Time Required: 2 or 3 class periods

Materials:

One valuable article that most students in the class will want. (Suggestions: a T-shirt or sweatshirt with school logo, a $5 gift certificate to a fast food restaurant.) Poster board or butcher paper and markers.

Concepts:

• scarcity
• money price rationing

Procedures:

Day 1

1. Hold up the T-shirt and explain to the class that there is a problem: there is only one T-shirt. Take this opportunity to review the definition of scarcity by asking how many students would like to have the shirt and pointing out that our wants are exceeded by our ability to satisfy them.

2. Ask students to brainstorm a list of ways to decide who gets the shirt. Introduce the term "rationing" and emphasize that it is a necessary consequence of scarcity. Sort the items on the list into categories. For example, "running a race," "the highest grade on the next test," and "whoever gets to class first tomorrow," might all be denoted "contests." (Commonly used categories include: contests, need, auction, merit, first-come-first-served, lottery, money-price, arbitrary distinctions such as age.)

3. Distribute the categories among the groups and instruct each group to list the advantages and disadvantages of their assigned method of rationing. As the groups report their conclusions, generate 2 lists on the board: Criteria for a good rationing system and Characteristics of a poor rationing system.

   Anticipate that students will begin to see the advantages of rationing by money price:

   • it allows all to participate
   • it allows people to match their willingness to pay and their desire for the product; thus it expands individuals’ options and power
   • it allows all individuals the opportunity to try to influence the outcome
   • it provides incentives for both buyers and sellers to modify their behavior in such a way as to reduce the impact of scarcity

   Anticipate further, that students will raise objections to money price rationing - the most common objection being that it is not "fair" because not everyone has the same amount of money. Counter by asking whether everyone has the same needs and wants, and whether everyone places the same value on the T-shirt. Defining "fair," and asking for comparisons to other forms of rationing will help to advance the conversation here. Note that the intent is not to convince students that a system of money-price rationing is perfect, but to establish that in most situations we encounter in everyday life, money-price rationing has clear advantages over the alternative methods of allocation.

4. Ask the class to determine how the T-shirt will be rationed. (If the students have not yet questioned the appropriateness of money price rationing in all situations, they will probably do so at this point. Do not be surprised if students choose to award the T-shirt by lottery, saying that because they didn’t know that they would need money, they didn’t bring any. Mention that the lottery may only delay the money-price rationing as whoever gets the T-shirt will own it and have the right to sell it if someone offers him something he values more.)

   Note: It is important to actually award the T-shirt by whatever method the students choose.

Day 2

5. Review the advantages of money-price rationing and emphasize that it is the basis for exchanges in market systems. Note, however, that other forms of rationing are present, if not prevalent, in our society. Ask students to generate a list of examples of non-money-price rationing. Some suggestions: standing in line for concert tickets (first-come-first-served), college admission (merit), entitlement funding (arbitrary distinction.)

6. Hand out the goals worksheet. Define each of the goals and provide examples. Choose a current events problem and discuss the potential for accomplishing each of the goals within the context of the problem. Help students to recognize that trade-offs are always necessary, and that goals may actually conflict with one another. Choosing from the list below or from current events, ask students to rank the goals, in order of their personal priorities, on two different issues:
   
   • welfare reform
   • protecting endangered species
   • reducing violence in American cities
   • improving public education
   Did the situation influence their goal priorities, or were their priorities independent of the circumstances?

7. For the third issue, ask students to consider the problem of health care, an area in which relative scarcity is high and demand is growing. Ask them to think about a national policy regarding the provision of health care services. Once individuals have completed their own ranking, ask students to form pairs (or groups of 3) and to reach consensus with their partner(s) on their priorities in health care.

8. Combine pairs (or 3s) to form groups of 4 (or 6). Give each group a set of 3x5 cards with the goals listed on them. Again, instruct groups to try to reach consensus. Encourage them to lay out the cards and move them around as they discuss their thoughts. (For groups of 8, repeat this process one more time.)

