Experimental economics and philosophy in the Basque country

XIV Summer School on Economics and Philosophy (2011), Experiments in Economics, Experiments in Philosophy

Since 1998 the Urrutia Elejalde Foundation has annually organized a Summer School on frontier topics between philosophy and economics and other social sciences, bringing together scholars from all these fields to explore them. The aim of this year Summer School is to explore the potential avenues for collaboration between the growing disciplines of experimental economics and experimental philosophy. Experimental economics has evolved into a thriving subfield, as attested by the number of experimental papers published in leading general economics journals. This growing enthusiasm for experiments in economics has coincided with the revival of philosophical and methodological analyses of causality, which view the controlled experiment as the privileged gate to causal inference. But more importantly, in the last years, a new field known as experimental philosophy has set out to complement or even substitute for pre-theoretical intuitions regarding philosophical themes such as moral dilemmas or rationality. At a moment in which experimental economics is already well-established and experimental philosophy is emerging, this meeting compares their main themes and results.

2. Preliminary list of speakers

Nicholas BARDSLEY (University of Reading), Giorgio CORICELLI (CNRS, Institut des Sciences Cognitives, Lyon), Francesco GUALA (Univ. di Milano), Nagore IRIBERRI (U. Pompeu Fabra), Joshua KNOBE (Yale University), Daniel ZIZZO (University of East Anglia), Cristina BICCHIERI (UPenn), Jason DANA (UPenn)

3. Call for papers

We encourage submission of papers that cover one or more of the above areas. The scientific committee will consider a number of submissions by young scholars at graduate or postgraduate level. The Foundation will cover the registration fees and accommodation expenses of the authors. Please send a pdf abstract of no more than 500 words tophilandecon@gmail.com before April 1st. A decision will be made by April 15th.

Market for adultery revisited

Cheating, Incorporated At Ashley Madison's website for "dating," the infidelity economy is alive, well, and profitable By Sheelah Kolhatkar

Lots of interesting bits, here are some...

"There's a lone genius—possibly evil and certainly entrepreneurial—behind Ashley Madison. His name is Noel Biderman, and he's the chief executive officer of Avid Life Media, based in Toronto. "Monogamy, in my opinion, is a failed experiment," he declares."
...
"Avid Life's six websites—including cougarlife.com, for older women seeking younger men, establishedmen.com, which connects "ambitious and attractive girls" with "successful and generous benefactors to fulfill their lifestyle needs," and hotornot.com, the 1990s throwback where people rate one another's photos"
...
"Promoting adultery and creating a market for it has made Biderman rich. It has not made him popular."
...
"...Ashley Madison is drowning in husbands, so many that they threaten to crush the few venturesome ladies who have boldly—and perhaps recklessly—put themselves out there. Each time you log on as a female, it's as if a new batch of peanut butter packets has been dropped over a refugee camp—everyone leaps at them at once, and you are overwhelmed with messages, "winks," and men attempting to interact. The pricing system is cleverly designed to charge the men at their most vulnerable moment: Each time one of those hungry males tries to grab at the peanut butter, he has to spend a few bucks. Creating a profile and browsing others are free, but if you'd like to initiate an e-mail or chat conversation with someone, you must purchase "credits"—200 of them cost $79.00, and they run like a meter (e-mails after the first one cost nothing; charges appear ambiguously on your credit card bill). "
...
"Curiously, Australia, where Ashley Madison was launched in April 2010, has the highest proportion of women users, at almost 40 percent. Biderman spent a few weeks there and says he noticed that prostitution is legal and that Aussie women aren't happy about it. "I think women down there have a view of the world that men have all these playgrounds—brothels, strip clubs, massage parlors," he says, "and they have nothing." Biederman has spent so much time studying his users, he sounds like an amateur sociologist: "We know there's a lot of doctors on there with god complexes who clearly either deal with so much stress in their lives, or believe they're so important, that having an affair—they're entitled to it."
...
"Biderman is quick to explain why his business isn't hurting anyone. "You eradicate Ashley Madison, you're not going to eradicate infidelity."
...
"When I asked Biderman's wife, Amanda, what it's like being joined in holy matrimony with an anti-marriage entrepreneur, she let out a long sigh. "Really, the business itself doesn't match who he is as a person—it's not our lifestyle or value system or any of that," she said. "I mean, yeah, I'd love it if he were working on a cure for cancer. But it's a business, and that's how we look at it."

HT: Benjamin Kay



For a historical view, see Elizabeth Abott, MISTRESSES: A history of the other woman; reviewed here:Mistresses through the ages: Prostitute, concubine, mistress, wife: the boundaries are blurred in this study

Debate on kidney allocation in NEJM

The attack is by Benjamin E. Hippen, M.D., J. Richard Thistlethwaite, Jr., M.D., Ph.D., and Lainie Friedman Ross, M.D., Ph.D., (some of whose arguments I've already blogged about: How not to assign kidneys), and the defense is by  Alan B. Leichtman, M.D., Keith P. McCullough, M.S., and Robert A. Wolfe, Ph.D. They say (NEJM, March 16):

"On February 16, 2011, the Organ Procurement and Transplantation Network (OPTN), the federal contractor responsible for overseeing solid-organ allocation in the United States, released for public comment three proposed concepts for the allocation of kidneys from deceased donors: using a Kidney Donor Profile Index (KDPI) to rank each kidney according to the length of time that it would be expected to function in an average transplant recipient, allocating the highest-quality 20% of kidneys to the 20% of candidates with the longest expected post-transplantation survival, and giving candidates within 15 years of the donor's age the highest priority in the allocation of the remaining 80% of kidneys....

To place into context the importance of these concepts, it is necessary to understand the existing system. At its core, the current U.S. system for allocating kidneys from deceased donors focuses primarily on how long patients have been waiting for a transplant. This approach contrasts with the allocation algorithms for liver and heart transplantation, which allocate organs on the basis of medical urgency, and the lung-allocation system, which allocates organs on the basis of a mixture of medical urgency and expected survival for 1 year after transplantation.

