Piracy watch: can security off the coast of Somalia be privatized?

Steve Leider writes:

Piracy season is resuming off the coast of Africa with the end of the monsoon season.  Several attacks have already been thwarted by ships newly equipped with safe rooms:

Over the weekend, pirates boarded the Greek-operated MV Lugela in the Indian Ocean but were frustrated to find the Ukrainian crew had locked itself in a safe room and disabled the engine.  Unable to hold the mariners' lives to ransom or steer the ship back to base, the pirates left the cargo.

Nick Davis, a piracy expert with the United Kingdom-based Merchant Maritime Warfare Centre, explained that such panic rooms were cheap and effective.  "You need a strong master, a well-stocked citadel, so you can sit there for up to five or seven days and wait for the cavalry," he said. "If the pirates have a dark ship and no crew, they'll just look for another."  But he stressed the importance of having functioning communications equipment in the citadel.

Earlier in September, pirates boarded a German-owned ship in the Gulf of Aden. Failing to find the crew, they even called the vessel's operator out of frustration, only to be told the ship was broken and the crew "on holiday".

Unfortunately only half of the ships active in the area are believed to have such a safe room.

A multi-national naval force is also currently patrolling the area, however it has yet to substantially reduce piracy.  A major UK insurer is suggesting the creation of a private navy to be placed under the command of existing international force to augment their activities:

A leading London insurer is pushing ahead with radical proposals to create a private fleet of about 20 patrol boats crewed by armed guards to bolster the international military presence off the Somali coast. They would act as escorts and fast-response vessels for shipping passing through the Suez Canal and the Indian Ocean.   Jardine Lloyd Thompson Group (JLT), which insures 14 per cent of the world’s commercial shipping fleet, said the unprecedented “private navy” would work under the direct control of the military with clear rules of engagement valid under international law …

Sean Woollerson, a senior partner with JLT, told The Independent: “We are looking at setting up a private navy to escort vessels through the danger zones. We would have armed personnel with fast boats escorting ships and make it very clear to any Somali vessels in the vicinity that they are entering a protected area.

“At the moment there is a disconnect between the private security sector and the international naval force. We think we can help remedy that and place this force under the control of the multi-national force. We look after about 5,000 ships and have had 10 vessels taken in total, including a seizure where one crew member was shot and killed. Piracy is a serious problem, these are criminals basically extorting funds, so why not do something more proactive?”

The force, which would have set-up costs of around £10m, would be funded by insurers and shipping companies in return for a reduction on the anti-piracy insurance premiums, which average around £50,000 per voyage and can reach £300,000 for a super-tanker. The maritime insurance industry, much of it based in London, has borne the brunt of the financial cost of the piracy problem, paying out $300m (£191m) in ransoms and associated costs in the last two years alone.

Major obstacles remain before the private navy can set sail, such as the legal status of a private force and it relationship with the Nato-controlled naval fleet. But major shipping companies and key insurers are keen to proceed with the plan. Although private contractors already offer armed teams on board vessels, the idea of a sizeable industry-funded naval force is a major departure and evidence of the strength of feeling there that more needs to be done to counter piracy.

The proposed “private navy” would therefore act in a somewhat similar fashion to the private security contractors operating in Iraq.  It will be important to clarify whether the navy would qualify as a mercenary force.  While mercenaries have historically been an important part of warfare, modern international law discourages mercenaries by withholding from them the protections afforded other combatants.  Article 47, Protocol I of the Geneva Convention regulates mercenaries as follows:

1. A mercenary shall not have the right to be a combatant or a prisoner of war.
2. A mercenary is any person who:
(a) is specially recruited locally or abroad in order to fight in an armed conflict;
(b) does, in fact, take a direct part in the hostilities;
(c) is motivated to take part in the hostilities essentially by the desire for private gain and, in fact, is promised, by or on behalf of a Party to the conflict, material compensation substantially in excess of that promised or paid to combatants of similar ranks and functions in the armed forces of that Party;
(d) is neither a national of a Party to the conflict nor a resident of territory controlled by a Party to the conflict;
(e) is not a member of the armed forces of a Party to the conflict; and
(f) has not been sent by a State which is not a Party to the conflict on official duty as a member of its armed forces.

The market for knife sharpening

There was a time when knife sharpeners brought their grindstones to the meat packers and butchers who were their main customers, and sharpened customers' knives on customers' premises. Now, the NY Times reports, the model is to rent a double set of knives to customers (who now include restaurants), so that the knife sharpener can come in and exchange all the dull knives for sharp ones, and sharpen the knives on his own premises: Venerable Craft, Modern Practitioner.

Apparently this business is one with ethnic, networked roots:
"Mr. Ambrosi’s grandfather, who came to the United States in the 1920s, hailed from the poor village of Carisolo. The village, with two neighboring towns of Pinzolo and Giustino, produced many of the more than 100 commercial knife sharpeners at work today in North America, sharpeners said. "
...
"At first the immigrants came mainly to New York, but soon their offspring scattered to stake out new routes, a dozen sharpeners across the country said in interviews. Ambrosis with grindstones do business in Connecticut, New Jersey and Ohio, as well as boroughs of New York. The Binellis set up knife-sharpening businesses in Detroit, Chicago and Medford, Mass.; the Maganzinis ended up in and around Boston. The Povinellis set up shop in Buffalo and ventured to North and South Carolina and Arizona; offshoots of the Nella family went to Toronto and Vancouver, as well as Long Island, Seattle and West Jordan, Utah.

"Robert Ambrosi’s grandfather traveled the Bronx in a horse-drawn cart with a grindstone powered by a foot pedal, serving, like the other knife sharpeners, mainly butchers and meatpackers.

"Mr. Ambrosi’s father used a grindstone fueled by a battery carried in a truck. The battery had to be plugged in each night in the garage to recharge. Then in the 1950s came the great innovation — double sets of knives — that eventually freed the Ambrosis to set up their first shop."
...
"Some of the northern Italian knife sharpeners still function in the old style, as members of the New York Grinders Association. The rules used to be simple: Don’t mess with someone’s turf. Stick to your own route — the one you inherited from your father or grandfather. Avoid the vendettas that have overtaken sharpeners in other cities.

“People will trade stops,” said Rinaldo Beltrami, the association’s president.

"Mr. Ambrosi, who let his membership in the association lapse, said, “I was brought up in that way of thinking.” Yet he will still sometimes appease a competitor by saying, “Let’s sit down, we’ll have a meeting, we’ll make a borderline — I won’t bother you.”

"Yet his sons have been knocking on doors to establish new routes, and Mr. Ambrosi has developed a Web site and a mail-order service, because his sons need enough business to sustain their future families, too. "

Unraveling and diversity in the market for law clerks

One question about unravelling of markets--in which hiring becomes earlier, more diffuse in time, and characterized by very short duration "exploding" offers, is whether it reduces diversity. The idea is that if you have to hire people far in advance, e.g. when they are still in kindergarten, then you can't tell as much as you would like about individuals, so you had better be hiring from good kindergartens.

I'm reminded of this for two reasons. The first is a recent article on clerks in the Supreme Court:

"There are about 160 active federal appeals court judges and more than 100 more semiretired ones, yet more than half of the clerks who have served on the Roberts court came from the chambers of just 10 judges. Three judges accounted for a fifth of all Supreme Court clerks."

That from Adam Liptak in the NY Times: A Sign of the Court’s Polarization: Choice of Clerks

The second is this graph showing which law schools clerks have been coming from:

That is from a blog post from Dave Hoffman at Concurring Opinions, called The Quickly Unraveling Clerkship Market.

He writes that this year there is even more unraveling than usual, i.e. the plan for regulating the hiring of law clerks may be on its last legs, as the increasing levels of cheating we observed in previous years has apparently continued to increase.
(see Avery, Christopher, Jolls, Christine, Posner, Richard A. and Roth, Alvin E., "The New Market for Federal Judicial Law Clerks" . University of Chicago Law Review, 74, Spring 2007, 447-486. )

Early decision in selective colleges

Steve Cohen at Forbes tabulates some admissions figures in his blog post: Early Decision: College Admission’s Secret Handshake

College Percentage of Class Filled by Early Acceptances
Brown 38%
Columbia 59%
Cornell 37%
Dartmouth 42%
Penn 50%
Williams 41%
Colgate 43%
Kenyon 38%
Lafayette 43%
Rice 27%

Update on that Medicare Auction

Peter Cramton writes to update us on the progress of the letter he organized about A poorly designed Medicare auction .

