, we took like a paragraph that described the efficiency of markets and we use that as an information treatment but we fail to replicate the you know the jump the 50 to 70 percent jump completely failed to replicate that if anything there was actually a small negative effect of reminding people about the efficiency property properties of markets. So our sort of tentative conclusion at that point was that, look, it's not like Americans are lovers of markets necessarily under all possible circumstances, but when they see that the market mechanism can be used to solve a pressing problem, then they're okay with that.
SPEAKER_00:That is interesting. So one of the things that interested me in the more recent study, the 2019 paper, which I think sheds some more light on this, is that how many of the subjects, I think it was a majority of them, had what we might call sticky beliefs, right? I mean, in other words, their beliefs actually did not change. So a lot of people who favored paying organ donors actually favored paying them without regard to increases in the number of transplants. And many people who opposed it continued to oppose it regardless of increases in the number of people that would be saved. And then you have this other, if I recall correctly, smaller set of people who do respond to the sort of cost benefit calculus that you go through.
SPEAKER_01:So yeah, that's one of the advantages of these more recent studies that we asked the same individual, so we have this within sort of design, to hypothesize, to assume different potential increases. that payments would lead to. And so we would see whether, again, looking at the trade-off, whether people were perceiving this and would switch, for example. But it's true. We found quite a bit of polarization. I think about half, maybe a little less of the respondent, 46% maybe, were in favor of payment no matter what. About 20, 22% were against payment, even under the assumption that payments would fill the demand, will essentially eliminate the shortage altogether. And then about another 20% were against you know, switcher of some sort. So they were against for a relatively low supply increase, and then they would switch to change in their beliefs. So this was quite interesting in itself. I think there were two other aspects that were interesting. First of all, these three different populations also were very different in terms of their moral views. of payments. And this is interesting because to the extent that we think there is something ethical behind this, we need to go and measure that. So we asked people whether they thought that payments were exploitative for donors, fair or unfair to donors or recipients, against their overall sense of dignity. We asked a bunch of questions. So it turns out that those who are against payment, no matter what, they also express more repugnance, you know, moral repugnance, those who are in favor much less. And interestingly enough, these two populations don't change their moral belief according to changes in supply. They're very sticky. Not only their favor or opposition to payment are sticky, but also their sort of repugnance, whereas those could change their favor for higher supply, they also have a more positive moral view of these exchanges. So also in supply, So there's a utilitarian view, if you want. Also, supply, per se, is amenable to moral consideration. So if you provide more kidneys, that's a more moral transaction, per se, regardless of payments or whatever. We were also able to go a little bit more in-depth and try to understand what kind of moral concerns really matter, right? Because one could think, is it only about payment? Is there something about payment that people... Or it's about who pays. What if we distinguish between the recipient having to pay for a kidney as opposed to a third party sort of buying the kidneys and giving them for free, essentially, so a clearinghouse of some
SPEAKER_00:sort. And that was something that did matter to your subjects quite a bit, right?
SPEAKER_03:Yeah. So, yeah, so the idea is that... A big concern that Americans have, I think it goes beyond America, is that if we allow kidneys to be bought and sold, so to speak, then a rich person or a person with health insurance can afford to obtain a kidney, needs a kidney and can afford to obtain one, then they would obtain it and survive, whereas someone with no health insurance or no resources would not. And that raises issues of fairness and justice. So one way to solve that problem was for us in the survey to decouple the procurement and allocation moments and to do that we asked survey respondents to hypothesize that a government agency would do the procurement compensating kidney donors and then that same agency would do the allocation of organs for transplantation using an algorithm set of you know allocation rules the same actually the same allocation rules that are currently used to allocate kidneys from deceased donors and that you know doing that sort of remove the fairness justice concerns because now you know the government agency compensate donors and distributes donors according to medical needs another objective criteria that do not include purchasing power, that do not include wealth. Approval for the government agency solution was much higher than approval for a hypothetical market where individuals can actually obtain kidneys from donors.
SPEAKER_00:And it also seemed, although I don't think the effect was as large, that non-cash payments were looked at more favorably than cash payments. Is that correct? Maybe
SPEAKER_01:from a point of view, but in terms of favor for payment, you know, support to payment, not that much. Not that much.
SPEAKER_03:A little bit. There is an effect, but it wasn't statistically significant. But there was a little bit of an effect, but
SPEAKER_00:not that big. Got it. So I'll ask you the same question then about this. What do you think that, I mean, why is it important for policymakers to be informed by actual research on what public attitudes are? Why does, I mean, I think it matters. I know you think it matters. Why does it matter?
SPEAKER_03:One big reason is that the shortage of kidneys for transplantation is very costly. The available statistics indicate that maybe four, five, six thousand Americans die every year because they're unable to obtain a kidney. There are 100,000 people on the waiting list. The waiting list grows every year because the number of additions, people who are added every year to the waiting list is larger than the number of transplants that take place. So that's a very big cost. The other sort of, you know, one important aspect that I think that others also are contributing to is making Americans, policymakers and society more broadly aware of what it takes to give a kidney, of the costs that are involved in, especially for a living kidney donor. And those costs add up. So if you put this together, like the prohibition, like the prohibiting compensation, in a situation in which a living kidney donor is looking at maybe 10, 20, even 30, 30,000 cost of donating a kidney, then we shouldn't be surprised by the existence of a shortage But that means that we need to do something. We need to, you know, intervene and be creative perhaps in relaxing that, you know, the strict prohibition that we currently have in place.