9. Once groups have agreed to at least their top 3 priorities in terms of health care, assign them to design a system for rationing scarce transplant organs. Remind them of the earlier discussion of methods of rationing. Characterize the transplant problem as one of high relative scarcity, with growing demand and a small and uncertain supply of organs. Each group will be given 5 minutes to present their rationing plan and 5 minutes to answer questions and defend the plan. The plan will be judged on the basis of its effectiveness in dealing with the problem, and on how well it reflects the group’s goal priorities.

Day 3

10. Evaluate the group presentations on the following criteria: rating 1-5, with 5 being the highest rating:
    • how effectively does the plan deal with the issue of scarcity?
    • what are the incentives embodied in the plan and do they produce unintended (good or bad) consequences?
    • how well does the plan meet the goal priorities of the group?

11. Debriefing or homework reaction paper questions: (you may want to supplement these by reading aloud or giving students a handout with reading excerpts about some of the current issues involved in the transplant problem.)
    • Should people be allowed to sell their own organs? (re: poor people from Middle Eastern countries selling their kidneys to hospitals in Europe to get money to support their families)
    • Should people be allowed to donate the organs or body parts of their living children? (re: people who conceive a child in the hopes that it will be a bone marrow match with a living, ill child)
    • Should people be allowed to bid for transplant organs? Should there be a market for transplant organs? (re: organ brokers)
    • What are the strengths and weaknesses of the current transplant system? (re: the politics of transplant waiting lists)
    • What kinds of incentives are built into first-come-first-served health care systems?
    • How do we prioritize need? merit?
    • How can we ethically increase the supply of transplant organs?
    • Why do you suppose that we are willing to have food allocated by money-price rationing, but that many people are disturbed by the idea of rationing transplant organs in this way?

Follow-up suggestions:

Homework assignment - Have each student choose one of the non-money-price methods of rationing and write a description of how the everyday world would change as a result. One of my students described grocery shopping if we allocated goods and services to those who won wrestling matches. His scenario was hilarious, including a description of the Sumo wrestlers who would work in the checkout lanes, the fact that fathers would take over the grocery shopping from mothers, and the prediction that children would be classified as "disadvantaged" if their fathers could bench press less than 300 lbs.

GOALS OF ECONOMIC POLICY

Transplant Organ Rationing Activity - Team Instructions

Purpose:

• scarcity and choice,
• opportunity cost,
• incentives, and
• utility.

Directions:

1. Read the general description of the current system (UNOS) for allocating transplant organs in the United States. (Description at the end of this handout.)
2. Review the attached UNOS transplant organ statistics handout.
3. In your discussion group, identify what is scarce? Evaluate - based only on your own background knowledge, the UNOS summary, and the statistics handout - the effectiveness of the UNOS system as a response to a condition of scarcity.You will not need to do any additional research.
4. If you believe the current system is the best system for addressing the issue of scarcity, prepare a defense. If you believe the system could be improved, design an alternative.
5. Prepare a group presentation of the conclusions of your analysis. Your presentation must include 2 parts:
   • A briefing analysis for a group of congressional aides who are considering renewal and/or revision of the legislation that created the UNOS system, and
   • A creative PR or public service announcement, logo, commercial, or slogan etc., designed to inform and garner support for the program you are proposing.

6. 6. Your presentation must be a minimum of 10 min but may not exceed 20 minutes (+5 minutes to respond to audience comments and questions).
7. Remember that the purpose of your presentation is to demonstrate your mastery of economics content standards 1, 3, and 4. Use the questions and evaluator’s rubrics below as guidelines for creating your presentation:

Scarcity and Choice

Standard 1 - Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result , they must choose some things and give up others.