"I want to thank you again for being a signatory on the letter to Chairman Stark expressing our concerns with the flawed Medicare Competitive Bidding Program. I sent the letter linked below to Chairman Stark late on Sunday night. He responded within two days with a letter to the head of Medicare concluding, “I urge you to give these comments and recommendations serious consideration. I would also request that you inform me in a timely way as to whether CMS plans to incorporate any of the recommended changes and if not, why not.”  The full letter is linked below.

"Letter from 167 Concerned Auction Experts on Medicare Competitive Bidding Program" to Chairman Stark, Health Subcommittee, Ways and Means, U.S. House of Representatives, 26 September 2010. [Letter from Chairman Stark to CMS] 

Yesterday, the deputy head of CMS, who is in charge of the competitive bidding program, contacted me to request a meeting  to discuss the issues. We have not met yet, but I am optimistic that something good will come from this. Please be patient. Washington has now effectively shut down until after the elections. This will be a slow burner, but thanks to all of you the chance of a sensible outcome is positive. One could not say that a week ago.

A thousand thanks!

Best,

Peter

PS You may find the [Excerpts from replies] of interest. The excerpts are anonymous. Finally, here is a Freakonomics Blog with Ian Ayres that appeared today in the Opinion Pages of the New York Times.

Professor Peter Cramton

Economics, Tydings Hall

University of Maryland

College Park MD 20742-7211

Update: Peter and Brett E. Katzman have a followup column in The Economists' Voice (Oct. 2010): Reducing Healthcare Costs Requires Good Market Design

Junior tennis players: turn pro or go to college?

Agents Bet on Future at the Juniors Tournament

"“Juniors are the lifeblood of the business,” said Norman Canter, an agent and owner of Renaissance Tennis Management. “Most people out here are looking for the kids born in 1995 who have demonstrated some talent and have some growing and maturing to do. But don’t kid yourself, it’s a total crapshoot.”

"What are the odds of unearthing the next Andre Agassi, or even an Andy Roddick?

"Not too long ago, McKinley said, Babolat examined the top 100 players from the International Tennis Federation’s boys’ and girls’ junior rankings over a stretch of several years. Then it tracked those players as they tried to crack the top 100 in the men’s and women’s professional tours.

"The results? About 7 percent of the world’s best juniors were able to make the transition to a top 100 men’s or women’s player. Barely 1 percent reached the top 10. Gael Monfils, for example, was the International Tennis Federation junior world champion in 2004 and reached as high as No. 9 in the A.T.P. world rankings in 2009. He was ranked 19th before losing Wednesday in the quarterfinals to Novak Djokovic.

“They are pretty discouraging numbers,” conceded McKinley, who covers America and Australia for Babolat, which earned more than $150 million in revenues in 2009. “But we’ve built our business at the grass-roots level by identifying up-and-coming juniors and making sure they are playing with our rackets and strings. They may not make it to Nadal’s level, but in their hometowns everyone knows who they are and what they are using. That is a lot of exposure and sales for us.”

"The agents, too, know it is a numbers game, and follow an adage: Sign 100 of them, and start picking up the phone when one or two start to win.

"After all, in 1998, Federer was the I.T.F. junior champion. Twelve years later, 20 percent of the $25 million in endorsements he earns as the world’s most decorated tennis player is substantial money.

"There is mounting evidence that older is better in professional tennis — the average age of the women occupying the first 10 spots in the world rankings is 26, a year older than that of the top 10 men. Patrick McEnroe, the general manager for the United States Tennis Association’s player development program, has been blunt in his assessment of what the search for teenage phenoms has done to weaken American tennis.
“The bottom line is, we lost a generation of players the last 10 years that should have gone to college but didn’t,” he said.

"Still, the juniors tournament at the United States Open remains a bustling marketplace as manufacturers and agents double down on the next-not-so-sure-thing. Lagardère made the biggest noise recently by signing Monica Puig, a 16-year-old who lives in Miami. She is ranked fourth in the I.T.F. junior rankings and won her first professional tournament in April in Spain.

"Turning pro hardly means instant riches. In addition to free equipment and clothing, companies like Babolat and Nike will offer performance bonuses for tournament victories and rankings. Winning a $10,000 Futures tournament — the fledgling pro’s starter circuit — might bring a $1,000 bonus. Rising to the top 100 tour rankings can be worth $25,000 from sponsors.

"The out-of-pocket expenses, however, are substantial; players train and practice five hours a day for 41 weeks, receive high-performance coaching and travel, and compete in 24 tournaments.
“It’s about $100,000 or $150,000 just to start a boy or girl down the professional path,” Canter said.

"The hard reality and cold cash it takes to chase a dream rarely discourages young players who have been given free equipment and courted by agents since the time they could hold a racket.
The American Ryan Harrison, 18, for example, who advanced to the second round of the main draw, said he was first approached by an agent as a 12-year-old and turned professional three years later.

"Sock, 17, the promising American, plays with Babolat rackets, wears Nike clothes and plays a mix of junior and pro tournaments, but he has yet to accept bonuses or prize money to preserve his N.C.A.A. eligibility. His father, Larry Sock, wanted his son to go to regular school and keep some semblance of a normal family life intact. ... The Socks have not decided if Jack will turn professional or go to college, perhaps at Nebraska, where his brother Eric plays for the Cornhuskers.
“They can be very persuasive,” Larry Sock said of agents. “But college sounds pretty good to me.”

"European players do not have college eligibility to protect and are often the center of the agent frenzy. But their odds of success are hardly any better. For every Maria Sharapova, there are perhaps dozens like Lera Solovieva.

"Solovieva, a Russian, was 11 and one of the most sought-after juniors in the world when Canter signed her. He got her deals with blue-chip sponsors like Nike, paid for her to live and train in Miami, and cared and outfitted her down to a set of braces. Nearly four years and $650,000 of Renaissance Tennis Management’s money later, Solovieva is back in Russia, trying to revive a career thwarted by injuries and a lack of development."

Kindergarten applications in Manhattan

A Frenzied First Day for Applying to Private Kindergartens
"As the new school year begins, another annual rite of Manhattan education commences: the crush of applicants to private nursery schools and kindergartens, many of which make applications for the following school year available the day after Labor Day.

"So parents swamped the schools’ Web sites and phone lines on Tuesday, reloading and redialing until they got through, and in some cases even turning in the paperwork before noon.
...
"At the 92nd Street Y and Epiphany Community nursery schools on the Upper East Side, just getting an application was a race against time. At Epiphany, applications became available online at 8 a.m. for about 30 slots next year. By 9 a.m., parents were being put on the waiting list — to get an application — and roughly 350 applications had been downloaded.

"Early birds had a big payoff: all who complete Epiphany’s application process are guaranteed an interview, said Wendy Levey, the director of the school. “I will interview parents all night if I need to,” she said.

"At the Y, candidates must call to set up a tour to be eligible for an application. The telephone lines opened early Tuesday, and by midmorning the tours were booked for 2- and 3-year-olds."

Proposal for porn education in Switzerland

Bettina Klaus writes about a form of sex education that might not catch on everywhere (or even anywhere):

"The "Jeunes Socialistes" ("Schweizer Jungsozialistinnen und -sozialisten" in the  German translation) - a political party in CH - propose to add a module concerning porn to the schools' sex education curriculum (the idea being that kids have free access to porn in the internet anyway and thus it might be better to learn more about it in a controlled environment).

Here are links to the French and to the German online articles:

Du porno pour éduquer les écoliers? 

http://www.20min.ch/ro/news/suisse/story/14413141

and

Schüler brauchen Erfahrung mit Pornos

http://www.20min.ch/tools/suchen/story/21903530

Thoughts on kidney exchange in a steady state

As kidney exchange grows, a growing number of people are thinking about how it might be organized. We can welcome to the club Larry Ausubel and Thayer Morrill, two economists with varied interests in market design, whose paper Sequential Kidney Exchange explores how non-simultaneous chains might look in a steady state world, in which the composition of the pool of patient-donor pairs would be completely stable over time. Under that assumption, an exchange that could be conducted simultaneously today, could also be conducted over multiple days, in which a pair would first donate a kidney, and then receive one from another pair (just like the one that was available today) tomorrow.

