Gonzalo Arrieta defends his dissertation

Gonzalo Arrieta defended his dissertation last week.

Here's his job market paper:

Procedural Decision-Making In The Face OfComplexity by Gonzalo Arrieta and Kirby Nielsen

Abstract: A large body of work documents that complexity affects individuals’ choices, but the literature has remained mostly agnostic about why. We provide direct evidence that individuals use different choice processes for complex and simple decisions. We hypothesize that individuals resort to “procedures”—cognitively simpler choice processes that we characterize as being easier to describe to another person—as the complexity of the decision environment increases. We test our hypothesis using two experiments, one with choices over lotteries and one with choices over charities. We exogenously vary the complexity of the decision environment and measure the describability of choice processes by how well another individual can replicate the decision-maker’s choices given the decision-maker’s description of how they chose. We find strong support for our hypothesis: Both of our experiments show that individuals’ choice processes are more describable in complex choice environments, which we interpret as evidence that decision-making becomes more procedural as complexity increases. We show that procedural decision-makers choose more consistently and exhibit fewer dominance violations, though we remain agnostic about the causal effect of procedures on decision quality. Additional secondary evidence suggests that procedural decision-making is a choice simplification that reduces the cognitive costs of decision-making."

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Another of his papers is a really creative investigation of human welfare:

What You Don't Know May Hurt You: A Revealed Preferences Approach by Gonzalo Arrieta and Lukas Bolte

Abstract: The dominant approach to welfare is based on revealed preferences and thus is restricted to settings where the individual knows their preferences have been fulfilled. We use a choosing-for-others framework to experimentally study welfare when what the individual believes to be true differs from what is actually true. About 42% of participants see welfare as independent of beliefs; 22% see welfare as only depending on beliefs; and 29% see a lower, but still positive, welfare effect when beliefs are fixed. Furthermore, the average participant values accurate beliefs. Our results suggest most people support the idea that welfare goes beyond awareness, which can inform media regulation, informational policies, and government communication.

 

Here's a figure from the instructions about the creation of "real" and "fake" inscribed copies of books. A third party judged the welfare to the recipient

"Our altruistically revealed preference paradigm consists of asking surrogate participants to trade off a monetary bonus given to the Receiver, and the Receiver getting the books with the original notes over those with the fake notes. The bonus amount is a surprise to the Receiver to minimize concerns that they use it to deduce which books they got (i.e., to maintain obliviousness). Our three requirements allow us to interpret the bonus amount that leaves participants indifferent between giving the original and fake notes as a measure of the change in the Receiver’s welfare. As a benchmark, we also elicit the welfare effect when the Receiver does learn which notes they get."

********

Welcome to the club, Gonzalo.

No Prices No Games! Four Economic Models by Michael Richter and Ariel Rubinstein

 Here's a new book on economic theory by Richter and Rubinstein.

No Prices No Games!  Four Economic Models  by Michael Richter and Ariel Rubinstein  

At the link you can download a pdf or read it online for free, or purchase a printed edition.

"While current economic theory focuses on prices and games, this book models economic settings where harmony is established through one of the following societal conventions:

• A power relation according to which stronger agents are able to force weaker ones to do things against their will.

• A norm that categorizes actions as permissible or forbidden.

• A status relation over alternatives which limits each agent's choices.

• Systematic biases in agents' preferences.

"These four conventions are analysed using simple and mathematically straightforward models, without any pretensions regarding direct applied usefulness. While we do not advocate for the adoption of any of these conventions specifically – we do advocate that when modelling an economic situation, alternative equilibrium notions should be considered, rather than automatically reaching for the familiar approaches of prices or games."

By email, Ariel tells me that he designed the cover.

Contents

0. Introduction

(pp. 1–12)

• Michael Richter
• Ariel Rubinstein

1. Equilibrium in the Jungle

(pp. 13–36)

• Michael Richter
• Ariel Rubinstein

2. The Permissible and the Forbidden

(pp. 37–64)

• Michael Richter
• Ariel Rubinstein

3. Status and Indoctrination

(pp. 65–90)

• Michael Richter
• Ariel Rubinstein

4. Biased Preferences Equilibrium

(pp. 91–110)

• Michael Richter
• Ariel Rubinstein

5. A Comparison to Game Theory

(pp. 111–133)

• Michael Richter
• Ariel Rubinstein
• • 
    
  • • 
      
    • • 
        
      • • 
          

"In the final chapter, we compare this book's modeling approaches with each other and to those of standard Game Theory on two ``battlegrounds''.