Under the current system, approximately 15% of donated kidneys (those from older, or a subgroup of less healthy, donors) are designated as “expanded criteria donor” (ECD) kidneys and are allocated according to waiting time alone to transplant candidates who have consented to receive such an organ in anticipation of reducing their pretransplantation waiting time.4 The remaining kidneys are referred to as “standard criteria donor” (SCD) kidneys, and approximately 4% of them are allocated for simultaneous transplantation with a lifesaving organ (liver, heart, or lung), 9% are allocated to patients with zero HLA-A, -B, and -DR antigen mismatches with the donor organ, and the balance are allocated to candidates according to a point system. The point system awards one point for each year a patient is on the waiting list. For SCD kidneys, candidates are awarded one point for each HLA-DR antigen match with a donor organ and four points if they are sensitized against 80% or more of the deceased-donor pool. In addition, patients with kidney failure who have previously donated an organ are awarded priority on their local lists, and pediatric candidates are awarded preferential access to kidneys from deceased donors younger than 35 years of age. About half of all candidates are removed from the list, typically owing to death or worsening health status, without having undergone transplantation.

The United States is divided into 58 donor service areas (DSAs), each served by a single organ procurement organization (OPO) that is responsible for recovering deceased-donor organs for transplantation. Most DSAs have a population of 3 million to 10 million people. Waiting time varies considerably among DSAs according to the prevalence of end-stage kidney disease (which is generally higher in large urban populations); the efficiency of the OPO in identifying possible donors, obtaining consent for donation, and recovering organs from donors; the opportunities within the DSA for referral and wait-listing for transplantation; and the practices of the individual transplant centers regarding the acceptance and discard of organs. The typical time to transplantation among recipients ranges from less than 6 months to more than 72 months, depending on their DSA and blood type. Therefore, the value of the extra allocation priority (1 to 4 years) given for sensitization and HLA-DR matching varies by geographic location.

The current allocation algorithm does not (with the exception of ECD transplantation) account for differences in potential survival of recipients and donated organs, and the dichotomous ECD–SCD distinction does not accurately assess the relative survival potential of many deceased-donor kidneys.4,5 Moreover, the allocation priority awarded for longer waiting time, HLA-DR match, and sensitization does not reflect the biologic effects of these elements on the survival of candidates, allografts, or recipients. By focusing on waiting time, rather than appropriately weighted medical factors, the current system makes access to transplants very different for otherwise similar patients.

...

As a consequence of the current allocation system and the aging of the candidate pool, the lifespan of patients after kidney transplantation in the United States has declined by 18 months since 1995. Computer simulations based on the current donor pool suggest that more than 35,000 years of post-transplantation survival, and more than 10,000 years of incremental post-transplantation survival (i.e., extra years of life that would not have been achieved if the patient had continued to undergo dialysis rather than receiving a transplant), are lost each year.2 We believe that survival matching as described in the OPTN concept document has the potential to reclaim many of these lost years of life and therefore warrants serious consideration.

...

"The loss of tens of thousands of future life-years that might be realized and enjoyed by transplant recipients and the increase in the waiting list resulting from an unnecessarily high rate of repeat transplantation are intolerable consequences of the current kidney-transplant algorithm and urgently need correction through the mechanism of survival matching. Although we suspect that there are opportunities for improvements to the kidney-allocation concepts that have been submitted for public comment by the OPTN, we believe that the core concepts — adoption of the KDPI and survival matching — warrant the strongest endorsement and the earliest possible implementation by the kidney-transplant community."

Organ donation from death row?

A thought provoking op-ed in the NY Times -- Giving Life After Death Row, By CHRISTIAN LONGO

His circumstances give him time to think, and he writes:
"EIGHT years ago I was sentenced to death for the murders of my wife and three children. I am guilty.
 ... 
"I spend 22 hours a day locked in a 6 foot by 8 foot box on Oregon’s death row. There is no way to atone for my crimes, but I believe that a profound benefit to society can come from my circumstances. I have asked to end my remaining appeals, and then donate my organs after my execution to those who need them. But my request has been rejected by the prison authorities.
...
"There is no law barring inmates condemned to death in the United States from donating their organs, but I haven’t found any prisons that allow it.
...
Aside from these logistical and health concerns, prisons have a moral reason for their reluctance to allow inmates to donate. America has a shameful history of using prisoners for medical experiments. In Oregon, for example, from 1963 to 1973, many inmates were paid to “volunteer” for research into the effects of radiation on testicular cells. Some ethicists believe that opening the door to voluntary donations would also open the door to abuse. And others argue that prisoners are simply unable to make a truly voluntary consent.
...
"I am not the only condemned prisoner who wants the right to donate his organs. I have discussed this issue with almost every one of the 35 men on Oregon’s death row, and nearly half of them expressed a wish to have the option of donating should their appeals run out.
...
"...I don’t expect to leave this prison alive. I am seeking nothing but the right to determine what happens to my body once the state has carried out its sentence.


"If I donated all of my organs today, I could clear nearly 1 percent of my state’s organ waiting list. I am 37 years old and healthy; throwing my organs away after I am executed is nothing but a waste.


"And yet the prison authority’s response to my latest appeal to donate was this: “The interests of the public and condemned inmates are best served by denying the petition.”


"Many in the public, most inmates, and especially those who are dying for lack of a healthy organ, would certainly disagree."


Christian Longo, a prisoner at Oregon State Penitentiary, is the founder of the organization Gifts of Anatomical Value From Everyone.


*******************
And here are some letters to the editor published in response, not all negative.

How not to assign kidneys

"That's the title of a NY Times Op-Ed by LAINIE FRIEDMAN ROSS and BENJAMIN E. HIPPEN, criticizing the recent UNOS proposals to change the deceased donor kidney allocation system (about which I recently blogged here and here). (Ross and Hippen don't always agree with each other; here they take opposite sides of the debate on whether it would be ok to compensate donors.)