"Abstract: The literature on kidney exchange considers situations where two or more patients needing transplants have live donors volunteering to donate one of their kidneys, but the donated organs are incompatible with the respective patients. The traditional analysis assumes that all components of the live donor exchange must occur simultaneously. People cannot write enforceable contracts that commit them to donate their organs; consequently, incentive compatibility is obtained by trading simultaneously. Unfortunately, a two-way exchange then requires the simultaneous availability of four operating rooms and associated personnel, while a three-way exchange requires six operating rooms, etc. The requirement of four or more operating rooms for concurrent surgeries may pose a significant constraint on the beneficial exchanges that may be attained. The basic insight of this paper is that satisfaction of the incentive constraint does not require simultaneous exchange; rather, it requires that organ donation occurs no later than the associated organ receipt. Using sequential exchanges may relax the operating-room constraint and thereby increase the number of beneficial exchanges. We show that most benefits of sequential exchange can be accomplished with only two concurrent operating rooms."

Note that Ausubel and Morrill propose to solve the incentive problem by having each patient-donor pair donate a kidney before (or at least no later than) they receive one, so reneging is not an issue. This is very different than current practice in non-simultaneous chains, which is to insure the individual rationality of the outcome by  having each pair receive a kidney before donating one. This latter approach means that non-simultaneous chains can only happen when initiated by a non-directed donor (a severe limitation). In the model Ausubel and Morrill explore, the danger that some pair won't receive a kidney after giving one vanishes because, in the steady state, a pair of the right kind will always be available.

Kidney exchange is a field in which ideas that aren't ready for implementation when published sometimes find an echo in practice pretty fast. (It wasn't long ago that only exchanges between two pairs were being done. But integrating chains with exchanges which had been proposed earlier, happened pretty fast thereafter.) I already know of some non-simultaneous chains in which a pair has donated a kidney before receiving one, for logistical reasons, after the full chain has already been identified. Those chains always make me feel a little nervous, but maybe they will become more common as the risks and rewards become better understood.

Bernanke on economic engineering

Speech by Chairman Ben S. Bernanke, At the Conference Co-sponsored by the Center for Economic Policy Studies and the Bendheim Center for Finance, Princeton University, Princeton, New Jersey, September 24, 2010

Implications of the Financial Crisis for Economics.

"Although economists have much to learn from this crisis, as I will discuss, I think that calls for a radical reworking of the field go too far. In particular, it seems to me that current critiques of economics sometimes conflate three overlapping yet separate enterprises, which, for the purposes of my remarks today, I will call economic science, economic engineering, and economic management. Economic science concerns itself primarily with theoretical and empirical generalizations about the behavior of individuals, institutions, markets, and national economies. Most academic research falls in this category. Economic engineering is about the design and analysis of frameworks for achieving specific economic objectives. Examples of such frameworks are the risk-management systems of financial institutions and the financial regulatory systems of the United States and other countries. Economic management involves the operation of economic frameworks in real time--for example, in the private sector, the management of complex financial institutions or, in the public sector, the day-to-day supervision of those institutions. "

Just for fun, here's a link to
Roth, Alvin E., "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Fisher-Schultz Lecture, Econometrica, 70,4, July 2002, 1341-1378.
 

HT to Wirtschafts-Ingenieur Axel Ockenfels

Organ markets, transplant tourism, and compensation of donors in Asia

The Australian ABC News carries a story about transplant tourism that seems to focus on China (but which I hope is a little dated): Australian organ tourists drive sinister trade
One of the disturbing (hearsay) quotes: ""I know of one patient who was heading for a country overseas; told the unit that they would be unable to come in for dialysis tomorrow because they were shooting her donor tomorrow."

The story quotes one Australian surgeon as suggesting that relying primarily on deceased donors would be preferable, since there is less room for an illegal market to creep in (maybe the reporter didn't read him the quote above).  Australia, like everywhere else in the world, doesn't have enough deceased donor kidneys to meet demand, and live donor transplantation continues to outperform deceased donor transplantation (hence kidney exchange). Stories like this make me worry about babies being thrown out with bathwater...

A recent paper discusses the organ trade in Asia, and policies regarding legal compensation of donors: , Living Organ Transplantation Policy Transition in Asia: towards Adaptive Policy Changes by Alex He Jingwei, Allen Lai Yu-Hung, and Leong Ching, in Global Health Governance, Volume III, Issue 2: Spring 2010.
The authors are all Ph.D. candidates at the Lee Kuan Yew School of Public Policy, National University of Singapore.

"This paper surveys trends in ten Asian economies and highlights the gradual loosening of restrictions on donor eligibility and compensation. We suggest that one explanation for those cases which have remained unchanged in their transplantation policies is the existence of a thriving trans-boundary organ trade, which although
ethically indefensible, is tolerated by pragmatic policymakers."
...
"...Saudi Arabia has changed its policy. According to the World Health Organization (WHO), a law passed in Saudi Arabia in October 2007 envisages that the government pays a monetary “reward” of 50,000 riyals (US$13,300) and other benefits, including life-time medical care, for unrelated organ donors in a system regulated at the national level. The law’s supporters said it would stop Saudi citizens from travelling to China, Egypt, Pakistan, the Philippines, and other countries to receive organ transplants.30 The effect of this new policy is immediate—Saudi Arabia quadrupled its rates of living kidney donation within a short period, ranking no. 1 today.31
"Singapore has faced a persistent shortage of organs for donations too. As of October 31, 2008, there were about 520 people on the kidney transplant waiting list. The average waiting time is nine years. Religious customs, cultural norms, and a fear of transplant operations have been cited as reasons for the donor shortage. Given its small population, and level of affluence, it is perhaps natural that this country will eventually find some ways to regulate this de facto market. The most recent of these has been an amendment to the “Human Organ Transplant Act” (HOTA) to allow compensation to donors. At the same time, it has also increased the penalty for organ trading, signaling that a complete price mechanism is unacceptable.
"HOTA originally prohibits the giving or acceptance of organs under a “contract of arrangement” which precludes organ trading. In November 2008, the Ministry of Health (MOH) proposed that paired matching for exchange of organs be allowed in Singapore to increase the chances of improved transplant outcomes and to save more lives. Under this arrangement, patients can essentially switch donors. The MOH sees this as creating matches that may otherwise have not occurred, as well as others that are medically compatible for improved clinical outcomes.
"A more radical change is to allow compensation to be made to living donors in Singapore. At the time of writing, this amendment has already been passed in the parliament, and the MOH is working out compensation levels. Under the law, provision is made for direct costs incurred as a result of the donation, as well as indirect losses such as lost earnings and future expenses due to the donation. In order to control the financial incentive, all the reimbursements will be credited to the donors’ medical savings accounts instead of cash transfers."

HT: Joshua Gans and Sally Satel

College admissions through the common ap, and supplements as signals

The Common Application makes it easy to apply to one more college. So colleges that use it get an increase in applications, some of which may not reflect much real interest. And so many colleges are adding supplements to the Common Ap, so that students will have to exert some effort to apply to them.

The Chronicle of Higher Ed writes of The Gravitational Pull of the Common Application (may need a subscription).

"Fall is here, and another harvest of college applications has begun. Over the next few months, hundreds of thousands of high-school seniors will apply to college through the popular portal known as the Common Application, a standardized form used by an ever-growing list of institutions.


"Now in its 35th year, the Common Application began as a small membership association of 15 private colleges. Today, more than 400 institutions use the form, which many admissions deans say has helped them recruit more first-generation and minority students. Recently, the nonprofit group welcomed its first two international members....
"Two years ago, the University of Chicago, long known for its distinctive Uncommon Application, joined the party after years of principled objections. This year, Columbia University hopped onboard, becoming the last member of the Ivy League to do so.


"In this era of hyper-competitive admissions, how can any college resist the Common Application’s gravitational pull?


"Recently, I put this question to Charles A. Deacon, dean of admissions at Georgetown University, among the most-prominent institutions that have not adopted the application (nobody should hold their breath waiting for that to change). Mr. Deacon describes the application as both an unnecessary tool and an unwelcome symbol of homogenization in admissions.

"The Common Application was created to promote equity in admissions by making it easier for students to apply to colleges that conduct “holistic” reviews of applicants. Mr. Deacon applauds that goal, but he says the standardized application prompts students to apply to colleges in which they have little or no interest. ...

"This year, Georgetown received about 18,000 applications for a freshman class of 1,580. Mr. Deacon suspects that adopting the Common Application would bring Georgetown 3,000 to 5,000 additional applicants in the first year or two. But he says the university doesn’t need that many—and that it already attracts plenty of diverse applicants through its traditional recruitment strategies.

