Question

Describe the market for kidney organs, as it would be in a free market without government intervention, using what you have learned about scarcity, marginal analysis in decision-making, and markets. You must include a discussion of resources, supply and demand, as well as marginal benefits and marginal costs. Think of this as an explanation of the pros and cons of the market using economic terminology.

Answer 1

In the market for kidney, marginal  benefit is very high as it is a new lease of life for the person receiving it and is highly valued by his family too.
On the other hand, the marginal cost of donating kidney ('producer' equivalent) is zero. The selling price is also zero. It is called kidney 'donation'.  It will be highly beneficial to society if there is free trading in kidney as many lives can be saved. In economics terms, the consumer surplus is quite high, therefore high social welfare too.

However, there is scarcity of kidneys in the market for kidneys as, currently, it is illegal and unethical to sell one's kidney. Hence there is very low supply of kidneys in spite of very high demand. In other words, there is scarcity of kidneys and many lives depend on a kidney donation. The waiting list is long and it takes months or even years to find a suitable donor.

If marginal benefit in the market  is considered, marginal cost can be fixed and kidney donation for certain remuneration can be fixed. If a small token is fixed to the kidney donation, and if general awareness created about the market conditions, then it is possible that the society will be able to reap benefit from the vast impending consumer surplus. That is, many lives can be saved; and kidney can be traded for a good cause.

However, legalising kidney market could also lead to a parallel market where kidneys can be forcefully stolen from unwilling donors for money. The scope for illegal trade can result in increase in crime rate due to abduction of innocent people and even homicide.
Therefore, free trade without government intervention is a dangerous proposition. However, a less constricted market with well thought plan of action will result in internalising the vast consumer surplus that now goes unharvested (deadweight loss).