In their op-ed they write:
"The proposal is supposed to provide deceased-donor kidneys of higher quality to healthier, younger patients instead of to elderly ones who presumably have fewer years to live.

"It sounds simple enough. But the strategy could result in fewer kidneys going from living donors to young candidates, and could lead to more deaths of older or sicker candidates on the waiting list. Moreover, it would do nothing to address the fundamental problem: the persistent shortage of kidneys from donors, both living and deceased.

"The proposal would set up a two-pronged strategy that is intended to increase the number of life-years gained for every donor kidney. Under the proposal, the top 20 percent of kidneys from deceased donors who had been young and healthy would be assigned to the top 20 percent of young healthy candidates. In other words, the best deceased-donor kidneys would be given to patients likeliest to have long lives ahead of them.

"The other 80 percent of deceased-donor kidneys would be allocated first to local candidates within a 15-year age range of the donor, and if no potential candidate were identified, then to the broader pool of candidates. (For example, candidates aged 25 to 55 would get priority for a kidney from a 40-year-old donor who had just died.)

"But while the goal is understandable, the proposal is flawed...

"...giving healthy young patients first dibs on kidneys from young deceased donors might reduce donation rates from living donors to the young candidates, which is at cross-purposes with the goal of extending years of life after transplant. In 2005, the network started giving pediatric transplant candidates priority for kidneys from deceased donors younger than 35. While the pediatric patients received more organs from deceased donors, they got fewer organs from living donors. The likely explanation is that the donors, including many parents, held off, figuring that they could donate later, when the deceased-donor kidney eventually failed. (Those kidneys can last up to 20 years.)

"The new proposal would effectively expand the 2005 rule to all healthier, younger candidates, potentially reducing living-donor transplantation to the very group that stands to benefit the most from it. This would only increase their need for another transplant later, since kidneys from deceased donors do not last as long as kidneys from living ones.

"Giving more organs to young recipients would also come at the expense of “older” recipients, which in this context can mean 50 to 64. (Only a tiny fraction of all kidneys go to recipients older than 70.) Since older candidates on the waiting list are less likely to live long enough to receive a kidney, making them less eligible for transplants will probably result in more deaths on the list, and more pressure on available living donors to donate to older candidates.
...
"What should be done instead?

"First, allocate kidneys on a broader basis. Under both the current and proposed systems, kidneys are allocated locally. But while a New Yorker with end-stage renal disease will typically wait at least six years for a transplant, her counterpart in Minnesota might wait just two to three. ...

"Second, the network should continue to support first-person consent legislation under which people who have properly declared their willingness to donate their organs in case of an unexpected death cannot have their wishes overruled by their bereaved families.

"But for now, the only sure way to reduce the shortage of organs is to expand transplantation from living donors...

"The network should also keep encouraging innovative efforts like “kidney swaps” or “donor chains.” Kidney swaps involve two donor-recipient pairs who are incompatible within the pair, but can donate to the other pair’s recipient. (Think of it as a square dance where the couples switch partners halfway through.)

Donor chains begin with a living donor willing to donate to anyone on the waiting list. Instead of simply giving that donor’s kidney to the next patient in line, the kidney can go to the would-be recipient in an incompatible donor-recipient pair; that donor, in turn, can then give to another recipient of an incompatible donor-recipient pair, with the chain continuing indefinitely. (Consider it the medical equivalent of “pay it forward.”)

Dating fees added to the British inflation index

Along with apps, natch. The Financial Times reports, Apps and dating fees added to inflation basket

"Smartphones and the applications that run on them have been added to the basket that makes up the consumer price index, along with fees paid to dating agencies.

"The Office for National Statistics on Tuesday unveiled changes to the composition of its CPI and retail price index baskets, intended to represent a “typical” shopping basket for households – an exercise it undertakes every year. Because shopping habits change, items are constantly being added and removed from both indices.
...
"Fees paid to dating agencies have been added to reflect the growing use of internet services to find a partner..."

Matching is everywhere...

“Summa cum fraude:” Plagiarism as a (culturally dependent) repugnant transaction

The NY Times discusses the recent resignation of the German defense minister after it was revealed that parts of his Ph.D. dissertation were plagiarized. The tone of the article is bemusement that anyone but academics could take such a crime seriously, but that the German public did: In Germany, Uproar Over a Doctoral Thesis

"A German author, Peter Schneider, even gravely linked the whole mess to Bill Clinton’s impeachment drama, since they both entailed what he called “the same question of honesty.” Leave it to a German intellectual to discern a deep connection between an American president dissembling about oral sex with an intern in the Oval Office and a doctoral student at Bayreuth University cribbing passages in a 475-page dissertation about contrasting constitutional developments.
...
"The trouble started last month when this country’s most popular cabinet minister, Karl-Theodor zu Guttenberg, a handsome, media-savvy, conspicuously pomaded 39-year-old baron widely presumed to be a leading candidate to succeed Angela Merkel someday as chancellor, tried to brush off charges that he had plagiarized parts of his 2006 thesis.

“Absurd,” was his initial response. And many Germans wanted to believe him. “Well-born, well-spoken and well-groomed,” as The Economist observed about the baron, he had “seemed blunt where others prevaricated, principled where they plotted. Alone among German leaders,” the magazine went on, referring to the gray, proficient bureaucrats who tend to run the country, he made “voters’ hearts quicken.”

