Blood, Price and Specific Egalitarianism
Why it's all about supply-side effects
Consider a hypothetical country, experiencing long waiting lists for blood donation. Blood donation is entirely altruistic, no payments provided, and distributed by the government based on a formulation for ‘need’. Suddenly, the market is deregulated on both the supply and demand sides:
1. people can be paid for donation, and;
2. blood is openly sold, distributed by willingness to pay (WTP).
As a result, the market clears and waiting lists disappear.
I’m sure most of you have mixed feelings about (1), there may be something distasteful in transforming a previously altruistic, community-based practice into a commercial one. There may also be the worry that commercialising something can ‘crowd out’ moral motivations, as Michael Sandel often suggests. However, people may be persuaded if the effect on supply was substantial enough. Sure I would like people to be motivated by altruism, but if it results in lives saved, it may nonetheless be worthwhile.
Most people would however consider (2) morally abhorrent. Blood is clearly essential for life, and thus WTP will reflect the parties’ ability to pay much more than any difference in preferences. Letting the price “float” would therefore likely result in blood being allocated upwards, towards the rich.
Note however, that the waiting list can disappear based solely on (2). Holding the supply constant, introducing markets on the demand side can eliminate “queuing” by replacing waiting with prices.
What is the purpose of this rather bizarre hypothetical? It is to demonstrate an asymmetry in the way many people think about the efficiency of markets, at least for essentials. I refer to it as Supply-Side Primacy (SSP): simply put, people view the supply-side effects of price rises as their primary virtue, not its demand-side reallocation.
A similar concept to SSP can be found in James Tobin’s classic On Limiting the Domain of Inequality in which he distinguishes between General Egalitarianism, or the egalitarianism of incomes, and Specific Egalitarianism, the egalitarian distribution of specific goods. In this, he states:
[A] crucial issue is the elasticity of supply, in the short run and the long run, of the commodity in question. When the scarce commodity is in fixed supply, then arrangements for distributing it equally, or on any other non-market criterion, can be made without worrying about efficiency. This is also the case in which social concern about specific inequality make the most sense.
Note here that Tobin’s concept of ‘efficiency’ is different to how economists usually conceptualise allocative efficiency, which does not require supply to be flexible to justify distribution based on WTP.
Of course, even if one is sceptical towards the usefulness of WTP as a benchmark for a particular scarce good’s distribution, the solution is not necessarily a form of price control. Using the above scenario, if blood was “sold but at a low price” it would likely not reach those most in need.
SSP does however help us understand a different way in which markets and prices can be conceptualised, as well as the structure of many essential government services. For a real life example, consider the development and distribution of the COVID vaccines. While creating incentives for production were paramount, there was never a serious movement that the “shortage” be ended by auctioning off the limited supply. Under such clear examples of specific egalitarianism, supply is paramount, and WTP relatively unimportant.
