Organ donation and compensation in Singapore: new legislation

A new law was passed on March 24 in Singapore, allowing compensation for live organ donation. It's not yet clear what this will mean in practice: I excerpt below from a number of stories.

Singapore allows payment for living organ donors
"After a heated two-day debate, in which some legislators raised concerns that the new law might lead to open organ trading, four of the 84 members of parliament abstained the final vote and one voted against, the Straits Times newspaper reported.
...
"Not all legislators were convinced, although Health Minister Khaw Boon Wan had assured parliament that the new law "is not to legalise organ trading."
"We are correcting our current extreme position of criminalising all kinds of payment to the donor," Khaw said.
Singapore already had a legal system to prevent organ trading, he said. "And we will be strengthening it," Khaw added.
The new law, which also contained some other changes, allows living organ donors to be reimbursed the costs for items like travel, accommodation, costs of domestic care and child care, loss of income and long-term medical care.
..
"Another dissenter, Halimah Yacob, said that many foreign workers in Singapore, who are hit hard by the recession, could become "a ready and vulnerable pool of organ donors to be exploited and abused.""To a desperate foreign worker, even a reimbursement of S$10,000 would be attractive compared to going home empty-handed with a huge debt waiting for him," the report quoted her as saying.
The Singapore government proposed to change the law after ailing retail magnate Tang Wee Sung was jailed for a day and fined S$17,000 in June last year for trying to buy a kidney from an Indonesian donor.Tang finally received a kidney from former organised crime boss Tan Chor Jin, who was hanged in a Singapore prison in December for the killing of a nightclub owner."

A tough moral choice : Slew of safeguards promised as MPs approve recompense for organ donors, though five remain unconvinced.
"IT WAS a moral dilemma Health Minister Khaw Boon Wan apologised for imposing on Members of Parliament, after two days of intense debate.
Their tough choice: Should they correct the unfairness against: altruistic organ donors by allowing them reimbursement for their financial losses, but at the risk of opening a backdoor for abuse? "

Singapore allows financial payment to organ donors
"Previously, it was illegal for a living donor to be financially compensated but the issue came to a head last year when a local tycoon was jailed for one day for attempting to pay off a prospective Indonesian kidney donor.
"This is a bill about fairness, being fair to donors who do suffer financial consequences as a result of their act of donation," Health Minister Khaw Boon Wan told parliament Tuesday during the final debate on the issue.
"I know the controversial nature of paying donors," Khaw said. "But we also realise that it is unfair to allow genuine donors to bear all the financial consequences of their altruistic acts."
Khaw said he disagreed with the suggestion made by some lawmakers that foreign donors be barred from accepting financial compensation to prevent exploitation of nationals from poor countries.
"How can we discriminate against the foreign donors in this fashion?" Khaw said.
"Once we decide that some payments can be ethically made, our law cannot unfairly discriminate against organ donors based on their nationalities," he said."

Singapore's Human Organ Transplant Act dates from 1986, when it instituted an opt-out system for all of the country's non-Muslim citizens. Under the law, citizens could opt out of becoming organ donors, but all those who did not would be considered as organ donors upon their death, and would in turn receive priority (over those who opted out) for receiving deceased organs. Unusually among countries with opt out policies, organ donation has been enforced even over the objections of next of kin.
As amended in January 2008, the Human Organ Transplant Act (HOTA) now includes Muslim citizens of Singapore.

Giving anonymously, for a fee

How to give money to a friend anonymously (and be sure that it is received)? Try Giving Anonymously, established "to facilitate giving in such a way that "money" does not hinder friendship." They will send along your gift via their own check, and send you a copy of the cancelled check.

Anonymity when giving charity has a long history. It plays a big role in Jewish thought, for example, as codified by the 12th century scholar Rabbi Moshe ben Maimon (aka Maimonides, or the Rambam).

When looking at repugnant transactions, often the addition of money is what arouses repugnance (e.g. kidney donations don't arouse the repugnance of kidney sales). Something like that seems to be at work here; you might like to give someone a gift, they might need and want one, but the complications of giving and receiving money from a friend might prevent an otherwise mutually desired transaction from going through.

