When Cal Tech economist D. Roderick Kiewiet looked hard at the stack of American regulations affecting health and safety, he found a mess.

In some areas, the American government was spending tens of billions of dollars per expected life saved. In other areas, the government was failing to spend a few thousand dollars to save lives. Shifting some of those billions from expensive areas to cheaper areas could save lives and money. As he concluded, in one of the most forthright assessments you'll find from any economist, "the vast regulatory machinery of the federal government has long been and continues to be stuck on stupid."

So what should we make of regulations that both cost the government money and wind up killing people? Chris Bishop's member's bill, which recently passed its first reading, helps to fix one of these policy absurdities.

New Zealand's compensation of live organ donors is abysmally low. A person donating a kidney to a friend or loved one is eligible for up to $350 per week in compensation through Work and Income, but average salary is closer to a thousand dollars a week. And so most people would take a substantial pay cut to spend a month or more recuperating after having given up a kidney. Donors are heroes, but this is too much to ask of them.

Bishop's bill would compensate donors at 80 per cent of their prior earnings - an additional cost to the health system. But recent work for The New Zealand Initiative by Elizabeth Prasad shows that every kidney transplant saves the government over $120,000.

Last year, there were 72 kidney transplants from living donors. If fully compensating donors' lost earnings enabled even only three more people to make that gift, the government would not lose any money from the increased compensation: it would save as much in dialysis costs as it would provide in compensation. Every additional donation enabled after that would save the government over a hundred thousand dollars.

And so the government can do well by doing good. Policy moves that enable greater organ donation, if they are big enough, can save the government money while saving and improving lives.

One move that could help encourage donation while costing the government nothing would be the adoption of Israel's priority system for live organ donors. Why does this matter? If you donate a kidney, there is always a small risk that you could, sometime down the line, regret your decision if your remaining kidney failed.

Those risks are small - the vast majority of living donors surveyed in the international literature are glad that they donated and would recommend it to others. But those lingering worries can make people hesitant to become donors.

Israel helped to solve that problem when its government provided live organ donors a guarantee that, should those donors ever need a transplant, they would not be at the back of a long queue.

Every living kidney donor has already made the queue one place shorter for everyone. Making sure those donors have a decent spot in the queue should they need a transplant encourages donation and helps makes the queue shorter. And it's fair. The Select Committee should consider taking this extra step.

Dr Eric Crampton is Head of Research with The New Zealand Initiative. Elizabeth Prasad's report is available on the Initiative's website.