...
"Mr. Deacon’s not the only critic of the Common Application. In some circles, the form has become a scapegoat for a variety of ills—frivolous applications, stressed-out students, overwhelmed admissions deans. At a conference for private high-school counselors I attended this summer, the consensus was that the Little Application That Could had become a big, big problem.


"Curiously, their objections differ. Some counselors say the form has made applying to college too easy, but others say that by requiring supplements, some participating colleges have made it too hard.
...
"...participating colleges embrace the Common Application in different ways. About two-thirds require applicants to complete supplements. The majority of those supplements, Mr. Killion says, are short, with one or two pages of questions. A few dozen have longer supplements, with additional essay questions (Chicago, for instance, still requires applicants to respond to its quirky prompts, like “Find X”).


"Mr. Killion notes that some institutions have had supplements from the Common Application’s inception. Where the concern is coming from, he says, “is really from people looking at a narrow band of very highly selective colleges with long supplements.”
...
"“We don’t exist to help colleges increase their applications, but it’s a side effect of what we do,” Mr. Killion says.


"Brown University saw a 21-percent jump in 2009, the year it switched to the Common Application. In 2008, it had a 7.7-percent increase. Chicago saw a 43-percent increase in applications this year, the second since it switched, but it had seen an increase of 20 percent just a few years ago. Columbia saw a 13-percent increase in 2009. What will it see during this cycle?
...
"At Georgetown, Mr. Deacon says joining the Common Application has become a keeping-up-with-the-Joneses phenomenon. He concedes that his opinion has been shaped, in part, by Georgetown’s enviable position in the marketplace. As a well-known institution with ample resources in the nation’s capital, it benefits from built-in demand. If the university’s applications dipped sharply, he admits, he would feel pressure to get more.


"That’s not likely to happen, despite Mr. Deacon’s relatively conservative approach to admissions. Each year, Georgetown begins its recruitment process by purchasing the names of PSAT test takers with equivalent scores of at least 650 on the critical reading section, 620 on the math section, and self-reported grade-point averages of A- or better. Last year, that was about 44,000 students, Mr. Deacon says. The university also buys another 5,000 to 6,000 names of underrepresented minority students with lower scores.

"Georgetown invites all those students to join its mailing list, and 12,000 to 13,000 of those students typically respond. The admissions staff supplements this search with a host of outreach, including travel to 140 cities and towns each year, and “pipeline” building in far-flung areas.

"Unlike most colleges, Georgetown strongly recommends that applicants submit scores from three SAT Subject Tests. The university also urges students to sit for interviews, and the vast majority of applicants do so. In other words, applying to Georgetown takes commitment."

San Francisco school choice goes in-house

Those of you who have been following school choice developments here know that, for the past year,  Atila Abdulkadiroglu, Clayton Featherstone, Muriel Niederle, Parag Pathak and I have been helping the San Francisco Unified School District design a new school choice system, which was adopted by the SF School Board last March.

The original plan was that we would continue to offer our services free of charge to implement the software, and then help monitor the effects of the new choice system.

Last week we heard from SFUSD staff that, because of concerns about sharing confidential data for monitoring the effects of the new system, they have decided to do further development in-house, and so will develop software to implement the new design on their own.

The SFUSD staff  have  been left with a sufficiently detailed description of the "assignment with transfers" design the Board  approved to move ahead with it if they wish. But it will take a good deal of care in implementing the new algorithm in software if its desirable properties--strategic simplicity and non wastefulness--are to be realized. (Both of these features were lacking in the old SFUSD assignment system, the one to be replaced.)

Below are links to some of the key developments before last week.

Here is a post with a link to the video of Muriel Niederle presenting the new design that the Board ultimately voted to adopt: SF School Board Meeting, Feb 17: new choice system.
And here is a link to the slides she presented, giving a description (with examples) of the new choice algorithm: Assignment in the SFUSD, and discussions of the features that make it strategically simple, non wasteful, and flexible.

In March 2010 the San Francisco Board of Education unanimously approved the new system. In their March 2010 press release (now here), the SFUSD reported (emphasis added):

"The choice algorithm was designed with the help of a volunteer team of market design experts who have previously been involved in designing choice algorithms for school choice in Boston and New York City. Volunteers from four prominent universities contributed to the effort, including Clayton Featherstone and Muriel Niederle of Stanford University, Atila Abdulkadiroglu of Duke University, Parag Pathak of MIT, and Alvin Roth of Harvard.
“We are pleased that the district has decided to adopt a choice architecture that makes it safe for parents to concentrate their effort on determining which schools they prefer, with confidence that they won’t hurt their chances by listing their preferences truthfully,” said Niederle and Featherstone, the Stanford research team."

A very simple description of the basic assignment with transfer algorithm is given on page 370 of this paper (where it is called "top trading cycles"). Much of the SFUSD school Board debate has focused on what priorities to implement. What is described on page 370 is a simple version of the underlying choice engine into which the priorities go (with a somewhat different description than in Muriel's slides). The priorities can depend on any characteristics of the students (e.g. previous schools, or siblings, or home zip code) or of the school (e.g. neighborhood or historical student composition). But to keep the process strategically simple--to make it safe for families to rank schools according to their true preferences--the priority of a student at a school cannot depend on how that student ranked that school. (If you happen to be the programmer asked to implement this, drop me a line if you run into trouble:)

Some related developments can be followed on the blog of SF Board of Education member Rachel Norton, including this September 15 post on delay in the implementation of the middle school assignment plan: Recap: Assignment committee recommends delay

General background on the theory and practice of designing school choice algorithms can be found here, and my earlier posts on San Francisco schools are here.

Update, 9/30/10: many comments followed the link to this post at The SF K Files
Update 10/2/10: Rachel Norton, the SF Board member/blogger gets emails asking if the new system will be strategy proof, and she says it will be: Reader mail: questions on student assignment

What have we learned from market design? Update to Roth 2008

Not quite a new paper, but I was asked to provide a postscript for Roth (2008).

What have we learned from market design? Update to Roth (2008): September 20, 2010

Alvin E. Roth

"After a market has been designed, adopted, and implemented, it has a continuing life of its own. For those involved directly in the market, it is useful to continue to monitor it to make sure it is functioning well. For those of us involved in market design, it is also good to check how things are going, as a way to find out if there are unanticipated problems that still need to be addressed. Finally, the design and operation of new marketplaces also raises new theoretical questions, which sometimes lead to progress in economic theory. In this update, I’ll briefly point to developments of each of these kinds, since the publication of Roth (2008), What have we learned from market design?. I’ll discuss theoretical results only informally, to avoid having to introduce the full apparatus of notation and technical assumptions."
 
And here's the 2008 paper:
Roth, Alvin E. "What have we learned from market design?" Hahn Lecture, Economic Journal, 118 (March), 2008, 285-310.

Computational aspects of matching

The Third International Workshop on Computational Social Choice Düsseldorf, Germany, September 13–16, 2010, looks to have been a very interesting event, and it included a number of papers related to matching:

Where are the Hard Manipulation Problems? Toby Walsh

Allocation via Deferred-Acceptance under Responsive Priorities Lars Ehlers and Bettina Klaus

Fractional Solutions for NTU-Games Péter Biró and Tamás Fleiner

Algorithms for Pareto Stable Assignment  Ning Chen and Arpita Ghosh

Stable Marriage Problems with Quantitative Preferences Maria Silvia Pini, Francesca Rossi, Kristen Brent Venable, and Toby Walsh

Local Search for Stable Marriage Problems  Mirco Gelain, Maria Silvia Pini, Francesca Rossi, Kristen Brent Venable, and Toby Walsh

HT: Bettina Klaus

A poorly designed Medicare auction

Peter Cramton writes:

Dear Al,

Below is my email to colleagues in market design. The "brief note" below tells the story. If any readers of your blog would like to sign as well, they are welcome to send me an email and I will add them. Washington is in desperate need for good market designers. I hope this helps. Many thanks for your support!