The first is the matching economy. An even-sized population of agents must match into exclusive pairs (pairings). Each agent possesses a preference relation over potential mates.

The standard cooperative game theory solution concept for matching economies is ``pairwise stability''. Following Richter and Rubinstein (2024), we compare this concept with the jungle equilibrium, the Y-equilibrium and the status and initial status equilibrium concepts.

The second battleground is a ``political economy'' situation. A group of agents hold views on a political issue. Each agent chooses a position and has preferences only regarding the position he himself chooses (and not the choices of others). However, there is a need that a majority of agents choose the same position.

Traditionally, such a situation is modeled as a non-cooperative game and its Nash equilibria are calculated. Extending Richter and Rubinstein (2021), we compare this approach with the convex Y-equilibrium and the biased preferences equilibria.

On both battlegrounds, the new approaches lead to very different outcomes than the traditional ones."

The DOJ on competition for workers

 A lot of market design is done by regulators, and some of that is done to enforce existing laws.  Here's a report from the Department of Justice, focusing on four cases involving payment to workers (including authors of books).

Athey, Susan, Mark Chicu, Malika Krishna, and Ioana Marinescu. "The Year in Review: Economics at the Antitrust Division, 2022–2023." Review of Industrial Organization (2024): 1-20.

"In this review article, we report on five enforcement matters that expanded the scope of enforcement by the Division. The first four enforcement matters highlight a number of the Division’s actions to protect labor market competition in criminal and civil merger and non-merger cases. These include: criminal enforcement against a provider of contract health care staffing services that allocated nurse employees through a no-poaching agreement and agreed to fix the wages of those nurses; civil enforcement to stop an e-Sports league from effectively imposing a salary cap on its players; civil enforcement to stop a conspiracy among poultry processors to share information about worker compensation; and the successful challenge of a merger between two of the largest book publishers in the U.S., which preserved competition for books that will benefit authors."

Banned books

 The LA Times has the story:

Book bans are soaring in U.S. schools, fueled largely by new laws in Republican-led states by  ALEXANDRA E. PETRI

"Fearing criminal penalties, public schools throughout Missouri removed hundreds of books from their libraries after state lawmakers last year made it illegal to provide students with “sexually explicit” material — a new law that carried punishment of up to a year in prison.

"The dangers are playing out in public school districts and campus libraries across the United States, First Amendment advocates warn: Book bans, gassed up by state legislation pushed by conservative officials and groups, are stacking up at an alarming rate.

"In a report published Thursday by PEN America, the nonprofit free speech organization found 1,477 instances of books being prohibited during the first half of the 2022-23 academic year, up 28.5% from 1,149 cases in the previous semester. Overall, the organization has recorded more than 4,000 instances of banned books since it started tracking cases in July 2021.

"At issue is more than “a single book being removed in a single district,” said Kasey Meehan, the Freedom to Read program director at PEN America and a lead author of the report.

“It’s a set of ideas, it’s themes, it’s identities, it’s knowledge on the history of our country — these are the kind of bigger buckets of what is being removed, restricted, suppressed in public schools and public school libraries,” Meehan said."

Online and Matching-Based Market Design (forthcoming in 2022), edited by Echenique, Immorlica, and Vazirani

 What to read in 2022? Here's a teaser...

Online and Matching-Based Market Design, forthcoming in 2022 from Cambridge University Press

Editors: Federico Echenique, Nicole Immorlica, Vijay V. Vazirani  

With a Foreword by Alvin E. Roth

The publisher's leaflet describes the book this way:

"The field of matching markets is, due to a unique confluence of circumstances, at the same time mature and yet in its infancy. Its birth goes back to the seminal 1962 paper of Gale and Shapley on stable matching. Over the decades, this field has become known for its highly successful applications, having economic as well as sociological impact. Its recent resurgence, with the revolutions of the Internet and mobile computing, has opened up altogether new avenues of research and novel, path-breaking applications. The distinctive feature of this book lies in treating this field in its true interdisciplinary spirit --- the field veritably sits at the intersection of economics, computer science, operations research and discrete mathematics, and this viewpoint has already led to a sequence of fundamental research results. Comprised of chapters written by over 50 top researchers, it still has the clarity, cohesiveness and organization of a textbook."