SPEAKER_01:And part of what we need to do or policymakers need to do is really acknowledge that there is an ethical issue and that people might have ethical issues and that, you know, some values, some moral values. Yes, I mean, they, you know, they hold societies together. We recognize ourselves in some main value. Less and less so, but there is stuff that unifies us and that, you know, make us stick together. And so the question is whether potential opposition to payments for kidneys or plasma are part of these core values. And the only way we believe to know this is just to go and ask. I mean, it's true that you know, these are representative democracies and at some point, you know, policymakers will make their own choices even if unpopular. I guess one message is that one shouldn't be too far away from what, you know, folks out there think because otherwise there will be always populists will do that on their behalf. And so, you know, go and run surveys in a way that allow you to, as Mario was saying, decoupling different components and what really matters to people when it comes to paying for body parts, when it comes to redistributive taxation, and there is a lot of work there. Or think about the COVID crisis right now. We are essentially trading off principles here, health versus individual liberties. what does it mean to people? Is it true, as some are arguing, that people care so much about the individual freedom that they're going to give up their masks and not believe in science because freedom comes first? Or actually people care a lot about staying alive and their dear friends and dear ones staying alive and so on. And so it goes the other way. What is the balance? That's another environment and context, which is very timely, obviously, where, you know, there is a clash potentially, or maybe not, of principles. And the only way to know it is, you know, try to ask in a systematic way.
SPEAKER_03:Yeah, no, exactly. And one big lesson from Alroth's work is that there are moral constraints to markets. And if we want to make progress, we as economists want to make progress, we need to acknowledge them and try and find ways to, like Arad did with the kidney exchange idea, to inject market mechanisms in a way into the problem and thereby, you know, working towards solving the problem in a way that is ethically acceptable. And there's, of course, a lot of work, you know, involved in doing that. But that's the work that we should be doing. Kidney exchanges didn't exist. And then at some point, and right now, they're generating 14, 15% of kidneys for transplantation. And so in the same spirit, you know, our study showed a few results that could be that we think are useful for policymakers, but also for us as economists when we go out into the policy world and make our proposals. So we know that people are very concerned about fairness and that there is very little sort of traction for individual purchases or transactions of kidneys for transplantation. So we shouldn't go that way. Instead, we should advocate for compensating donors for their costs with a robust presence of the government, of a government agency that reassures people and reduces sort of the ethical concerns. At least one of the ethical concerns that has a major role according to our data, which is the fairness of the result in distribution of this lifesaving resource.
SPEAKER_00:Yeah. And that certainly, you know, the decoupling of the procurement with allocation is, I think, an important point that... that people can be educated on, at least. I'm surprised at the number of people who assume that those two things have to go together, right? And so just perhaps educating people on the possibility of this decoupling is probably an important point that's supported, of course, by your study. Well, so I've kept you guys, even longer than I said I would. In our last few minutes, do you want to tell me what you're working on now? Because I noticed on Nico's website, you have a few working papers together. So luckily for the rest of us, you're not done. I have to update my
SPEAKER_02:website.
SPEAKER_00:Yeah, you got to update yours, Mario.
SPEAKER_01:It's a little bit of an overstatement. So we... inspired a little bit by the covid pandemics have been thinking recently in this sort of real of ethically controversial transactions about issues of pricing. There have been a lot of talks, especially at the beginning of the pandemic in March and April, about price gouging from masks to hand sanitizer and perhaps even more relevantly for medications, for drugs to treat COVID. There is quite a bit of work in behavioral and experimental economics about, again, fairness concerns around, for example, price discrimination, so charging different prices at different times. Think about Uber, surge pricing, or other things. Or, you know, the usual example of snow shovels going for twice as much when it... You don't know about that down there in North Carolina, but we do. We
SPEAKER_03:do know hurricanes sometimes. That's right. about shortages of ice, for example, when the power goes out.
SPEAKER_01:Yes, yes. Generators. Generators. And so people in general find it absolutely unacceptable and very unfair that you charge higher price. Again, the hard-nosed economists would say, well, there is a shortage. You sell it to those who value it the most. But again, this is not something that satisfies the average person because those who value it the most may be the better off and stuff like that. So again, there are some of these issues. So we wanted to see, though, What would happen in this view if you sort of gave additional information or awareness about what other roles that prices might have in addition to in the short term, perhaps allocating to those who value, you know, a drug or a face mask more. And these are the supply effects. So sure, there may be a short term shortage, but then more, you know, firms or individuals might be willing to participate in this market because of the profit opportunities and that might increase supply leave the prices down again and so you would have actually higher supply for lower prices so there is this trade-off again as opposed to for example setting a price price ceiling which will provide goods to everybody or to a large larger audience in the short term but it might actually reduce supply in the long term so we are trying to set up surveys to explore in some sense how people perceive this this trade-off
SPEAKER_03:exactly yeah and the the drug you know example from is a good example like now we know that this drug remdesivir that has some beneficial effects in the treatment of COVID-19. There has been some discussion about what price should be charged for the drug. And so on the one hand, you've got pressure to charge a low price so that people who are sick can receive it without going bankrupt. But at the same time, This is not, hopefully, the only drug for COVID-19. We want to keep incentives alive for pharmaceutical companies to come up with more and better, hopefully, drugs. So there's this tension between prices generating incentives for innovation, and in this case, for introducing more and better drugs, and fairness or justice considerations for low prices, making the drugs more accessible to patients today. So those are the sort of intentions that we will be hopefully trying to study in the next couple of months.
SPEAKER_00:Well, I really look forward to reading it. And it's good to thank you again for doing this. This has been really a lot of fun. A
SPEAKER_01:pleasure.
SPEAKER_00:Let's do it again. This was fun
SPEAKER_01:indeed.
SPEAKER_02:Okay. Thanks, guys.