Ms. Merkel backed him up, even as German graduate students and others, by the tens of thousands, began to organize, signing an open letter of protest that heaped scorn on her. Several hundred protesters hung their shoes on the iron fence outside the Defense Ministry in Berlin in a sly (again, typically German) multivalent allusion both to the now familiar Arab insult of displaying the soles of one’s shoes and also to the missing footnotes in Mr. Guttenberg’s dissertation.
...
"At the same time, however, Mr. Guttenberg’s troubles thrust into embarrassing national relief the dirty secret that to gain such credentials, many Germans, well-connected ones anyway, apparently cut corners or worse, and universities often look the other way. The minister couldn’t admit to having farmed out his dissertation, because that’s literally a crime here, but he was generally suspected of having hired someone to write the work for him (how else to explain why he seemed so blithely oblivious to the contents of his own thesis?). And to add insult to injury, his advisers had even awarded him a rank of “summa cum laude” (“Summa cum fraude” was another of those protesters’ placards), notwithstanding that the thesis seems to have poached material from one of those very advisers.
...
"Mr. Poschardt fumed in Welt Online recently that when news broke some years ago about the Rev. Dr. Martin Luther King Jr.’s plagiarizing parts of his dissertation, Americans hardly reacted. For Germans the nonchalance may seem as odd as it is for many Americans to hear that Horst Seehofer, the married chairman of Mr. Guttenberg’s Christian Social Union, the Bavarian partner to Ms. Merkel’s conservative Christian Democratic Union, was elected to his post after it was reported that his mistress had given birth to a child. Germans debated his improprieties, but in the end overlooked them.

"And this gets back to the author Mr. Schneider and the Clinton impeachment scandal.

"Despite the cultural gulf, both incidents, the president’s and the minister’s, which were incited by peripheral, if not actually private, affairs, prompted fits of national anguish: for Americans about sex, for Germans about integrity.
...
"The widespread expectation now is that Mr. Guttenberg, whose popularity has not dimmed but increased, according to the latest polls, will retreat for a while, and, like Mr. Clinton, after an obligatory period of remorse, come back. First he will have to contend with prosecutors, who the other day announced they had opened an investigation. Plagiarism entails breach of copyright crimes here."

Academic letters of reference

At the Chronicle of Higher Ed, David Roediger writes of The Failed Promise of Electronic Applications

"It would have been easy enough, some years back, when I started to get requests to put recommendation letters on Interfolio, to connect the new practice with general trends to outsource university jobs, cut the positions of support workers, and privatize service work in public universities.

"Indeed, my own department at the University of Illinois at Urbana-Champaign quickly moved from maintaining its own dossier service for graduate students to partially subsidizing their applications for jobs made through Interfolio. Back then, when I thought about the switch in labor terms, I was able to quickly decide that the change was justifiable because it saved work, including, for staff members, the drudgery of photocopying.

"Mostly, though, I hoped the new electronic processes would save me labor. The department's old dossier service file was acceptable to most employers and used by all students. However, when writing recommendations on behalf of colleagues who had jobs but were seeking new ones, each letter had to be an individual production, as faculty candidates were outside the dossier system.

"Moreover, I hoped that the new systems would ease the burden of writing endless letters for undergraduates to get into doctoral programs and could centralize that process. Indeed, law schools were something of a model: Centralized recommendation-letter banks, organized either at the university level or by the Law School Admission Council, had greatly eased letting-writing, envelope-licking, and mailing. One student, one letter.
"Several years into the process, it is clear that, within the humanities, labor is not being saved—even on the supply side of sending out the recommendation letters electronically. Interfolio itself remains cumbersome and, contrary to the centralized law-school model, graduate schools have adopted countless variants for handling the letters. Some schools require hard copies, sometimes gathered by the student into a file, sometimes not. Where letters supporting job applications are concerned, two schools recently asked that I forward my recommendation letters through the student, forgetting confidentiality altogether.

"Odd little boxes asking that professors use a check mark to give a percentile ranking to students on everything from honesty to industry to leadership had been a feature of the older paper-application forms. Retaining those idiosyncratic grids—each school using them seems to survey a different set of virtues—sometimes now justifies departments' holding on to distinctive formats rather than adopting a standardized recommendation letter. Fellowship applications are almost militantly idiosyncratic in the forms that letters are required to take. No standard practices have emerged.

"Most important, school after school contracts for its own systems, meaning the letters are not just sent either through an agency or individually. Instead they fall into an endless number of electronic delivery systems, each slightly different, most new, and typically with giant bugs to be worked out. So frequently do those systems not work—or not work in concert with configurations of the sender's computer—that some searches are now accompanied by the e-mail contact of the person shepherding tutorials or end runs around the system.

Adoption as a (less) repugnant transaction

You wouldn't think that adoption would sometimes be regarded as a repugnant transaction, i.e. as something that some people didn't want other people to do, but in fact there have in many times and places been laws and customs that prevent certain sorts of people from adopting certain other sorts of people, e.g. inter-racial or inter-ethnic or inter-religious adoptions of various sorts. (And of course there have also been restrictions barring certain kinds of couples, e.g. same sex couples, from any kind of adoption.)

The Telegraph reports that things are changing in England in this regard:

Adoption shake-up: new guidelines will stop 'social-engineering': "New adoption guidelines have been announced by the Government to break down the barriers faced by potential parents and children."

"Michael Gove, the Education Secretary, said some of the limitations put on adopters in the past - based on ethnicity, sexual orientation and faith - was ''social engineering of the worst kind''.
Outlining the adoption guidance being introduced, the minister said: ''At the moment, the system simply doesn't allow many of those people who are desperate to help the chance to give young people and children a loving home.
''It has always been the case unfortunately that far too many children are growing up in circumstances where sadly they won't have the architecture or stability that means they can achieve everything of which they are capable.''
The Government said progress in adoption has stalled in recent years, with the number of children placed for adoption falling by 15 per cent between March 2009 and 2010, and more children waiting longer to be adopted.
Black children took over 50 per cent longer on average to be placed for adoption than children from other ethnic groups, and children over five were four times less likely to be adopted compared to children under five in the last year.

Mr Gove said: ''What I do find difficult to accept is that we've created over time a web of rules that mean that we are not always putting the interests of children first.
''We all know that the length time which children spend in institutional care once they be been taken into care is far too long, when those children could be adopted by loving parents.''
He said the average amount of time children spend in care before being adopted is 21 months.
''One of the reasons that they sound so long is that for far too long, we have made an idea of the perfect the enemy of the good,'' he said.
Speaking about the barriers faced by adopters previously, he said: ''We said that this particular couple can't adopt because, in the past, they might have the wrong sexuality, they might even have the wrong ethnic background.
''It could be that they're too young, it could be that their social background doesn't make for perfect match. That sort of thinking is social engineering of the worst kind.''