CONTRIBUTORS: Atila Abdulkadiroglu, Nikhil Agarwal, Samson Alva, Itai Ashlagi, Mariagiovanna Baccara, Gabriel Carroll, Hector Chade, Jiehua Chen, Yan Chen, Nikhil Devanur, Federico Echenique, Lars Ehlers, Matthew Elliott, Michal Feldman, Zhe Feng, Tamas Fleiner, Alfred Galichon, Renato Gomes, Aram Grigoryan, Guillaume Haeringer, Hanna Halaburda, John Hatfield, Zhiyi Huang, Nicole Immorlica, Ravi Jagadeesan, Philipp Kircher, Bettina Klaus, Robert Kleinberg, Scott Kominers, Soohyung Lee, Jacob Leshno, Shengwu Li, Irene Lo, Brendan Lucier, David Manlove, Aranyak Mehta, Paul Milgrom, Jamie Morgenstern, Thanh Nguyen, Alexandru Nichifor, Michael Ostrovsky, David Parkes, Alessandro Pavan, Marek Pycia, Aaron Roth, Bernard Salanie, Aleksandrs Slivkins, Paulo Somaini, Sai Srivatsa Ravindranath, Eduard Talamas, Alexander Teytelboym, Thorben Tröbst, Vijay Vazirani, Andrew Vogt, Rakesh Vohra, Alexander Westkamp, Leeat Yariv

Milgrom's "Discovering Prices" reviewed in the JEL by Kominers and Teytelboym

 In the December Journal of Economic Literature:

The Parable of the Auctioneer: Complexity in Paul R. Milgrom's Discovering Prices

by Scott Duke Kominers and Alexander Teytelboym, JOURNAL OF ECONOMIC LITERATURE, VOL. 58, NO. 4, DECEMBER 2020, (pp. 1180-96)

Abstract: Designing marketplaces in complex settings requires both novel economic theory and real-world engineering, often drawing upon ideas from fields such as computer science and operations research. In Discovering Prices: Auction Design in Markets with Complex Constraints, Milgrom (2017) explains the theory and design of the United States' "incentive auction" that reallocated wireless spectrum licenses from television broadcasters to telecoms. Milgrom's account teaches us how economic designers can grapple with complexity both in theory and in practice. Along the way, we come to understand several different types of complexity that can arise in marketplace design."

And from the conclusion:

"So what have we discovered from Prices? Modern marketplace design increasingly wrestles with complexity; as it does so, we need novel, tailor-made theory as well as supporting infrastructure. Complexity has real economic meaning—and can take multiple forms."

The Power of Experiments by Mike Luca and Max Bazerman

New this month from MIT Press, a history and guide to experiments in (mostly) online businesses:

The Power of Experiments

Decision Making in a Data-Driven World

By Michael Luca and Max H. Bazerman

"How organizations—including Google, StubHub, Airbnb, and Facebook—learn from experiments in a data-driven world."

My blurb says: "Luca and Bazerman's The Power of Experiments will open your eyes about how to distill information from data."

Hal Varian's blurb says: "One of the great things about e-commerce is that it is far easier to run experiments online than offline. As more and more companies move online, they need to learn how to use this powerful tool. This book shows how to take advantage of experiments and how this will revolutionize business, both online and off."

Susan Athey's says: "This accessible and engaging book provides an excellent introduction to a subject that every young person entering the business world today should understand—experimentation. The case studies draw the reader into the challenges that arise in practice, highlighting issues ranging from bias to ethics to unintended consequences."

And the draft I read was fun and easy to read.  This might be the book to spend time with while you're sheltering in place.

