The Real Price of Blood

[Clark]

http://www.gsas.harvard.edu/scholarly_life/the_real_price_of_blood.php

The Real Price of Blood
Lusia Zaitseva

How one GSAS student uses the tools of behavioral economics to increase blood donations

Love isn’t the only thing money can’t buy—blood is, too. And yet, though no money is exchanged, blood can find ways of getting to the people who need it, though not often in ways where demand and supply are aligned. In the days following the Boston Marathon bombing, people rushed to give blood in support of the victims, eager to donate one of the human body’s most precious resources to others, free of charge.

While this altruistic impulse is certainly commendable, according to Carmen Wang, it is sometimes misguided. “In that instance, the American Red Cross had to issue an announcement thanking would-be donors and informing them that they already had an adequate supply of blood.” But at other times, for example when the flu or cold virus afflicts many regular donors, blood supply dips, and blood banks have trouble finding people willing to give.

As an undergraduate at the University of Sydney, Wang, now a PhD student in business economics, a joint program run by the Department of Economics and the Harvard Business School, wondered how this problem could be addressed using the principles of economics. Wang reasoned that blood donation can be conceptualized as a market, but with a twist. In the case of a normal market, supply and demand are coordinated through the intermediary of price: as demand for a commodity rises, so does the price, motivating potential providers to increase supply. As Wang explains, since blood banks’ professional code prevents them from paying for blood, “the blood market lacks the coordinating factor of price.” The result is a lack of adjustment between supply and demand. “People do not know when there is an increase in demand, but if they had known, they would have helped.”

Lessons from the Kidney Exchange

In thinking about blood market design, Wang was inspired by the market for another (quite literally) priceless commodity: the kidney. The nefarious black market for nephrons notwithstanding, people cannot pay for kidneys. Yet each year, thousands of people die waiting for a kidney transplant. While patients are allowed to receive a kidney donation from someone they know, the potential donor is not always a match. Some hospitals have found a local solution to this problem, by coordinating patient/donor pairs that do not have a match to their would-be donor but do to another patient in the same situation. In this case, kidneys are not sold but exchanged, saving lives and circumventing the ban on kidney purchase in the process.

This kidney exchange, initially started in New England, has expanded on a national scale. In 2012, Alvin E. Roth won a Nobel Prize in Economic Sciences for his groundbreaking work designing this new market for kidney exchange, using principles similar to those he employed in redesigning the model for matching medical residents with hospitals.

When Wang learned about Roth’s work as a junior in college, she says, “I was blown away.” Roth’s work served as inspiration for Wang’s own: She later came up with a design to centrally process relevant information and coordinate blood donation on a large scale. While Roth’s work focuses primarily on market design, however, Wang is interested in combining it with another increasingly popular field: behavioral economics.

Encouraging Donations

Working with the Australian Red Cross, Wang, together with her mentors and collaborators Professors Robert Slonim and Ellen Garbarino of the University of Sydney, has also studied how blood donors react to reciprocity in the form of small unconditional gifts. They found that when past donors who had not given blood for two to four years received a small gift such as a pen, they were more likely to return and donate. “It’s a really nice pen, though,” Wang laughs. Moreover, given a choice of returning to donate again or simply filling out a brief survey regarding their knowledge of blood donation, Wang observed: “People didn’t do the easiest thing—they filled out the survey and they came back and donated again.”

Wang’s work with the Australian Red Cross perfectly embodies her approach to complicated economic questions. “On the one hand, behavioral economics tells us that people are altruistic and want to do good,” she says. “On the other, market design allows us to change a system so that people who want to do something good will find it easier to do so.”

GSAS’s joint PhD program with HBS has allowed Wang to pursue both the theoretical side of her interests and her passion for finding real-world applications for those theories. “Theory helps you see the world in a different way, but it also shows you what could have been done better,” she says. But the work is also about discipline. “I can’t just make convenient assumptions,” she explains. “I’m constantly asking myself, does this really matter? Am I doing the best I can do?”