Twelve international criminal markets

I'm not confident of the data, but numbers one and two are drugs and human trafficking, and number five is human organs.
This from Transnational Crime In The Developing World: A February 2011 Report from Global Financial Integrity. The detailed report is here.

Roughly organized in terms of overall cash flow here is their list of goods illicitly traded across borders (the ordering depends not only on highly unreliable estimates, but on how the categories are aggregated...).

1. Drugs
2. Human trafficking
3. Illicit wildlife
4. Counterfeit goods and currency ("If imitation is the sincerest form of flattery, counterfeiting is the criminal form.")
5. Human organs (my worries about data sources are compounded by noting that their figures for legal US transplants come from a 2008 article in the Economist, rather than e.g. from UNOS/OPTN data, which is easily available on the web)
6. Small arms
7. Diamonds
8. Oil
9. Timber
10. Fish
11. Art and artifacts
12. Gold

From the executive summary:
"This report analyzes the scale, flow, profit distribution, and impact of 12 different types of illicit trade: drugs, humans, wildlife, counterfeit goods and currency, human organs, small arms, diamonds and colored gemstones, oil, timber, fish, art and cultural property, and gold. Though the specific characteristics of each market vary, in general it can be said that these profitable and complex criminal operations originate primarily in developing countries, thrive in the space created by poverty, inequality, and state weakness, and contribute to forestalling economic prosperity for billions of people in countries across the world.

"The global illicit flow of goods, guns, people, and natural resources is estimated at approximately $650 billion. Though data is scarce and experts are constantly debating the relative merits and weaknesses of every new study, it is generally accepted that illicit drug trafficking and counterfeiting are the two most valuable markets. This report finds the illicit drug trade to be worth roughly $320 billion and counterfeiting $250 billion. These numbers reflect the potential for huge profits which is
the fundamental driver of criminal trade."

HT: Bettina Klaus

Unraveling in the war for new private equity talent

Kevin Roose at Dealbook writes of A Grab for Wall Street’s Rising Stars Before They’ve Risen

"Some of the world’s largest private equity firms are in a tug of war over top talent. But the competition isn’t over brand-name executives commanding eight-figure salaries. Instead, firms are fighting for the affections of bankers barely old enough to rent cars.

"This month starts the private equity recruiting season, an annual Wall Street ritual in which young analysts from leading investment banks like Goldman Sachs and Morgan Stanley are wined and dined by Kohlberg Kravis Roberts, the Blackstone Group, TPG Capital and a handful of other top-flight firms. The industry is gearing up earlier than ever this year, with some firms already making offers for jobs that won’t start until the fall of 2012, a full 18 months from now.

“Five years ago, it happened in September, then July, then May, then April. This year, it’s March,” said a senior partner at a large private equity firm, who spoke on the condition of anonymity because he was not authorized to comment on the hiring process.

Young analysts typically fulfill two-year contracts at their banks before making the switch to the more prestigious, higher-paid world of private equity. It’s a common move often referred to as “two and out.” Many of these analysts, referred to as “pre-M.B.A. hires,” are contacted by private equity firms only months into their first post-collegiate jobs, and some are as young as 22.

“There is a shortage of stars, and that gives a strong incentive for a given firm to be the first,” said Adam Zoia, chief executive of Glocap Search, whose clients include leading private equity firms. “But everyone sensible — the clients, the banks, the candidates — believes it’s in no one’s interest to start this early.”

"Top firms have traditionally made informal agreements to synchronize their recruiting drives. It is a delicate monthlong dance that can include cocktail hours, meet-and-greets with executives and interview marathons sometimes referred to as “Super Saturdays.” This year, many of the largest firms scheduled events in April, approximately the same time as last year.

"But in early March, word spread that Bain Capital, the $65 billion private equity firm, was holding interviews and making offers to top candidates, according to several people familiar with the matter. Bain’s competitors — some of which moved early in previous years — were forced to scramble. They quickly rearranged schedules and, in some cases, canceled planned recruiting events in order to make their offers as soon as this week.

“Every year, we talk to the other private equity firms and actually pretend we have a vested interest in being reasonable about this,” said a private equity executive who oversees his firm’s hiring efforts. “And every year, some jerk kicks off the process a month early.” The executive, who also spoke on the condition of anonymity to avoid angering rival firms, called the analyst recruiting process “one of the last vestiges of completely rogue behavior” in the well-heeled world of private equity.

"Bain declined to comment.

"The early recruiting process has serious limitations. Private equity firms are essentially wooing young analysts with less than a year’s experience, giving them little time to learn crucial skills like building complex financial models to value companies. Few have also received the annual performance reviews necessary for identifying top talent.

“The kids we’re talking to got out of college last summer, spent six months in training, entered the job in January, and have done exactly nothing since then,” the executive said. “So we’re asking them about their transaction experience, and they’re talking about what fraternity they were in.”
...
"Competition is fierce. According to industry insiders, more than a thousand analysts are expected to apply for perhaps 50 spots at the largest buyout firms this year. Coming from a so-called target group can help an analyst’s chances — Goldman Sachs’s technology, media and telecom group and Morgan Stanley’s mergers and acquisitions group are thought to be the cream of the crop — but there are no guarantees.
...
"In perhaps the clearest sign that the recruiting frenzy has hit a boiling point, several smaller private equity firms have hired star students or well-connected ones straight out of college. Industry experts say they don’t expect that trend to spread to mega-firms like K.K.R. and Blackstone. But even longtime private equity players, like the executive managing his firm’s hiring process, admit that the competition has made anything possible.

“It’s a land grab,” the executive said. “And it’s a land grab for completely undeveloped property.”