Handbook of the Shapley Value

Google books makes available excerpts from the new
Handbook of the Shapley Value
edited by Encarnación Algaba, Vito Fragnelli, Joaquín Sánchez-Soriano
CRC Press, Dec 6, 2019

I wrote a Foreword:
The Shapley Value: a giant legacy, and ongoing research agenda,
the final paragraph (p6) of which is

"Lloyd Stowell Shapley was one of the founding giants of game theory, who helped lay the foundations of both cooperative and non-cooperative game theory, and who influenced everything and everyone in the field. He was born in 1923. His paper defining the Shapley value was published in 1953, when he was 30 years old.  A previous volume on the Shapley value, Roth (1988), was published in honor of his 65th birthday. The present volume brings up to date the important stream of research on the Shapley value that has continued, unabated, ever since Shapley first proposed it, and that I expect will continue for the foreseeable future."

In this connection, see my recent post about the use of the Shapley value for explaining particular predictions made by machine learning algorithms:

Sunday, December 22, 2019  The Shapley value and explainable machine learning

"The Ethical Algorithm" by Michael Kearns and Aaron Roth (book talk at Google)

Here's a talk about "The Ethical Algorithm--The Science of Socially Aware Algorithm Design"
by Michael Kearns and Aaron Roth.


IMHO it would make a fine last minute holiday gift for those interested in econ and market design as well as for fans of computer science and algorithms:) 

The future of economic design: a book of short essays, edited by Laslier, Moulin, Sanver, and . Zwicker

Here's a new book that I haven't seen yet, except on the internet. There's a long table of contents at the link, and you can click on the chapters to read an abstract. It looks like most essays are four or five pages, by many distinguished authors.

The Future of Economic Design
The Continuing Development of a Field as Envisioned by Its Researchers
Editors: Jean-François Laslier, Hervé Moulin, M. Remzi Sanver, and William S. Zwicker

Is it repugnant to write books for children and young adults that deal explicitly with sex?

Is it repugnant to write books for teenagers that deal explicitly with sex?  How about for four year olds?

From the NY Times:
Want Teenage Boys to Read? Easy. Give Them Books About Sex.
By DANIEL HANDLER
"I write books for children under the pen name Lemony Snicket, and I’ve noticed that when I go to Lemony Snicket events, the crowds are about evenly split between boys and girls. But I also write young adult books, and if more than one boy shows up at one of my teen book club events, it’s notable, if not a miracle. Something happens once a young man hits puberty.
...
"It is a gross generalization, of course, to say that what young men want to read about is sex — or to imply that the rest of us aren’t as interested — but it’s also offensive to pretend, when we’re ostensibly wondering how to get more young men to read, that they’re not interested in the thing we all know they’re interested in. There’s hardly any real sex in young adult books, and when it happens, it’s largely couched in the utopian dreams or the finger-wagging object lessons of the world we hope for, rather than the messy, risky, delicious and heartbreaking one we live in."
************
And from Haaretz:
Israelis debate: Is it okay for a children’s book to say sex is pleasurable?
The latest work by celebrated Israeli children's author Alona Frankel tells preschoolers how their parents do it. Israeli lawmakers are worried

"About two weeks ago the Knesset Committee on the Rights of the Child held a discussion on sex education for preschool children. The reason was the Hebrew-language book by the author and illustrator Alona Frankel: “A Book Full of Love – How Naftali Came Into the World.”
In the book, Frankel describes how people meet, fall in love and have sex – in one case leading to the birth of Naftali, the curly-haired protagonist of her stories whom every Israeli knows from her popular book published 40 years ago and since translated, “Once Upon a Potty.”
But MK Yifat Shasha-Biton (Kulanu), who heads the Committee on the Rights of the Child, said "How Naftali Came Into the World" raised many questions for her, including whether its descriptions were “a little too much for 3- and 4-year-olds.” Shasha-Biton objects mainly to the description of the sex act in the book, which was published two years ago by the Steimatzky publishing house.
As Naftali’s mother puts it in the book, “When people love each other, they want to be very close. We embraced, we caressed, we kissed, and it was sweet and pleasant. We were wrapped around each other and very close, when the penis on the body of Naftali’s father slipped into my vagina. And inside my body it was warm, enjoyable and exciting. A flood of sperm was ejected from him and became attached to a tiny egg that was waiting in the uterus, a special place inside my tummy.”
During the discussion, Frankel was attacked by the committee’s chairwoman, Shasha-Biton, who although she did not deny the importance of sex education for children, worried about the way it was being presented to preschoolers."