Dear Colleagues,

Click here for a brief comment (via Dropbox) to the House Ways and Means Health Subcommittee on the Medicare Competitive Bidding Program for Durable Medical Equipment. I would be grateful if you would agree to be a signatory of the comment. As you will see the program has some basic and obvious flaws. Indeed, your reward for reading the short comment is seeing a peculiar pricing rule for multi-unit auctions—set the price at the median winning bid, rather than the highest accepted bid. Remarkably CMS (the agency that administers the auction) has been working for over ten years on this auction program. CMS has conducted several auction events in particular regions of the U.S. to test the program. The tests have demonstrated serious problems, but CMS has chosen to hide the problems and make minor and ineffective changes in response (e.g., changing the pricing rule from unweighted average winning bid to unweighted median winning bid).

There is some urgency to this, since the House Subcommittee will have a hearing on this matter the week of September 27, and I have been asked to testify. I would be grateful if you could reply in the next two days (Wednesday, September 22). A simple "yes" or "no" response is all that is required.

Many thanks!

All the best,

Peter

P.S. For those who would like some additional information on the program, you may be interested in the following:

0. A brief note on the current problems and the need for action.

1. The Request for Bids Instructions. The median pricing rule is defined in Section E (bottom of page 4 and top of page 5). "The single payment amount for an item furnished under a competitive bidding program is equal to the median of the bids submitted for that item by suppliers whose composite bids for the product category are equal to or below the pivotal bid for that product category, see 42 CFR §414.416." [Products are assigned to product categories. A composite bid for a category is the demand-weighted average of a bidder's bids on individual products within the category. This is what creates the bid skewing issue.]

2. The Federal Register, which presents the final rule together with a discussion for its rationale. The winner determination and pricing are discussed on pages 18041-18047. The median pricing rule and its rationale appear in pages 18045-18047. On the rationale, I excerpt the most relevant text below:

"We believe that setting the single payment amount based on the median of the contract suppliers' bids satisfies the statutory requirement that single payment amounts are to be based on bids submitted and accepted. This will result in a single payment for an item under a competitive bidding program that is representative of all acceptable bids, not just the highest or the lowest of the winning bids for that item."

"While this was our proposed approach, we solicited comments on other methodologies for setting the single payment amount, including using an adjustment factor as part of the methodology for setting the single payment amount. This was the methodology we used for the competitive bidding demonstrations..." (p. 18045) [A price adjustment was used in the earlier trials of the program, but it is no longer used.]

"Finally, we considered taking the maximum winning bid for each item. However, this approach would have led to program payment amounts that were higher than necessary because some suppliers were willing to provide these items to beneficiaries at a lower cost." (p. 18046)

3. Katzman and McGeary (2008) study the earlier trials and show the bid skewing problem as well as other problems in these trials.

4. Request for Bids Bidding Form, so you can see what a bid looks like.

5. Eligibility Requirements, so you can get a sense of bidder qualification.

6. Quality Standards, so you can see the limited information on quality standards and performance obligations.

Professor Peter Cramton

Economics, Tydings Hall

University of Maryland

College Park MD 20742-7211

pcramton@gmail.com  www.cramton.umd.edu  voice/fax +1 240 396 1043

Kidney exchange at the Center for Research on Computation and Society

I'll be speaking today at Harvard's CRCS lunchtime talk:
Monday, September 20, 2010: Alvin Roth, Harvard Business School on Kidney Exchange

Time: 11:30am – 1:00pm
Place: Maxwell Dworkin 119
Title: Kidney Exchange

Abstract: I’ll discuss the history of organized kidney exchange in the last few years, and how the issues of market design have changed as kidney exchange has started to become established.
Bio: Al Roth has taught at Harvard since 1998. He has a joint appointment in the Economics Department and HBS. This semester he is teaching a course on Market Design.

Kidney exchange at NEPKE and the APD

At XXIII International Conference of The Transplantation Society in Vancouver this past August, colleagues of mine presented the following two brief reports:

Hanto, Ruthanne L., Susan L. Saidman, Alvin E. Roth, and Francis L. Delmonico, "The Evolution of a Successful Kidney Paired Donation Program," XXIII International Congress of The Transplantation Society, August 16, 2010, Vancouver.


Rees, Michael A., Jonathan E. Kopke, Ronald P. Pelletier, Dorry L. Segev, Alfredo J. Fabrega, Jeffrey Rogers, Oleh G. Pankewycz, Alvin E. Roth, Tim E. Taber, M. Utku Ünver, Bobby Nibhunubpudy, Alan B. Leichtman, Charles T. VanBuren, Carlton J. Young, Brian J. Gallay, and Robert A. Montgomery, "Nine Non-Simultaneous Extended Altruistic Donor (NEAD) Chains'' XXIII International Congress of The Transplantation Society, August 15-19, 2010, Vancouver.

The market for books (right after the invention of printing)

Printed books didn't replace hand lettered books and scrolls overnight.

The Boston Globe interviews Andrew Pettegree, a professor of modern history at the University of St. Andrews and author of “The Book in the Renaissance,” the story of the birth of print: The first printed books came with a question: What do you do with these things?

"Inventing the printing press was not the same thing as inventing the publishing business. Technologically, craftsmen were ready to follow Gutenberg’s example, opening presses across Europe. But they could only guess at what to print, and the public saw no particular need to buy books. The books they knew, manuscript texts, were valuable items and were copied to order. The habit of spending money to read something a printer had decided to publish was an alien one.

Nor was print clearly destined to replace manuscript, from the point of view of the book owners of the day. A few fussy color-printing experiments aside, the new books were monochrome, dull in comparison to illuminated manuscripts. Many books left blank spaces for adding hand decoration, and collectors frequently bound printed pages together with manuscript ones.
...
"As in our own Internet era, culture and commerce went through upheaval as Europe tried to figure out what to make of the new medium and its possibilities. Should it serve to spread familiar Latin texts, or to promote new ideas, written in the vernacular? Was print a vessel for great and serious works, or for quick and sloppy ones? As with the iPad (or the Newton before it), who would want to buy a printed book, and why?
...
"What made print viable, Pettegree found, was not the earth-shaking impact of mighty tomes, but the rustle of countless little pages: almanacs, calendars, municipal announcements. Indulgence certificates, the documents showing that sinners had paid the Catholic church for reduced time in purgatory, were especially popular. These ephemeral jobs were what made printing a viable business through the long decades while book publishers — and the public — struggled to find what else this new technology might be good for.
...
"PETTEGREE: What you’ve got to do once you’ve got 300 identical copies of a book is you’ve got to sell it to people who don’t even yet know they want it. And that’s a very, very different way of selling.

And whereas the printers were taking advice from 15th-century humanist scholars, who said, “Wouldn’t it be good to have this? Wouldn’t it be good to have that?” they weren’t in any position to give them any advice on how to dispose of these 300 copies. And in due course they found that the only way to do this is to create a market which is trans-European.

It’s this classic example of how you get technological innovation without people really being aware of the commercial implications, of how you can make money from it. There’s quite a little similarity in the first generation of print with the dot-com boom and bust of the ’90s, where people have this fantastic new innovation, a lot of creative energy is put into it, a lot of development capital is put into it, and then people say, “Well, yeah, but how are we going to make money from the Internet?” And that takes another 10 years to work out.

IDEAS: The one thing that most early printers seemed to do was to go out of business.

PETTEGREE: And the ones who didn’t were the ones who tended to have a close relationship with official customers. And this really I think is the new part of the story that we’ve been able to put together.

Most narratives of print have relied on looking at the most eye-catching products — whether it’s Gutenberg’s Bible or Copernicus or the polyglot Bible of Plantin — these are the ones which seem to push civilization forward. In fact, these are very untypical productions of the 16th-century press.

I’ve done a specific study of the Low Countries, and there, something like 40 percent of all the books published before 1600 would have taken less than two days to print. That’s a phenomenal market, and it’s a very productive one for the printers. These are the sort of books they want to produce, tiny books. Very often they’re not even trying to sell them retail. They’re a commissioned book for a particular customer, who might be the town council or a local church, and they get paid for the whole edition. And those are the people who tended to stay in business in the first age of print."

Cleaning up the scramble for medical residents with SOAP

Changes are coming in the scramble that follows the medical resident match run by the National Resident Matching Program (NRMP). A new, semi-centralized, partially computerized Supplemental Offer and Acceptance Program (SOAP) has been announced, for implementation in March 2010.

If I understand the proposal correctly, residency programs with unmatched positions will be able to submit preference lists of match participants who ended up unmatched, and these preferences will be used to make exploding offers, after which the preference lists and positions will be updated to take account of acceptances (e.g. candidates who accept a position will be removed from other program's preference lists), and new exploding offers will be issued. Unlike in the main match (which these days uses the Roth-Peranson algorithm, but which you can think of as a student-proposing deferred acceptance algorithm), applicants will not submit preference lists, but will accept or reject offers as they come in (i.e. they cannot defer acceptances by holding their best offer until they see if any better offers arrive later).