HT: Eric Budish, the market design guy at Chicago, who writes "Back in my former life as a wall street guy this recruiting process was in spring of the second year (of a two year gig... )

More on random graph models of kidney exchange

A new paper by Panos Toulis and David Parkes explores random graph models of kidney exchange: A Random Graph Model of Kidney Exchanges: Efficiency, Individual-Rationality and Incentives

Abstract:
"In kidney exchanges, hospitals share patient lists and receive transplantations. A kidney-paired donation (KPD) mechanism needs to promote full sharing of information
about donor-patient pairs, and identify a Pareto efficient outcome that also satisfies participation constraints of hospitals. Random graph theory is applied to the kidney exchange problem to provide a two-fold benefit: early experimental results can be explained analytically, and complex models with participation of multiple hospitals can be studied in terms of incentives in a methodological way. In this paper, we introduce a random graph model of the KPD exchange and then fully characterize the structure of the efficient outcome and the expected number of transplantations that can be performed. We derive a square-root law between the welfare gains from sharing patient-donor pairs in a central pool and the individual sizes of hospitals, which also illustrates the urgent need for the nationwide expansion  of such programs. Finally, we establish through theoretical and computational analysis that enforcing simple individual rationality constraints on the outcome can mitigate the negative impact of strategic behavior by hospitals."

While they consider only two-way exchange, their results parallel those obtained in the random graph model that Itai Ashlagi and I wrote about in Ashlagi, Itai and Alvin E. Roth, "Individual rationality and participation in large scale, multi-hospital kidney exchange," working paper, January 2011.

One of the developments it has been exciting to witness is the increasingly interdisciplinary work on kidney exchange, which now involves surgeons, economists, operations researchers and computer scientists. Here at Harvard, a lot of the connection to computer science comes through David Parkes, Yileng Chen, and the EconCS group.

I enjoyed speaking at the interdisciplinary seminar run by the Center for Research on Computation and Society (CRCS, pronounced "circus"). You can see my talk on the CRCS video site, ordered by dates, Monday, September 20, 2010: Alvin Roth on Kidney Exchange. From about 27 minutes to 13 minutes from the end (if you get that far, it's an 85 minute video:), you can hear me start to talk about some of the issues explored in these two papers.

Kidney exchange software

Itai Ashlagi has made available some of the  kidney exchange software (for both cycles and chains) that we used in two recent papers.

He writes: "To use
(i) one should have cplex and
(ii) please cite

• Ashlagi, Itai, Duncan S. Gilchrist, Alvin E. Roth, and Michael A. Rees, ; ''Nonsimultaneous Chains and Dominos in Kidney Paired Donation -- Revisited,'' American Journal of Transplantation, forthcoming, 2011.
• Ashlagi, Itai and Alvin E. Roth, "Individual rationality and participation in large scale, multi-hospital kidney exchange," working paper, January 2011.

The software either generates simulated patient/donor pairs as well as a compatibility matrix, or alternatively gets as an input such data. It finds an allocation that maximizes the number of transplants using cycles and chains each of a different bounded length. (Chains begin with non-directed donors.)"

Itai has also created a video abstract of the second paper above, about incentives for participation in large scale kidney exchange:

Medical progress in the last 200 years

MASSACHUSETTS GENERAL HOSPITAL AT 200
(the Legislature created Mass. General on Feb. 25, 1811, but it didn’t open to patients until a decade later.)

"When Massachusetts General Hospital opened in 1821, most patients were required to apply in writing for admission. They could be turned away for “bad morals’’ — and discharged for spitting, drinking, smoking, or swearing. Patients who followed the rules stayed for two months on average at an all-inclusive daily rate of 43 cents.

"They endured hemorrhoid and cataract surgery and amputations without anesthesia — assistants held them down, and sometimes they got opium and brandy for pain. Patients seeking treatment of broken legs or arms died as often as they went home."

I'm hopeful that equally big gains will be made in the next 200 years, so that much of today's medicine will look primitive in retrospect.

In particular, of interest to readers of this blog who have been following the great advances made in the past half dozen years in kidney exchange, I hope the time will come soon when that will seem a primitive stopgap, replaced by e.g. xenotransplants or even stem cell therapy to help patients grow new kidneys, not to mention cures for diabetes and other causes of kidney failure...

Non-simultaneous kidney chains are getting longer

Mike Rees' revolution in non-simultaneous extended altruistic donor (NEAD) chains continues to grow in importance in kidney exchange. Since the 2009 NEJM paper reporting the first NEAD chain, which accomplished 10 transplants (and therefore required 20 surgeries, ten of them nephrectomies), chains have been getting both more frequent and often longer.

The venerable transplant center at the University of Pittsburgh reports its recent involvement in a long chain:
A UPMC First: Transplant Team Participates In Large Multi-State Kidney Chain Involving 32 Operations and 16 Transplants
"The paired kidney exchange, coordinated by the National Kidney Registry, involved 32 patients and 16 transplants performed at 12 U.S. hospitals over two months. It marked the first time that UPMC participated in a kidney chain."

The National Kidney Registry is one of the relatively nimble networks that, following the New England Program for Kidney Exchange, and Rees' Alliance for Paired Donation, have grown by recruiting sometimes overlapping networks of transplant centers.
Sean Hamill at the Pittsburgh Post Gazette gives the story a competitive angle by contrasting the NKR with the national exchange that is slowly gearing up (emphasis added, on which I'll comment after):

32-person chain nets 16 kidney transplants: 2 national groups in big competition

"This most recent chain started Dec. 17, 2010, and by the time it ended Feb. 11 it involved 16 donors and 16 recipients at 12 transplant centers in nine states from New York to California. Mr. Johnson's transplant and Ms. Dolezal's kidney removal both took place Feb. 10 in Pittsburgh and both of them are doing well.
...
"A national program that could push the number of paired donations from nearly 400 last year nationally to 3,000 or more a year has been the dream for the last half decade. That's significant when 93,000 people are on the national waiting list for kidneys and only about 17,000 a year get transplants

"Last fall, the United Network for Organ Sharing, an organization that oversees the nation's organ and transplant network, finally began its long-awaited pilot program that will attempt to do just that and link all of the eligible patients from the nation's more than 200 transplant centers.