Self-evaluation questions:

1. Does your presentation accurately and clearly demonstrate that scarcity exists and that it forces us to make choices in dealing with the issue of transplant organs?
2. Does the proposal you are defending effectively reduce the scarcity that you have identified? Be prepared to explain and defend your proposal in those terms.

Opportunity Cost

Standard 1 - People cannot have all the goods and services they want; as a result , they must choose some things and give up others.

Standard 3 - Different methods can be used to allocate goods and services.

Self-evaluation questions:

1. Does your presentation acknowledge that there is more than one way to ration transplant organs?
2. Does your presentation identify the benefits and costs of the chosen alternative?
3. Does your presentation accurately identify the opportunity cost as the benefits of the foregone alternative?

Incentives

Standard 4 - People respond predictably to positive and negative incentives.

Self-evaluation questions:

1. Does your presentation include incentives?
2. Have you predicted behavior in response to the identified incentives?
3. Is the prediction reasonable? (Are there unintended consequences you should acknowledge and consider?)

UNOS Summary

1. The National Organ Transplant Act of 1984 governs the allocation of transplant organs through the creation of a national group know as the United Network for Organ Sharing (UNOS).
2. UNOS maintains a computerized list of people needing transplant organs.
3. To be listed with UNOS, a patient must be registered with a hospital that performs transplants (and may be registered with more than one hospital). The criteria for registration with a hospital that performs transplants varies with the center.
   • The UNOS legislation clearly leaves a great deal of leeway in a transplant center’s decision about who to accept as a registered candidate.
   • There is a generally accepted view among those who have studied the system that wealthy and/or famous people have an advantage in getting registered and in being accepted for registration at a number of hospitals.
4. Ranking on the list depends on a list of criteria, including (the list is in no particular order):
   • urgency of need, age, ability to pay, likelihood of a good outcome (tissue match, organ size match, etc.), fitness etc.
5. Once on the list, a person’s ranking determines how soon he/she will be eligible to receive an available organ.
   • List rankings may change with a change in the patient’s situation.
   • It is generally accepted among experts that the list of criteria is generally adhered to - that is, prominent people don’t "skip to the front of the line" by virtue of their fame or wealth.
6. The National Organ Transplant Act forbids any payment to a donor’s family.

Data: U.S. Organ Transplants

Source: UNOS/OPTN – The United Network for Organ Sharing

UNOS National Patient Waiting List

In August 29, 2003, registrants and patients on the UNOS list for organ transplant:

* UNOS policies allow patients to be listed with more than one transplant center, so the number of registrations is greater than the number of patients.

* Some patients are waiting for more than one organ, so the total number of patients is less than the sum of patients waiting for each organ.

* Based on UNOS registry as of 2002. Double kidney, double lung, or heart – lung counted as one. Data subject to change with future data submission or correction.

* Overall does not equal total for all organs as some patients are listed more than once.

Number of U.S. Transplants: 1992 to 2002

by Organ and Donor Type *

Transplant Organ Rationing Activity - Notes for the Evaluator

Students will take this assessment early in their economics instruction. Their understanding of scarcity, opportunity cost, and incentives will continue to develop and should be much more sophisticated by the end of the semester or course. Keep in mind their inexperience with the economic way of thinking and their naiveté regarding such things as government and public finance or health care expenditures. The key to this exercise is that they show that they understand that we face alternatives, that choosing one means giving up another, and that if we want to change people’s behavior, we must look at incentives.

Read through the student instruction sheet and the following evaluator questions and notes before viewing the student presentations.

Scarcity and Choice

Evaluation Questions:

1. Does the presentation accurately and clearly demonstrate student understanding that scarcity forces us to make choices?
2. Does the proposal the students have chosen to support effectively address the issue of scarcity and can they explain how it reduces the scarcity of transplant organs?