Part of the proposal is to integrate the scramble with the Electronic Residency Application Service (ERAS), which will make some kinds of automatic processing and regulation possible,while some of the proposed regulations may be more challenging to enforce. (Markets that use exploding offers at fixed times have often been subject to cheating of various sorts: here's a paper on the experience of the law clerk market. There are lots of differences in the market culture of doctors and lawyers that may result in different outcomes.)

Here are some of its proposed rules:

• Unmatched applicant and unfilled program information will be released simultaneously.

• There will be a “time out” period during which unmatched applicants can send applications but programs cannot make offers.

• Applicants and programs will be required to send and receive applications only through ERAS.

• NRMP-participating programs that fill positions during Match Week must do so only through the SOAP.

• New functionality will be added to the R3 System to allow programs to offer unfilled positions on the basis of preference lists submitted by the programs.

• Applicants must accept or reject their offer(s) within a specific timeframe; offers not accepted or rejected will expire.

• The R3 System will establish an electronic “handshake” when an applicant accepts a position.

• Positions will be deleted from the dynamic List of Unfilled Programs once an offer has been accepted.

• A program’s unfilled positions will be offered to applicants in order of preference until all positions are filled or the preference list has been exhausted; programs will be able to add applicants to the bottom of their preference lists throughout Match Week.

• The NRMP Match Participation Agreement will be expanded to include Match Week and SOAP, and sanctions will be imposed for improper behavior.
...
Eligible NRMP applicants:


• Must be able to enter GME on July 1 in the year of the Match

• Will be able to apply only to unfilled Match-participating programs during Match Week

􀀹 Access to the List of Unfilled Programs will be restricted by match status (preliminary or advanced)

􀀹 Must use ERAS and will be able to select only unfilled Match-participating programs

􀀹 Cannot use phone, fax, email, or other methods

􀀹 Cannot have another individual/entity contact programs on applicant’s behalf

􀀹 Will be able to accept positions only through SOAP during Match Week

• Can apply to non-Match-participating programs after Match Week

Ineligible NRMP applicants:

• Cannot participate in SOAP

􀀹 Cannot apply to Match-participating programs using ERAS, phone, fax, email, or other methods

􀀹 Cannot have another individual/entity contact Match-participating programs on applicant’s behalf

• Can apply to non-Match-participating programs during Match Week

􀀹 Can use ERAS to select non-Match-participating programs

􀀹 Can use phone, fax, email, or other methods

• Can apply to Match-participating programs after Match Week

Unfilled Programs:

• Must accept applications only through ERAS during Match Week

􀀹 Cannot use phone, fax, email, or personal contacts

• Must fill positions using SOAP during Match Week

􀀹 Cannot offer positions to ineligible applicants during Match Week

􀀹 Cannot make offers outside SOAP during Match Week

􀀹 Are not required to fill positions during Match Week

• Can add applicants to bottom of preference list

If an applicant rejects an offer or allows an offer to expire, no further offers will be made to that applicant by the same program.

Once an applicant accepts an offer, the applicant will not be able to send additional applications via ERAS.

Once a program has filled all of its positions through SOAP, applicants will be unable to send applications to that program via ERAS.

Offers extended by programs and accepted by applicants during the Match Week Supplemental Offer and Acceptance Program (SOAP) will create a binding commitment. Failure to honor that commitment or failure to adhere to SOAP policies will be a violation of the Match Participation Agreement.

Could academic tenure become a repugnant transaction?

In an essay in the NY Times Book Review, Christopher Shea reflects on some recent books that suggest it might: The End of Tenure?

"In tough economic times, it’s easy to gin up anger against elites. The bashing of bankers is already so robust that the economist William Easterly has compared it, with perhaps a touch of hyperbole, to genocidal racism. But in recent months, a more unlikely privileged group has found itself in the cross hairs: tenured ­professors.

"At a time when nearly one in 10 American workers is unemployed, here’s a crew (the complaint goes) who are guaranteed jobs for life, teach only a few hours a week, routinely get entire years off, dump grading duties onto graduate students and produce “research” on subjects like “Rednecks, Queers and Country Music” or “The Whatness of Books.” Or maybe they stop doing research altogether (who’s going to stop them?), dropping their workweek to a manageable dozen hours or so, all while making $100,000 or more a year. Ready to grab that pitchfork yet?

"That sketch — relayed on numerous blogs and op-ed pages — is exaggerated, but no one who has observed the academic world could call it entirely false. And it’s a vision that has caught on with an American public worried about how to foot the bill for it all. The cost of a college education has risen, in real dollars, by 250 to 300 percent over the past three decades, far above the rate of inflation. Elite private colleges can cost more than $200,000 over four years. Total student-loan debt, at nearly $830 billion, recently surpassed total national credit card debt. Meanwhile, university presidents, who can make upward of $1 million annually, gravely intone that the $50,000 price tag doesn’t even cover the full cost of a year’s education. (Consider the balance a gift!) Then your daughter reports that her history prof is a part-time adjunct, who might be making $1,500 for a semester’s work. There’s something wrong with this picture.
...
"The higher-ed jeremiads of the last generation came mainly from the right. But this time, it’s the tenured radicals — or at least the tenured liberals — who are leading the charge. "

He goes on to say that the books he reviews call for a separation of research and teaching, with universities to concentrate only on teaching.

Tenure is tied up with a different bundle of issues at research universities, but even here it can raise questions, as the Harvard Crimson reports in connection with a recent, widely reported case of academic misconduct (about which relatively little has yet been made public): Hauser Losing Tenure Not Likely, Harvard’s History Shows--A review of recent cases of faculty misconduct reveals tenure termination is rare

Judd Kessler on the roommate problem in 2002

In response to my recent posts on roommate matching for college students, Judd Kessler points me to a newspaper column he wrote in 2002, on roommates, peer effects, and the Harvard housing system: More Than A Bunkmate.

Scott Duke Kominers at Yahoo!

You can see a very short video of Scott , drunk on market design juice, being interviewed at The View from Yahoo! Labs’ Key Scientific Challenges Summit 2010. Here is a direct link to the interview...)

The Craigslist market for erotic/adult services

Scott Cunningham at Baylor, who is a serious student of illicit labor markets (e.g. the market for sex), writes

"Not sure if you saw this or not. Adult services censored on Craigslist

"It's not clear whether Craigslist has shut down the adult services section or not. That it is censored from the US but not from the rest of the country, though, suggests to some maybe.

"You've probably at least been peripherally aware that in the last month, approximately 20 state attorney generals had begun a new public campaign calling for Craigslist to shut down "adult services" altogether. FWIW, I have a chapter entitled "Sex for Sale: Online Commerce in the World's Oldest Profession" (with Todd Kendall) in the 2010 forthcoming book _Crime Online: Correlates, Causes and Controls_ edited by Tom Hold through Carolina Academic Press in which we explore, among other things, what happened the last time Craigslist implemented a major change to its erotic services section (namely, requiring all cities/markets to pay the $5-10 per ad and replacing erotic services with adult services, which was more heavily screened by Craigslist staff to identify prostitution advertisements). There was a temporary drop in ads, but they began to grow again as the weeks and months went on. But more importantly perhaps, there was a sudden spike in prostitution advertisements at a separate classified website operated by Village Voice called "backpage.com". Before Craigslist implemented that policy, backpage was never really used at all, but after that policy, it both saw a shortrun spike, and a longrun trend upwards in terms of daily posts, suggesting if nothing else that the cross-price elasticity of supply for these kinds of ads is not zero in the shortrun, but especially the longrun."

And here's the NY Times story: Craigslist Blocks Access to ‘Adult Services’ Pages, and two further stories that note that it will be easy for prostitution ads to relocate to other sites: How Censoring Craigslist Helps Pimps, Child Traffickers and Other Abusive Scumbags; and  Pimp Mobile--Craigslist shuts its "adult" section. Where will sex ads go now?  More recently, the "censored" label has been removed but the section remains closed: Craigslist Pulls ‘Censored’ Label From Sex Ads Area

Update (Sept. 15): ‘Adult Services’ Closed, Craigslist Says
"Craigslist, for the first time since it unexpectedly blocked sex ads from its site this month, said Wednesday that it had permanently closed its “adult services” section but defended its right to post sex-related ads as well as its efforts to fight sex trafficking.