"But Garet Hil, founder and president of the National Kidney Registry in Babylon, N.Y., which organized the 32-person chain, said UNOS's pilot program "is a failure."

"Mr. Hil, who runs a consulting and software development company, sits on the Kidney Paired Donation Pilot working group that has been trying to make the program work.

"I've witnessed a program with a flawed design, working in a bureaucratic way that's not going to get many people transplanted," he said Friday in a phone interview. "The program has been out since October and it's only done two transplants and we've done 60 since then -- including this chain" of which UPMC was a part.
...
"He has a host of criticisms with the pilot program, including that it allows only small chains that would give just two or three people new kidneys at a time, while the National Kidney Registry runs chains, like this recent one, where dozens of people get new kidneys.

"Ken Andreoni, an Ohio State University transplant surgeon who chairs UNOS's kidney committee, has heard Mr. Hil's arguments and concerns before and he believes he's just being too impatient.

"I'm in this for the 50-year- and 100-year-long issues," he said, adding that they will take time to solve.

"He concedes the pilot program is slowed by the bureaucracy of having to follow rigid rules that aim to maximize successful transplants and minimize risk.

"But that's the price you pay when you're creating what is to be a real national program that answers to everyone, unlike Mr. Hil's registry.

"The pilot program has had a difficult time because, first, the patients who have signed on are typically the most difficult patients to match, with significant variables that make them hard to match.

"And while UNOS would love to run long chains like the registry, currently it believes that shorter, two- and three-person-paired chains are safer because they're less complicated, Dr. Andreoni said.

"He doesn't see it as the competition Mr. Hil does.

"In the end, if you get people off the waiting list, that's great," Dr. Andreoni said, "no matter who is doing it."

*******
About the controversy about long versus short chains, the concerns about long chains are based in part on a modeling error, see this earlier post: Nonsimultaneous kidney exchange chains produce more transplants than simultaneous chains

And the issue about having only hard-to-match patients enrolled so far in the national exchange, that is likely to be a problem that will need to be addressed at a fairly fundamental level, because the current incentives make that a tempting strategy for transplant centers. See this earlier post: Kidney exchange when hospitals are the players

Finally, regarding time horizons, I sure hope that in 50 and 100 years we'll have better cures for kidney disease than transplantation. But for the next 10 or 20 it's likely to be the best solution by far for patients with end stage renal disease, and so we'd better keep figuring out how to make the best use of it.

Marketplace for retired economists

The AEA is attempting to make another part of the job market thick: it is linked from the main JOE page at  http://www.aeaweb.org/joe/

Here is the direct link.

Available Retired Faculty Listing: "As an experiment, the AEA is initiating a listing of retired economists who may be interested in teaching on either a part-time or temporary basis. Individuals can add or delete their name at any time during the year. The listing will be active from February 1 through November 30 each year. Listings will be deleted on November 30; the service will be closed during December and January, re-opening on February 1."


Right now the list is waiting to be populated by retired faculty seeking part time or temporary work.

The state of economic theory

Jeff Ely at Cheap Talk reviews the state of economic theory and lists four positive signs (among them a plug for market design):

1. Theorists have been recruiting targets for high-profile private sector jobs.  Michael Schwarz and Preston McAfee at Yahoo!, Susan Athey at Microsoft for example.  In addition the research departments in these places are full of theorists-on-leave.
2. Despite some overall weakness, theory is and always has been well represented at the top of the junior market.  This year Alex Wolitzky, as pure a theorist as there is, is the clear superstar of the market.  Here is the list of invitees to the Review of Economics Studies Tour from previous years.  This is generally considered to be an all-star team of new PhDs in each year.  Two theorists out of seven per year on average.  (No theorist last year though.)
3. In recent years, two new theory journals, Theoretical Economicsand American Economic Journal:  Microeconomics, have been adopted by the leading Academic Societies in economics.  These journals are already going strong.
4. Market design is an essentially brand new field and one of the most important contributions of economics in recent years.  It is dominated by theorists.

HT to Eric Budish, who is one of those guys Ely has in mind...

Matching conference at Northwestern

A recent conference at Northwestern looked at matching and market design: Matching: findings, flaws and future 

February 18th

• 1.30-2.30pm
  The Mechanism Design Approach to Student Assignment [paper #1 | paper #2] [slides]
  Parag Pathak, Massachusetts Institute of Technology
• 2.30-2.45pm - Break
• 2.45-3.45pm
  Matching Models versus Mechanism Design for Allocating Indivisible Goods[paper #1 | paper #2] [slides]
  Speaker: Eric Budish, Booth School of Business, Chicago University
  3.45-4.00pm - Discussant: Utku Unver, Boston College [slides]
• 4.00-4.15pm - Break
• 4.15-5.15pm
  Title: Sorting and Factor Intensity: Production and Unemployment across Skills[paper] [slides]
  Speaker: Philipp Kircher, LSE and UPENN (on leave)
• dinner at stained glass for 7.15pm on first night (invite only)

• February 19th

• 9.00 -9.30am continental breakfast
• 9.30-10.30am
  Buyers, Sellers and Middlemen: Variations on Search-Theoretic Themes [paper]
  Speaker: Randall Wright, University of Wisconsin
  10.30-10.45am - Discussant: Jan Eeckhout, University Pompeu Fabra [slides]
• 10.30-10.45am - Break
• 11.00-12.00pm
  Role of Preferences in Matching with Randomization [paper #1] [paper#2] [slides]
  Yeon-Koo Che, Columbia University
  12.00-12.15pm - Discussant: Marek Pycia, UCLA [slides]

Microeconomics and Market Design at Yahoo!

Microeconomics and Market Design  By Michael Schwarz and David Reiley

• What are the effects of complexity in mechanism design? Participating in an auction mechanism (or any market institution) requires time and effort on the side of the buyers. That in turn may lead some buyers to bid very conservatively, or not to participate at all, in order to economize on effort. We lack a theory for quantifying the complexity of a mechanism.
  