What is the price of anonymity? Doing it through this particular anonymizing service costs $2.50 + 2.5% of your gift.

Update (and sign of the hard times): Today's Boston Globe has a story on a related theme: Colleagues pitch in to ease the pain.
"As the economic downturn persists, specialists who follow workplace trends say more employees are trying to save colleagues' jobs through voluntary pay cuts or freezes, furloughs, and donations. "

Markets for (viewing) bodies

Among the oldest repugnant transactions are those that involve dealing with the dead. In the early 1800's, British medical schools illegally purchased cadavers for anatomy classes from grave robbers called "resurrection men," because the only cadavers legally available for dissection were the bodies of executed murderers. (The Harvard Medical School is in Boston rather than Cambridge, I understand, because of an arrangement offered by the city of Boston to supply unclaimed cadavers.) But those constraints have been relaxed over time, and in my 2007 paper Repugnance as a Constraint on Markets, I used as an example the "Bodyworlds" museum shows that tour the world, allowing museum goers to see cadavers (posed as if engaged in lifetime activities) in detail previously available only to medical students (and here is an essay on the value of that experience to medical students: Dead Body of Knowledge).

But while the laws governing the trade in corpses have been relaxed, there remain considerable feelings of repugnance about desecrating corpses, and these museum shows have also aroused opposition. The latest news is that such a show is planned as a travelling exhibit in Israel. Judaism has strong norms about respect for the dead, and it seems likely that there will be considerable controversy: Controversial 'Body Worlds' exhibit based on preserved human bodies scheduled to arrive in Israel next month. Various religious body gearing up for battle against show, arguing it violates the dignity of the dead .

(Meanwhile, elsewhere in the Middle East, the tensions between secular and religious, ancient and modern, is of a very different sort:
Hardline Saudi Clerics Urge TV Ban on Women, Music.
" ''No Saudi women should appear on TV, no matter what the reason,'' the statement said. ''No images of women should appear in Saudi newspapers and magazines.'' ")

Google's auction for TV ads (and some thoughts on Practice and Theory)

Noam Nisan at Algorithmic Game Theory posts a preliminary version of his paper Google's auction for TV ads.

It is part of a post titled AGT and practice, which is worth reading along with the paper. In the paper, Nisan and his coauthors first describe the Google system and some of its requirements, then outline a (too) simple model (an ascending auction of the Demange, Gale, Sotomayor line), and then discuss ways in which the model is too simple.

All of this made me think of writing a post sometime called "Practice and Theory." I don't know that I have enough to say on that right now, but the main idea would be to reflect on some of the ways that market design, and the theoretical work that supports it, differ from traditional (theoretical) game theory.

In a traditional theory paper, a problem is presented, along with a model of that problem, and an exact solution. Producing such a paper is a bit like finding a fixed point: in the course of proving the theorem, it may be necessary to adjust the model, and the statement of the theorem, and perhaps the definition of the problem, in order that the parts all fit together properly.

In a market design paper, in contrast, the problem and to a large extent the model may be fixed in advance, and so what has to be adjusted is the solution. Sometimes an exact solution can't be found (perhaps an impossibility theorem shows that there is no exact solution), and instead some sort of approximate solution is found. Traditional theorists sometimes look at the results and say that they don't look like a good theory paper, which should find an exact solution. Part of our job as market designers, and theorists who do market design, is to help explain this difference.

Update on scalping

My old friend the sports economist Larry DeBrock writes to update my recent post on Scalping and intermediation:

"...the Cubs won a big lawsuit in 2003 after they set up a wholly separate firm “Premium Ticket Services” and transferred GREAT seats to them before opening tickets to the general public. They made some tremendous markups (reported to be 30 times face) on these seats.
Attached is the law review paper about this case.
Jasmin Yang, A Whole Different Ballgame: Ticket Scalping Legislation and Behavioral Economics?, 7 VAND. J. ENT. L. & PRAC. 111, 111 (2004)."

