So it turns out there’s a market for infant foreskins that have been removed by circumcision (link via Marginal Revolution). A single foreskin can sell for thousands of dollars. A few thoughts that went through my mind in quick succession:
1. Revealing that some part of my brain still doesn’t think like an economist, I immediately thought: “What a gyp! The hospitals are getting money that rightfully belongs to the baby’s family!”
2. But wait a minute. The foreskin’s value should be incorporated into the price. The parents’ hospital bill for the birth week might be higher if foreskins weren’t sold. Hospitals that didn’t offer the foreskin-discount would lose customers to those that did.
3. But that conclusion depends on there being effective competition among hospitals. And in the current healthcare market, there’s some competition, but not very much.
4. So how could we find out? Maybe we could look for differences in hospital bills between male and female babies, or between non-Jewish and Jewish babies (since the latter would typically be circumcised outside the hospital).
5. But all this is complicated by the fact that circumcision is a surgical procedure, and therefore has some cost. What we really need for a proper comparison is a group of patients who do get circumcised by doctors, but under circumstances in which foreskin sale is not possible. And that suggests...
6. Adult circumcisions. Adult foreskins don’t have the special properties that infant ones do, so there’s no resale value. Problem is, ceteris paribus doesn’t hold here. Anesthesia is most likely different between adult and infant circumcision, and I suppose the difficulty of the procedure might also differ.
That’s about as far as I got. Anyone have suggestions on how we could discern whether the value of foreskins is incorporated into hospital prices?