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Organ sale is legal in Iran. I was wondering: are organ markets Pareto efficient? Or could an argument be made for them being Pareto efficient? I have been thinking that both the buyer and the seller benefit from the transaction, thus no parties are made worse off. However, coercion/kidnap could occur. There has also been the emergence of black markets (which some scholars attribute to the lack of a legitimate market in almost every country in the world).

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There are economists who argue that market for organs would be efficient and would improve the allocation of cadavers saving lives. There also good arguments for them leading to Pareto improvements although you should note that market does not necessary have to be strictly pareto-optimal for it to be desirable. Often in public economics it is enough to show that a policy improves on the current state of affairs.

Hence there is significant number of economists who support such markets (but not all). For example, Gary Becker is an advocate of such markets (see Becker & Elias, 2007). Another known advocate is Roth who supports such markets (see Roth (2015) Who Gets What — and Why: The New Economics of Matchmaking and Market Design). In fact according to IGM forum more than half of top US economists would be in favor of introducing market for kidneys in the US once the opinions are weighed by the confidence.

When economists consider efficiency of these markets kidnap or coercion (in its crude form) does not play big role. Even without any market for kidneys people can be kidnapped and it is completely possible that even with only voluntary donations of organs people get coerced (in fact it could be argued absence of market would actually make these issues more prevalent). Rather the market efficiency debate would depend on whether there are some market imperfections (asymmetric information, externalities etc.) and how exactly the market is organized.

Not all markets are created equal and it is important to create proper institutional framework for markets especially in such delicate issues as cadaver markets (see above cited Roth). Moreover, organ markets can be criticized on grounds that people might not be completely rational they might have inconsistent preferences and thus make choices that will end up not maximizing their utility (there is some evidence for people regretting donating/selling their organs see Goyal, Mehta, Schneiderman, and Sehgal, 2002; Zargooshi, 2001). This is why economists usually also argue such markets should be well regulated.

Furthermore, a worry exist that creation of market for kidneys could lead to crowding out of charitable donations of organs (Albertsen, 2020). Hence even if there would be overall benefit there might be some distributional and inequality issues (however, these are for moral philosophers to discuss). On other hand as argued by this previous answer here the prices on legal markets for organs are not prohibitively large and charities tend to sprung up to support poor people.

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