I can't resist adding that, long, long before Larry became Dean of the College of Business at the University of Illinois in Urbana Champaign (so long ago that it was still called the College of Commerce, and the Rand Journal was still the Bell Journal), he coauthored what I always hoped would become the definitive paper on strikes in major league baseball.

Market for book reviews: Amazon version

Here's a nice description of how Amazon's reviews are ordered: at the top are the ones rated most useful, both positive and negative: The Magic Behind Amazon's 2.7 Billion Dollar Question

"Even the behavior of clicking Yes or No is elegant. Amazon tracks who rates each review as helpful, allowing each person to only vote once. This prevents "gaming the system" by voting for a friend's (or your own) review multiple times. Clicking either Yes or No pops up a quick message, saying the vote will take effect within 24 hours. (This delay also reduces gaming.)
Amazon quietly bumps the three most helpful reviews to the top. It tries to balance positive and negative reviews, so shoppers get a balanced perspective. An interesting side effect is how these selected reviews get more votes. If they are controversial (in that not everyone agrees they were helpful), their ratio goes down, allowing the most helpful reviews to bubble up past them."

And here is a discussion of how online recommendation systems might decrease the total diversity of products: Online Monoculture and the End of the Niche (HT to MR)

Algorithmic Game Theory blog

Noam Nisan the eminent Hebrew University computer scientist, has a new blog, called Algorithmic Game Theory.

For economists who may not yet know, Nisan is one of the pioneers on the interface of computer science, game theory, and economics. He's also one of the editors of the book Algorithmic Game Theory, and the advisor of a host of students and postdocs whose work we are going to need to be familiar with as the connections between CS and Econ grow closer.

Here is Nisan's blogroll of related blogs:
Adventures in computation
Combinatorics and more
Computational Complexity
Godel’s lost letter and P=NP
In theory
Market design
Michael Nielsen
My biased coin
My Slice of Pizza
Paul Goldberg
Shtetl optimized
TCS blog aggregator
Terry Tao
WebDiarios de Motocicleta,

and here are some links from my web page on Game Theory and Computer Science.

''Not everything that is immoral has to be illegal'

The quotation in the title of this post is from Romanian Justice Ministry legal expert Valerian Cioclei, and it comes from the NY Times story Romania Weighs Decriminalizing Consensual Incest .

"Three European Union nations -- France, Spain and Portugal -- do not prosecute consenting adults for incest, and Romania is considering following suit.
...
"Incest is defined as sexual intercourse between people too closely related to marry legally. In the United States, all 50 states and the District of Columbia prohibit even consensual incest, although a few states impose no criminal penalties for it..."

Incest is surely one of the prototypical repugnant transactions, namely one that people don't like to have others engage in. Such repugnance is often reflected in law, but by no means always. (E.g. there is no law against going to the front of a long line at the supermarket checkout counter and asking a person near the front to sell you their spot, i.e. to move to the back of the line and let you into their place in return for a cash payment. But here's a story of an economist , Oz Brownlee, who, after trying to do that, decided that the best course of action was to leave the store without buying anything.)

A famous article by Jonathan Haidt (Haidt, J. (2001). The emotional dog and its rational tail: A social intuitionist approach to moral judgment. Psychological Review. 108, 814-834 ) begins with an example of consensual incest.
"Julie and Mark are brother and sister. They are traveling together in France on summer vacation from college. One night they are staying alone in a cabin near the beach. They decide that it would be interesting and fun if they tried making love. At very least it would be a new experience for each of them. Julie was already taking birth control pills, but Mark uses a condom too, just to be safe. They both enjoy making love, but they decide not to do it again. They keep that night as a special secret, which makes
them feel even closer to each other.
What do you think about that, was it OK for them to make love?

"Most people who hear the above story immediately say that it was wrong for the siblings to make love, and they then set about searching for reasons (Haidt, Bjorklund, & Murphy, 2000). They point out the dangers of inbreeding, only to remember that Julie and Mark used two forms of birth control. They argue that Julie and Mark will be hurt, perhaps emotionally, even though the story makes it clear that no harm befell them. Eventually,
many people say something like “I don’t know, I can’t explain it, I just know it’s wrong.” But what model of moral judgment allows a person to know that something was wrong, without knowing why?"