To Meet the Standard:

• Students should identify that it is the scarcity is of organs rather than, for example, trained surgeons or facilities that perform transplants. They might phrase this as a scarcity of donors - which is also an acceptable answer.
• The students’ presentation should acknowledge - either explicitly or by implication - that there is more than one way to ration scarce transplant organs.
• The students’ proposal must do more than just rearrange the current allocation of transplant organs; that is, it must intend to reduce demand, increase supply, or both. (Another possibility is that students explain why the current system is the best way to address the scarcity issue, but it is doubtful that many groups will take this option, given that the introduction to the assignment focused on "problems" and dissatisfactions with the current system.)

To Exceed the Standard:

• The first instinct of student groups is to tinker with the allocation system. It is a major step forward to have students - who rarely or never have occasion to think of themselves as suppliers - understand that scarcity has both a supply and a demand component. If the students’ proposal attacks scarcity by trying to increase the supply of transplant organs, they have exceeded the standard.
• Students may note that increases in technology and in population which have increased the demand for transplant organs could also increase the supply. They might also note that efforts to increase the supply of transplant organs by increasing the numbers of donors could greatly reduce scarcity. Or, they might note that other advances in medical technology could eliminate the need for transplants.

Opportunity Cost

Evaluation Question:

1. Does the presentation acknowledge that there is more than one way to ration transplant organs?
2. Does the presentation identify the benefits and costs of the chosen alternative?
3. Does the presentation accurately identify the opportunity cost as the benefits of the foregone alternative?

To Meet the Standard:

• Because of the nature of the assignment, expect most groups to compare their own proposal to the current system.
• Expect students to identify the opportunity cost as the program given up - that is, the current program. It is not necessary that they identify the opportunity cost of specific features of their own proposal - for example, the opportunity cost of a tax credit - to meet the standard.
• Expect this argument for bearing the opportunity cost to take the form of explaining why the students’ own proposal is better than the current UNOS system. Although some parts of their argument may be explicit, other parts may be implied in such things as a commercial or slogan.

To Exceed the Standard:

• Students identify the basis for their proposal - i.e. a "need" based system. a "first-come-first-served" system and explain why they chose that rationale.
• Few students are willing to adopt a market approach to organ transplants. Suggesting a market approach and being able to defend it in terms of alleviating scarcity exceeds the standards.
• We have asked students only to identify opportunity cost in terms of the foregone alternative - in this case, the rationing plan that was replaced. If however, students understand the opportunity cost of specific parts of their proposal - for example, the other government programs that might not be funded or the foregone consumer spending that results from increased taxes if they propose to pay a tax credit to donors - then they have exceeded the standard.

Incentives

Evaluation questions:

1. Does the presentation include incentives?
2. Have the students predicted behavior in response to the identified incentives?
3. Is the prediction reasonable? (Are there unintended consequences students have overlooked?)

To Meet the Standard:

• Students must clearly identify an incentive. Expect many to use "feeling good" as an incentive, which they will incorporate in public service campaigns or slogans or commercials etc. This is fine, as long as they identify it as an incentive.

To Exceed the Standard:

• Students should be able to refer to another situation in which a similar incentive worked. For example, some student groups have made a comparison between their own slogan drive incentive and the success of the "If you drink, don’t drive," or "Beautify America" ad campaigns.
• The willingness to use monetary incentives - either in the form of tax credits or direct payments - should be regarded as exceeding the standard as it is new thinking for most students.
• Consideration of unintended consequences often involves two-step analysis of the "if A, then B, and if B, then C" variety. If students are able to identify unintended consequences - even if they discount them - they have exceeded the standard.

Evaluation Form: Transplant Rationing Presentations

Group Members:

Evaluator: Highlight or circle Exceeds Standard, Meets Standard or Below Standard for each of the 3 evaluation components. You may also wish to highlight specific bullets that seem especially appropriate to this group’s presentation. Refer to the "Evaluator Notes" for additional guidance.

Scarcity and Choice

Opportunity Cost

Incentives

Comments:

Copyright © 1999-2003 Foundation for Teaching Economics
Permission granted to copy for classroom use.