‘The market is a democratic institution aggregating the decisions of whoever participates in it. When all is said and done, complaints about the market are nothing but complaints about the people themselves.’
In 2010 there were around 7000 people in the UK who needed a kidney transplant. Given that healthy adults only require one functioning kidney, this means that the potential supply is almost 38 million.2 And yet less than 3000 operations were performed. This shortage means that around 1 in 10 of those needing a kidney will die before they get one. For those who need any organ transplant, three people die every day. To an economist the answer is simple: have a market. For many people, the idea is repugnant. But at what cost? How many lives are you willing to sacrifice to avoid feeling icky? Maybe it isn't a coincidence that the only country in the world to have a legalised market in kidney transplants is also the only country in the world that doesn't have a shortage?
Having discussed the concepts of demand and supply, the purpose of this chapter is to see how markets can bring them together. A ‘market’ as an institution through which buyers and sellers meet to trade goods and services. Historically, a market would be a physical place – usually close to ports or other transport hubs. This explains why geography has played an important role in how trade routes have developed. But markets can also be a virtual place, as modern technology ...