Haidt (and colleagues, particularly Paul Rozin) have studied the emotion of disgust, and think that a lot of moral judgements may be mediated by the disgust reaction (whose initial evolutionary significance is presumably to prevent us from eating spoiled food, etc.). This makes a lot of sense for incest (because evolution should help us avoid inbreeding, with the excessive concentration of recessive genes in offspring).

I suspect that many of the more clearly economic transactions that are or have been regarded as repugnant are less closely tied to hard-wired disgust. That is not to say that, as people who are culturally acclimated to find some kind of transaction repugnant (e.g. charging interest on loans was repugnant for centuries in Europe), we may not be able to recruit our disgust reaction to make sense of things we disapprove of. Just as not every repugnant transaction is against the law, they may not all originate with (or even activate in a secondary manner) feelings of disgust. (See my other posts on repugnant transactions for a variety of examples...)

Update: see an article on disgust and moral judgement in the March 2009 issue of The Jury Expert (a very task oriented journal focused on picking and persuading jurors): Grime and Punishment: How Disgust Influences Moral, Social and Legal judgments

School choice in Belgium: update

In an earlier post, I discussed some of the problems in the school choice systems in Belgium, and noted that Estelle Cantillon had organized a conference on the subject in Brussels in January.

Estelle's conference has had some effect. She writes "The parliament of the French-speaking Community will adopt tomorrow a new school enrollment decree. The article says that it will be centralized (coordination among networks), that parents will be asked for their preferences, ... The details will be worked out after the elections in June. " Inscriptions: un nouveau décret, trois mesures

Economics Job Market “Scramble” for New Ph.D.s

To candidates on the economics job market (and to graduate placement directors): the scramble opens for registration tomorrow (March 24), and is open one week only (registration closes on March 30). There's no special benefit to registering on the very first day, but if you haven't registered by the last day you can't participate, so, if you're planning to register, don't wait til the last day (behavioral economist's advice).

The back story on this is that new Ph.D.s in economics have been busy since the first days of the year interviewing for jobs. The first stage of the interviewing process was at the annual professional meetings in early January. For jobs at universities, the latter stage of the interviewing process involves "flyouts," campus visits at which the candidate meets the faculty, and gives a research seminar or teaching demonstration, or sometimes both. While many jobs have been filled by now, there are both candidates and jobs still available. Many of the still unmatched candidates and still unfilled jobs are already engaged with each other in the courtship process, and are slowly working towards offers and acceptances. However there are also people and jobs still available who failed to connect with each other in the earlier parts of the market.

To make it easier for people and jobs to connect at this late stage of the market, the American Economic Association's Ad Hoc Committee on the Job Market* started a simple "scramble" in the 2005-06 academic year. It is a pair of web pages on which candidates and jobs can list their continued availability. See the Scramble Guide for details. This year's scramble opens tomorrow, March 24, and stays open for registration for a week. After that it becomes visible to registered participants on both sides of the market.

It doesn't attempt to do any more than make the two sides of the market more visible to each other, and after two weeks it closes. Once registration closes on March 30, the site is passive, it isn't updated. It is up to candidates and jobs to contact each other.

There is one new feature this year, which I'm slightly ambivalent about. Some departments that entered the scramble last year complained that they were overwhelmed by the large number of new applications they received. Faced with the threat of employers declining to participate in the scramble, the Committee decided to allow employers to register but withhold their information from job candidates. So this year there will be some "invisible" employers registered for the scramble, who will be able to see the candidates and contact those they wish, but whose own contact information will not be available.

So far, the scramble hasn't been a giant part of the market; most jobs have (fortunately) been arranged earlier, through the regular process. Last year, in the 2008 scramble (following the 2007-08 job market) 100 employers and 361 applicants registered. We conducted a followup survey of employers and received 30 replies. Of those employers who responded, 22 contacted people in the scramble, 19 interviewed someone from the scramble, and 10 hired someone from the scramble (one hired two people from the scramble) . 17 of the 22 respondents who contacted applicants in the scramble were academic economics departments, as were 8 of the 10 respondents who reported hiring through the scramble.

