Why Dinner Guests Say Thank You With Wine, Not Cash

Because U.S. organ donation has been mismanaged, the group that controls it will be replaced by a new system. Yet still, with 104,000 people on kidney waiting lists, we can be sure that the new system will not let individuals pay for the organ that will save their lives. By contrast, in Iran, where there reputedly is no waiting list and donors have been known to line up, people sell their kidneys.

With kidney sales illegal almost everywhere, we can include them in a long list of repugnant transactions.

Repugnant Transactions

So yes, we know that activities are called repugnant because some people do not want others to engage in them. As the next step, researchers, concerned that no one had definitively determined what creates a repugnant transaction, asked more than 1500 people to respond to 51 different market transactions. Winding up with 21 characteristics, they then placed them in five categories.

These were the 51 “transactions” that they ranked from least repugnant to most in the first of two studies:

Then, when researchers checked the validty of their conclusions, the results were slightly different (again moving from least to most repugnant):

Repugnant transactions embody the fundamental clash between the market and one (or several) of five reactions. While a repugnant transaction can save a life, others are much less serious. Assume, for example, that you are going to a friend’s home for dinner. Having had no time to pick up a bottle of wine, instead you give your host $30. Your host is horrified.

These are the five common causes of repugnant transactions:

1. Moral outrage: people display moral outrage when a transaction disgusts them. A probable reason  could be a conflct with their values.
2. Need for regulation: sometimes people feel the need for government. When government does not respond, the transaction can become repugnant.
3. Incommensurability: incommensurability refers to transactions for priceless items and processes like selling brides or voting or the sacred rights we automatically have in a democracy that are not for sale.
4. Exploitation: A transaction results in exploitation when a party is objectified and/or coerced.
5. Unknown risk: Here, we have the need to proect people. It could be a buyer or a seller cluelessly entering a transaction.

Below, you can see why moral outrage is the most likely reason a trasaction becomes repugnant: 

Our Bottom Line: Allocation

A common denominator shared by many regugnant transactions is moral outrage. Here, we have one group deciding that someone else’s behavior is unacceptable because their values conflict. As a result, the variable that relates to government regulation kicks in.

The researchers that sought to decompose the reasons for repugnant transactions created a graphic displaying how moral outrage and the need for government regulation (in certain individuals’minds) intersect.

Looking at their quadrants, we see horse meat in restaurants low for moral outrage and regulation while organ donaction is high:

But perhaps most importantly, we see the market’s efficiency being constrained. Instead of the market’s incentives dictating how to allocate land, labor, and capital, the perception of a repugnant transaction injects government and inefficiency…and the mismanagement of organ allocation that created a 100,000+ waiting list and many unnecessary deaths.

My sources and more: Reading the Washington Post’s discussion of how organ donations were mismanaged took me to repugnant transactions. From there, this paper came in handy. But, if you want to hear how Alvin Roth would allocate organs and hear more about repugnant transactions, HiddenBrain and econlife are the perfect ending for today.