Discovering Prices, by Paul Milgrom

Just published and well worth reading (here's a link at which you can discover its price:)
Discovering Prices  -- Auction Design in Markets with Complex Constraints
Paul Milgrom
Columbia University Press

The Handbook of Experimental Economics, volume 2, edited by John Kagel and Al Roth (forthcoming Sept 27:)

The Handbook of Experimental Economics, Volume 2 Hardcover –  forthcoming, September 27, 2016
by John H. Kagel (Editor), Alvin E. Roth (Editor)

from Princeton University Press
Table of Contents [PDF] 


from Amazon

From the Back Cover

"This new volume of Kagel and Roth's indispensable handbook covers the latest dramatic developments that have led experimental economics into areas such as market design and neuroeconomics, and also offers fresh insights into more traditional areas. It is all here, and all told in a manner both informative and engaging."--Gary Bolton, University of Texas, Dallas
"Kagel and Roth have done it again. While the first volume of the Handbook showed how experimental economics had reached its maturity as a scientific method, this second volume shows just how wide its reach has become, and how deep these tools can take our understanding of economic theory and human behavior. This book will change the way the world views economics."--James Andreoni, University of California, San Diego
"The contributors provide insights that will be invaluable to anyone seeking a deeper understanding of the issues at hand. I know of no other book that covers the same breadth of material in the same way. People will use this as a reference book for many years to come."--Tim Salmon, Southern Methodist University
"A worthy successor to the first volume. This ambitious and well-written book will appeal to a broad economic audience."--Tom Wilkening, University of Melbourne
"I wish every economist and economics graduate student would read this book. Those who are considering running experiments should be forced to; this is a bible in how to run good experiments. Every chapter is amazingly comprehensive and has been written by a true expert in the field. But economists who would never dream about running an experiment can benefit from reading this just as much. The beauty of experiments is that they force theorists to think carefully about their theories."--Richard Thaler, Cornell University
"This Handbook surveys one of the most important developments in economics in the last decade, the flowering of experimental economics. Led by two of the leaders of current economic theory and experimental economics, an impressive group of researchers provides the reader with an excellent up-to-date overview of one of the most fascinating and promising areas of current economic research."--Ariel Rubinstein, Princeton University
"The Handbook is not only a contribution to experimental economics, it is a major contribution to social science. It successfully combines the rigor and clarity of economic analysis with a commitment to open-minded examination of data, and a refreshing willingness to question dogma. Every student of human choice and action will find this text useful."--Daniel Kahneman, The Woodrow Wilson School of Public and International Affairs, Princeton University
"Experimental economics comes of age with this volume. At last the dust begins to clear, and it becomes possible to confront theory with coherent and reliable laboratory data."--Ken Binmore, University College of London

Repugnance for money: The Other Paris, by Luc Sante

Paris is romanticized as the opposite of NY, and poverty as freedom from money, in this review in The Guardian of The Other Paris by Luc Sante

"“My book is a kind of love letter to the city as it was and before it got overtaken by money. Money, for me, may not immediately kill people in the way terrorism does, but it does certainly change the fabric of daily life in much deeper and more insidious ways. The terrorist may be defeated in 50 or 20 or 10 years, but money is going to be much harder to defeat.”

The Handbook of Market Design--now in paperback

The Handbook of Market Design is now available in paperback: here's what the publisher (Oxford U Press) has to say about it.

New in Paperback

The Handbook of Market Design

Edited by Nir Vulkan, Alvin E. Roth, and Zvika Neeman

• Includes chapters by Alvin Roth, winner of the Nobel Prize in Economics 2012, including research for which he was awarded the prize
• A comprehensive overview that presents the latest research in applied market design
• Brings together all major researchers in the area, across disciplines- economics, engineering, computer science
• Chapters on matching markets where there is a need to match large two-sided populations of agents such as medical residents and hospitals, law clerks and judges, patients and kidney donors, to one another
• Active and fast-growing area of economics, lots of research, theory, and applications
• No other book on this subject

and here's a recent book review...

Book Review: The Handbook of Market Design

 

Mark S. Rzepczynski

Categories: Economics, Equity Investments, Standards, Ethics & Regulations (SER)

The Handbook of Market Design. 2013. Nir Vulkan, Alvin E. Roth, and Zvika Neeman.