"William Clinton Powell, director of customer relations and law enforcement relations at Craigslist, made the remarks Wednesday in testimony prepared for a hearing on sex trafficking of minors before the House Judiciary Committee.

“Craigslist has terminated its adult services section,” Mr. Powell said in his prepared remarks. “Those who formerly posted adult services ads on Craigslist will now advertise at countless other venues.”

NSF "Grand Challenge" white paper on market design

The National Science Foundation has asked for two-thousand-word 'white papers' on challenges worth exploring over the next decade.

Here's mine, on Market Design.

Abstract

In the past fifteen years, the emerging field of Market Design has solved important practical problems, and clarified both what we know and what we don’t yet know about how markets work. The challenge is to understand complex markets well enough to fix them when they’re broken, and implement new markets and market-like mechanisms when needed.

Among markets that economists have helped design are multi-unit auctions for complementary goods such as spectrum licenses; computerized clearinghouses such as the National Resident Matching Program, through which most American doctors get their first jobs; decentralized labor markets such as those for more advanced medical positions and for academic positions; school choice systems; and kidney exchange, which allows patients with incompatible living donors to exchange donor kidneys with other incompatible patient-donor pairs.

These markets differ from markets for simple commodities, in which, once prices have been established, everyone can choose whatever they can afford. Most of these markets are matching markets, in which you can’t just choose what you want, you also have to be chosen. One of the scientific challenges is to learn more about the workings of complex matching markets, such as labor markets for professionals, college admissions, and marriage.

Matchmaking at Harvard, the roommate problem

The Crimson reports, In Choosing Roommates, Deans Become Matchmakers.

"The day is June 10, and Resident Dean of Freshmen Sue Brown embarks upon what will be a five-week quest: sorting 398 first-years into rooms in Grays, Matthews, and Weld Halls.


"Much of this task remains the same as it has been in years past. She sorts freshmen largely by hand, thoroughly reading incoming freshmen’s responses to roommate questionnaires. During the process, her floor is covered with a mass of paper that is eventually divided into nine distinct piles—one of the early steps in the lengthy matchmaking process.

"But in the midst of that process, technology rears its head. In Adobe Acrobat, Brown categorizes freshmen, using colors to sort the incoming students by geography and stamping the freshmen’s rooming surveys with various logos made in Photoshop. A cartoon of a chess piece marks a chess player. A compass is reserved for the “curious and adventurous” freshman, Brown says.

"Emblazoned with colors and cartoons, the surveys are printed out and scattered on a floor in Brown’s residence in Weld Hall. From there, she divides the students into three categories based on students’ self-reported levels of sociability.

"Social tendencies are one of the most important factors in determining roommate compatibility “because it’s going to be something that comes between roommates before they even meet each other,” she says.

"But other factors matter as well, Brown adds. From the sleeping habits freshmen keep and the sports they play, to the neatness they maintain and the number of roommates they want, the resident deans take into account a slew of determinants of each first-year’s personality.

"Some factors, like musical tastes, are often stronger predictors of compatibility than others, according to Brown.
...
"Resident deans often try to place local freshmen with those from outside the area, especially international students for whom going home during vacations is more difficult, according to Dean of Freshmen Thomas A. Dingman ’67.
...
"Every year, a small margin of freshmen—”about half a dozen”—are switched out of their original suites after approaching the FDO, Dingman says. Many more choose to block with and live with others in future years.

...
"After organizing the rooms, the deans turn to assembling the entryways.
“You want it to be a dIverse group, a microcosm of the freshman class,” Brown says.
But at the same time, the entryway can’t be so diverse that a student feels isolated. For example, the FDO tries to avoid placing only one international student in any entryway, Brown says. She also avoids putting two students from the same varsity sport or the same high school in a single entryway."

Somali Pirates

U.S. Forces Free Ship From Somali Pirates

"American officials said the rescue appeared to be the first time the American military had boarded a ship commandeered by Somali pirates, who have been hijacking vessel after vessel off Somalia’s coast and wreaking havoc on some of the busiest shipping lanes in the world.
"The Americans, however, are active in the area. Last year, Navy Seal snipers killed three pirates who were holding an American cargo ship captain in a lifeboat, after he had offered himself as a hostage in exchange for the safety of his crew.
"Despite the intense international naval presence in the region, the pirates are on track to have another banner year, with more than 30 ships hijacked so far in 2010, which has earned them tens of millions of dollars in ransoms. "

However, piracy seems to be becoming fully entrenched in the fabric of Somali political culture: In Somali Civil War, Both Sides Embrace Pirates

"For years, Somalia’s heavily armed pirate gangs seemed content to rob and hijack on the high seas and not get sucked into the messy civil war on land. Now, that may be changing, and the pirates are taking sides — both sides.

"While local government officials in Hobyo have deputized pirate gangs to ring off coastal villages and block out the Shabab, down the beach in Xarardheere, another pirate lair, elders said that other pirates recently agreed to split their ransoms with the Shabab and Hizbul Islam, another Islamist insurgent group.
"The militant Islamists had originally vowed to shut down piracy in Xarardheere, claiming it was unholy, but apparently the money was too good. This seems to be beginning of the West’s worst Somali nightmare, with two of the country’s biggest growth industries — piracy and Islamist radicalism — joining hands."

Dual career couples

Although dual career couples in academia aren't strictly speaking (only) a gender concern, the best collection of resources on academic couples I've found is on a site organized through an NSF program for the advancement of women in science and engineering careers.

It consists of links to reports both on what academic couples do, and on what universities do (or should do) to accomodate them and hire them.  One Stanford report, called Dual-Career Academic Couples: What Universities Need to Know surveyed full time faculty at 13 research universities and found that 36% had partners employed in academia. (And of course many other professors are part of two-professional-career households even if their partner isn't an academic.)

So this is a big and growing issue for the academic labor market, likely to play out in different hiring policies, and employment patters for urban and rural universities.

There are obviously some market design issues, as well as strategy issues. For example, there are now legal restrictions on what you can ask a potential employee about her/his marital status. But academic couples also have to decide to what extent to do joint searches that involve/inform the potential employers at an early stage.

The AAUP has just released a set of Recommendations on Partner Accommodation and Dual Career Appointments (2010). Here's an accompanying story from Inside Higher Ed, which outlines some of the contradictory impulses behind the AAUP recommendations (which suggest both that partner hires should not be as adjuncts, nor should they come at the expense of adjunct positions): Doing 'Dual Career' Right.

Here are my earlier posts on couples, including discussion of how the couples match plays out for medical residents (and a link to a recent paper).

Shana Tova, 5771

Calendars both mark the passage of time and help people coordinate their activities. Labor Day is late this year, and the Jewish new year, Rosh HaShana is early, so this week has an unusual coincidence.

The Hebrew Calendar has a complicated relationship with the secular calendar.

Here's hoping that the Author of Peace has peace in store for the coming year, and that the year is a sweet one for you all.

A long non-simultaneous kidney exchange chain

Mike Rees' revolution in kidney exchange--non-simultaneous extended altrusitic donor (NEAD) chains--continues to grow.. Here's a story about a long one, brokered by the National Kidney Registry, that ended recently in San Diego: San Diego couple final link in kidney transplant chain.

"The transplant chain relied on donations involving 21 donors and 21 recipients in seven states. Each person in need of a kidney had a donor partner — a relative, friend, co-worker or possibly a stranger — whose kidney was not a match for them.
...
"The 21-transplant chain began Jan. 20 in New York with a donor whose kidney was given to a patient at the same Bronx hospital.


"That recipient had a partner donor whose kidney was flown to UC San Francisco Medical Center and given to a recipient. That person’s partner donated a kidney that was sent to St. Barnabas Medical Center in New Jersey.

"The chain continued to crisscross the country — including nine surgeries on Tuesday and Wednesday — before finally ending in San Diego...
"The final recipient did not have a donor partner but was on Sharp Memorial’s transplant list.
...
"“This is why we get up and go to work,” said Dr. Barry Browne, who performed the transplants at Sharp Memorial.

“With this new way of facilitating transplants, we can do a lot more,” he said. ...

"There has been no nationwide program for live donor transplants, however, and transplant centers have relied on their own networks to find suitable organs. Donors and patients also have turned to the Internet, with MatchingDonors.com creating the largest online network.