• Auction theory and matching theory offer models and algorithms for allocating goods or matching market participants. However, the majority of markets do not use structured mechanisms (such as auctions and matching algorithms). Why are some markets (such the medical residency match) using centralized matching procedure while other markets (such as the purchases of automobiles with various options packages) do not? Answering this question may help to design structured market mechanisms for the markets where chaotic negotiations rule the day.
  
• Understanding when and how reputations emerge, and how to improve the designs of structured reputation systems. Reputations of individuals and businesses play an important role in economic and personal life. With some exceptions, most notably in electronic commerce, the mechanisms for accumulating reputation are informal rather than structured.
  
• How should a firm set posted prices for a menu of products? Although economics offers a theoretical framework for how to set prices, most theory assumes omniscience about demand. To build a practical pricing engine, one needs a system that generates exogenous price variation and then uses it to calculate appropriate prices going forward. Yahoo! offers thousands, even millions, of different advertising products, so estimating a demand system suffers from the curse of dimensionality as well as practical constraints (perceived fairness, etc.) in generating price variation. We are looking for better theory and econometrics for the problem of building a pricing engine.

This is part of Yahoo!'s Key Scientific Challenges Program, about which they say

"We invite PhD students working in each of our core research areas to review the challenges listed below and submit an application between January 24th - March 11th, 2011 to be considered for the Key Scientific Challenges Program."

Program Award Benefits

• $5,000 unrestricted research seed funding which can be used for conference fees and travel, lab materials, professional society membership dues, etc.
• Exclusive access to select Yahoo! datasets
• The unique opportunity to collaborate with our industry-leading scientists
• An invitation to this summer's exclusive Key Scientific Challenges Graduate Student Summit where you'll join the top minds in academia and industry to present your work, discuss research trends and jointly develop revolutionary approaches to fundamental problems

HT: Noam Nisan at AGT

NPR On Point discusses kidney allocation proposals

The On Point show at National Public Radio has a broadcast on the pros and cons of the recent proposal to change the allocation of deceased donor kidneys, to take more account of age.

Allocating Organs: Who Gets the Next Kidney?

Guests:

Rob Stein, health reporter for the Washington Post. Read his article “Under kidney transplant proposal, younger patients would get the best organs.”
Kenneth Andreoni, professor of surgery at Ohio State University and chair of the Kidney Transplantation Committee, which is reviewing kidney organ procurement, distribution, and allocation for the United Network of Organ Sharing.
** See the full “concept document” and submit your comments.
Lainie Friedman Ross, professor and associate director of the MacLean Center for Clinical Medical Ethics at the University of Chicago.
Arthur Caplan, professor and director of the Center for Bioethics at the University of Pennsylvania.

Lainie Ross worries about the effect of this change on the incentives for live donation (starting just before minute 10). 

The special (Medicare) status of kidney disease

Special Treatment — The Story of Medicare’s ESRD Entitlement
NEJM, February 16, 2011, by Richard A. Rettig, Ph.D.

"In October 1972, Medicare, which had been enacted for the elderly in 1965, was extended to the disabled by the Social Security Amendments. One provision, added at the last minute, declared that persons with chronic renal disease who required hemodialysis or kidney transplantation “shall be deemed to be disabled” for purposes of Medicare Parts A and B. To be eligible for this Medicare coverage, patients had to have paid into the system long enough to be “fully or currently insured” under Social Security or be the spouse or dependent child of someone who was. This near-universal Medicare entitlement for end-stage renal disease (ESRD) has now been in effect for nearly 40 years.
...
In 2008, there were more than 112,000 new patients with ESRD in all eligibility categories (elderly, disabled, and ESRD-only). There were approximately 548,000 U.S. patients undergoing dialysis at the end of 2008, but many of them were not covered by Medicare, either because they had not yet fulfilled the initial waiting period or because they had received transplants and their coverage had ceased after 3 years. Medicare expenditures for ESRD in 2008 were $26.8 billion for Parts A and B. Non-Medicare expenditures for ESRD (covered by employer-sponsored group health plans or paid directly by patients) added another $12.7 billion, for total national expenditures of $39.5 billion.¹ According to an analysis by the U.S. Renal Data System, ESRD beneficiaries represented 1.3% of all Medicare beneficiaries and used 7.9% of Medicare expenditures.
...
"So how was it that full coverage for treatment of one specific disease became enshrined in U.S. law? The story began during World War II, in Nazi-occupied Holland, where Willem Kolff invented the artificial kidney; after a visit by Kolff to the United States in 1947, a modified version of his machine was developed and used in Boston by John Merrill and colleagues at the Peter Bent Brigham Hospital. During the Korean War in the early 1950s, proof of concept was provided for treating acute renal failure with this Kolff–Brigham device. In 1960, Belding Scribner and Wayne Quinton, at the University of Washington Hospital in Seattle, invented an implanted arteriovenous shunt that made it possible for a patient to be connected to the machine repeatedly and ushered in the use of hemodialysis as a treatment for chronic renal failure. The shunt was later replaced by a subcutaneous fistula developed by the physicians Michael Brescia and James Cimino at the Bronx Veterans Administration (VA) Hospital.
...
" In Seattle, in response to financial limitations, access to dialysis was restricted through explicit rationing carried out by an anonymous lay committee — an approach that was laid bare for the American public in a Life magazine article in November 1962.² Elsewhere, decisions limiting access to dialysis were tacitly incorporated into traditional medical decision making. Dialysis highlighted the tragic choices that had to be made when fundamental societal values encountered problems of scarcity.
...
"In November 1971, a patient received dialysis — albeit very briefly — at a hearing of the House Committee on Ways and Means. Many casual observers attribute the passage of the 1972 legislation to this event, overlooking the myriad other contributing developments. But the committee saw that the patient was a family man, in his prime working years, who could be rehabilitated and returned to gainful employment — with help from his government. Ultimately, the ESRD entitlement was added to Medicare because the moral cost of failing to provide lifesaving care was deemed to be greater than the financial cost of doing so."