Guru Madhavan on economists and engineers

Guru Madhavan has a new book, Applied Minds: How Engineers Think.
I liked it enough to write a blurb for the cover:
“Guru Madhavan not only dispels any hint of darkness concerning how engineers think, his delightful book explains how the designed world of machines and systems interacts with the social world in which we use the tools that engineers give us.” (Alvin Roth, winner of the Nobel Prize in Economics and author of Who Gets What―and Why)"

Now he's published an article in Wired, whose headline conceals how well he thinks engineering and economics go together. I'm guessing he didn't write the headline. Somewhat misleadingly it's called Irrational humans need engineers, not economists.  In fact, he's enthusiastic about market design as the engineering part of economics.

He concludes
"Through an increased reliance on engineers -- or better yet, rethinking economics using the principles of engineering - policymakers can develop more effective solutions to social challenges."

Who Gets What and Why at the Milken Institute in Santa Monica, June 23

This should be fun--I'll be interviewed Tuesday by Peter Passell, whose columns I used to read in the NY Times, about my new book  .( A bit more on Peter Passell at the end of this post...)

Who Gets What — and Why: The New Economics of Matchmaking and Market Design

Alvin Roth, McCaw professor of economics at Stanford University and Nobel laureate
Moderated by Peter Passell, editor of the Milken Institute Review

June 23, 2015

6:30pm - 8:00pm

Santa Monica

CAPITAL MARKETS, HEALTH, U.S. ECONOMY

Markets are about more than money. Price isn’t the crucial factor in matching aspirants with career opportunities, students with schools or bodily organs with transplant patients, yet these examples involve markets nonetheless. Alvin Roth, a Nobel laureate in economics and the author of “Who Gets What — and Why: The New Economics of Matchmaking and Market Design,” has created markets meant to lift the barriers that hinder the goals of individuals and society at large. Roth is an authority on the application of exchange dynamics to real-world problems, inventively adapting the tools of game theory and market design.

At this Milken Institute Forum, Roth will demonstrate that markets are ubiquitous, if even we don’t commonly recognize them, and how skillfully we navigate them can determine the most important events in our lives. Even the freest markets have rules, and Roth will delve into how unseen conditions drive outcomes. Those conditions can be modified to better serve the participants, he explains. From marriage to parking spaces, if the “buyers” and “sellers” can be matched more effectively, everyone wins.

“Alvin Roth guides us through the jungle of modern life, pointing to the many markets that are hidden in plain view all around us,” says behavioral economist and “Predictably Irrational” author Dan Ariely. “He teaches us how markets work—and fail—and how we can build better ones.”

ABOUT THE AUTHOR

Alvin Roth is the McCaw professor of economics at Stanford University and co-recipient of the 2012 Nobel Prize in economics. Roth is one of the world’s leading experts in the fields of market design, game theory, and matching markets. He has designed several of those markets, including the system that increases the number of kidney transplants by better matching donors to patients, the exchange that places medical students in residencies and the New York City and Boston school choice systems.

ABOUT THE MODERATOR

Peter Passell is editor of the Milken Institute Review, the Institute's economic quarterly. A senior fellow, Passell was previously an economics columnist for the New York Times, a member of the Times' editorial board and an assistant professor at Columbia University's Graduate Department of Economics. Passell has written for publications including the Washington Post, the New Republic, the Nation, American Economic Review and the Journal of Political Economy. Passell received his Ph.D. in economics from Yale University.

---

"Who Gets What — and Why: The New Economics of Matchmaking and Market Design" will be for sale after the Forum, and Roth will be available to sign copies. This event is open to the public, although registration is required. Reserved seating is available for Milken Institute Associates. If you are not currently a member of the Associates and would like to join or receive more information, click here. Parking is not available at the Institute. Free parking for 90 minutes is available in Public Parking Lot No. 1 on Fourth Street, adjacent to our building. This Forum is part of our effort to present multiple perspectives on current business and public policy issues. Videotaping, recording or photographing this event is prohibited without the prior approval of the Milken Institute. *********** A funny thing about this interview is that I recall reading Peter Passell's 'Economic Scene' column in the NY Times when he seemed to be one of the few economic journalists who was an actual economist. Here's the last of those columns he wrote for the Times, which still reads very well today. Economic Scene; Rich nation, poor nation. Is anyone even looking for a cure? By Peter Passell Published: August 13, 1998