"UNOS started a pilot program this year for kidney paired-donation transplants and five medical centers will participate.
“We expect to have the first of these chains done in the fall,” said UNOS spokeswoman Anne Paschke.

"Browne said the need for kidney transplants is expected to continue growing because the leading causes of kidney failure — including diabetes, high blood pressure and obesity — continue to escalate."

NBER Market Design conference, October 8-9 in Cambridge MA

The conference is organized by Susan Athey and Parag Pathak. Here is a preliminary program:

Friday, October 8

8:30 am Breakfast
8:55 am  Opening Remarks

9:00 am Dynamic Auctions
Should Auctions Be Transparent?
Dirk Bergemann and Johannes Horner, Yale University

Optimal Dynamic Auctions for Durable Goods: Posted Prices and Fire Sales
Simon Board, UC, Los Angeles, Andy Skrypacz, Stanford University

10:30 am Break
10:45 am Auction Design: Theory
Optimal Auctions with Financial Constrained Bidders
Mallesh Pai, University of Pennsylvania and Rakesh Vohra, Northwestern University

Core-Selecting Auctions with Incomplete Information
Lawrence Ausubel and Oleg V. Baranov, University of Maryland

12:15 pm Lunch

1:15 pm Design of Online Markets
Hidden Market Design: A Peer-to-Peer Backup Market
Sven Seuken and David Parkes, Harvard University; Kamal Jain, Denis Charles, and Max Chickering, Microsoft

Engineering Trust: Reciprocity in the Production of Reputation Information
Gary Bolton, Pennsylvania State University, Ben Greiner, University of New South Wales, Axel Ockenfels, University of Cologne

Propose with a Rose? Signaling in Internet Dating Markets
Soohyung Lee, University of Maryland, Muriel Niederle, Stanford University and NBER

3:30 pm Break

3:45 pm Empirical Approaches in Matching Markets
Gaming School Choice Mechanisms
Yinghua He, Toulouse School of Economics

Aggregate Matchings
Federico Echenique. SangMok Lee, and Matthew Shum, California Institute of Technology

5:15 pm Adjourn

Saturday, October 9
8:30 am Breakfast

9:00 am  Applications of Large Matching Markets

Matching with Couples: Stability and Incentives in Large Markets
Fuhito Kojima, Stanford University, Parag Pathak, MIT and NBER, Alvin Roth, Harvard University and NBER

Participation versus Free-Riding in Large Scale, Multi-Hospital Kidney Exchange
Itai Ashlagi, MIT, Alvin Roth, Harvard University and NBER

10:30 am Break
10:45 am Auction Design: Applications

Reserve Prices in Internet Advertising Auctions: A Field Experiment
Michael Ostrovsky, Stanford Univeristy, and Michael Schwarz, Yahoo!

Set Asides and Subsidies in Timber Auctions
Susan Athey, Harvard University and NBER, Dominic Coey and Jon Levin, Stanford University

12:15 pm Lunch

1:15 pm Matching Market Design

Incentive Compatible Allocation and the Exchange of Discrete Resources
Marek Pycia, UC, Los Angeles, Utku Unver, Boston College

Stability and Competitive Equilibrium in Trading Networks
John Hatfield, Stanford University, Scott Kominers, Harvard University,
Alexandru Nichifor, University of Maastricht, Michael Ostrovsky, Stanford University, Alexander Westkamp, University of Bonn

2:45 pm Adjourn

7 sessions, 40 minutes per paper, no discussants, 10 minutes for general discussion

THE LAW CLERK HIRING PLAN FOR 2010

Here it is, with today (Sept 7, 2010), being the "First date when applications may be received" for federal judicial clerkships.

Similarly, the "First date and time when judges may contact applicants to schedule interviews" is 10:00 a.m. (EDT), Monday, September 13, 2010, and the
"First date and time when interviews may be held and offers made" is 8:00 a.m. (EDT) Thursday, September 16, 2010.

When we last surveyed the market, there was a lot of cheating in connection with these dates, see
Avery, Christopher, Jolls, Christine, Posner, Richard A. and Roth, Alvin E., "The New Market for Federal Judicial Law Clerks" . University of Chicago Law Review, 74, Spring 2007, 447-486.


That doesn't mean that the new "system" might not be an improvement on the old unravelling/exploding offer regimes of previous years, see
Avery, Christopher, Christine Jolls, Richard A. Posner, and Alvin E. Roth, "The Market for Federal Judicial Law Clerks" University of Chicago Law Review, 68, 3, Summer, 2001, 793-902.
But it will be interesting to see if the level of "non-compliance" will hold steady, or if it will increase until unraveling resumes.

Note that I am not counting exploding offers as non-compliance; they are explicitly allowed, as long as they aren't made before 10am on Sept. 13. The plan states
"Offers may be made as soon as interviews are permitted under the Plan. Generally, it is for the judge to determine the terms upon which an offer is extended. However, judges are encouraged not to require an applicant to accept an offer immediately without reasonable time to weigh it against other viable options that remain open to the applicant. This would not prohibit an applicant from accepting an offer on the spot.


"When setting up an interview with a clerkship applicant, a judge should make clear to the applicant his or her interview and offer policies or practices. For example, a judge may have a policy or practice of making offers and entirely filling his or her clerkship slots, even if more interviews are scheduled for that day. The applicant should be told this in a timely fashion, so that the applicant's decision to accept or decline the interview is appropriately informed. Applicants should also be informed if the judge will ask them to make a decision on the spot.

The law and economics of surrogate motherhood: what contracts should be legal?

Aristides N. Hatzis writes to let me know about his work on the law and economics of surrogacy, and related topics, as follows (I've inserted the abstracts of the two papers):

"I follow religiously your blog and your work after reading your very interesting paper on repugnance and markets. I am also interested in the subject since I am working on the economics of self-ownership. I am sending you two of my published papers you might find of interest:

'Just the Oven': A Law & Economics Approach to Gestational Surrogacy Contracts
Abstract:  Gestational surrogacy is a form of artificial insemination whereby a doctor implants the fertilized eggs of a woman into the surrogate's uterus. Gestational surrogacy contracts are unenforceable almost everywhere in the world. In this paper, we support the thesis that these contracts should be enforceable. Our approach is informed by the economic analysis of contract law and is predicated on the assumption that law should serve social welfare (as a function of individuals' well being). We discuss and rebut the arguments most often invoked against surrogacy: immorality, commodification and exploitation. Finally, we present some legal policy proposals for the regulation of gestational contracts in order to safeguard the best interests of the child, to ensure the informed consent of surrogate mothers and to protect intentional parents from the surrogate's opportunistic or reckless behavior.

From Soft to Hard Paternalism and Back: The Regulation of Surrogate Motherhood in Greece
Abstract: This paper is a critical analysis of the regulation of surrogate motherhood in Greece; I will discuss the way that a consensus reached in the legislative committee among liberal and conservative jurists on the matter of compensation of surrogate mothers was undermined by intra-party populism in the Greek parliament which banned it to avoid commodification; inevitably the law fell into disuse leading to a new law which allowed government-defined compensation, not the one agreed by the parties; the regulation of surrogate motherhood in Greece is a typical example of the deleterious effects of the combination of legal formalism and legal moralism in contemporary Greece.

"You might also find these blogs of interest: http://www.self-ownership.org/ , http://www.economicanalysisoflaw.org/"

Misc. kidney exchanges

The New England Journal of Medicine has created a virtual library of it's kidney transplant articles, I think all of which are now ungated. See e.g.
A Nonsimultaneous, Extended, Altruistic-Donor Chain by Michael A. Rees, M.D., Ph.D., Jonathan E. Kopke, B.S., Ronald P. Pelletier, M.D., Dorry L. Segev, M.D., Matthew E. Rutter, M.D., Alfredo J. Fabrega, M.D., Jeffrey Rogers, M.D., Oleh G. Pankewycz, M.D., Janet Hiller, M.S.N., Alvin E. Roth, Ph.D., Tuomas Sandholm, Ph.D., M. Utku Ünver, Ph.D. and Robert A. Montgomery, M.D., D.Phil.
N Engl J Med 2009; 360:1096-1101March 12, 2009

The University of Michigan performed its first simultaneous 3-pair kidney exchange this summer, on July 21 2010: UM Paired Kidney Exchange Program performs its first triple kidney transplant exchange.
One of the recipients was quoted in a local news story as pointing out another advantage of live donation: ""Nobody else had to die for us to get this"