Every economist is important. Good luck to those still on the job market.

To summarize. 2009 Job Market Scramble Important Dates:
March 24: Registration Opens
March 30: Registration Closes
April 1 : Scramble Website will open for viewing by registered participants only
April 11: Scramble Viewing will close

*American Economic Association Ad Hoc Committee on the Job Market
Alvin E. Roth (chair), John Cawley, Peter Coles, Phillip Levine, Muriel Niederle, John Siegfried

The Harvard of Auctioneering

I was struck by this line in a story in the NY Times:
"The auction itself began at 10:15 a.m. when Rob Nord, a professor of bid calling at the Missouri Auction School (“The Harvard of Auctioneering”), started with Lot 1: four diamonds varying in weight from 1.1 to 1.4 carats."

Here is the story: Selling the Diamonds the Government Doesn’t Need , which is about how the US government sells off items seized in the course of federal crimes, and, lately, acquired by the government in other ways.
"Mr. Levin, who, on average, takes a 10 percent cut from his auctions, has been very busy of late. In the last few years alone, he has sold for the government smuggled horses in Arizona, stolen cab medallions in Boston, 54,000 pounds of smoked Chinese scallops, a shipping container of blue jeans, illegally marketed Freon and a million packs of untaxed cigarettes.
"Tapping what could be a growing market, Mr. Levin recently secured a contract with the Federal Deposit Insurance Corporation to auction furniture, fixtures and equipment seized from failed banks around the country."

And here is the website of the Missouri Auction School, which does indeed mention that it is called the "Harvard of Auctioneering." Here are some sentences from the description of their course (I have always thought that the different chants used by auctioneers of different products in different places would be worth study):
"The classroom portion includes small group sessions learning the auction chant from leading auctioneers from around the country. It also includes those top auctioneers sharing business insights and secrets with the entire class."

Market for childrens' books

Bestsellers in any category are what make publishing profitable. But childrens' books must be very special, because a bestseller can have high sales for a long time, as new generations of the target audience are born. I've always thought that this must be especially true for those books made of thick cardboard, suitable for chewing on as well as reading, since each new reader needs a new copy (chewing cuts down on the used book/hand me down market). But I hadn't guessed just how big the revenue stream is.

Both of my children enjoyed "The Very Hungry Caterpillar," which celebrates its 40th birthday this week: Happy birthday, hungry caterpillar!

" 'The Very Hungry Caterpillar,' who eats his way through the book, leaving a trail of holes behind, has sold 29 million copies and has licensing deals, Newsweek reports, of $50 million annually. With the money, Carle established the Eric Carle Museum of Picture Book Art in Amherst, Mass.; its exhibits have celebrated works by Dorothy Kunhardt ("Pat the Bunny"), Arnold Lobel ("Frog and Toad") and Maurice Sendak ("Where the Wild Things Are"). "

Scalping and intermediation

The resale of tickets for concerts and sporting events, at higher prices than those at which they were initially made available, is often regarded as "scalping," a repugnant transaction that is illegal in some states. (See e.g. Greg Mankiw's post about resales of Jay Leno tickets...)

But the lines are getting less clear, as artists and sporting venues try to make use of the secondary market themselves, to benefit from the higher prices enabled by discriminatory pricing:
Concert Tickets Get Set Aside, Marked Up by Artists, Managers .

"Less than a minute after tickets for last August's Neil Diamond concerts at New York's Madison Square Garden went on sale, more than 100 seats were available for hundreds of dollars more than their normal face value on premium-ticket site TicketExchange.com. The seller? Neil Diamond."

..."Secondary ticket sales are viewed by Ticketmaster, concert promoters and artists as one of the biggest -- yet thorniest -- sources for revenue gains. In 2006, Ticketmaster launched TicketExchange in response to pressure put on its profit margins by secondary-ticket sellers such as StubHub. But in doing so, it opened the company to criticism by ticket brokers, fans and politicians, who accuse the ticketing giant of profiteering and obfuscation.
Ticketmaster is moving to distance itself from some parts of the secondary ticketing market. It is in the process of hiring an investment bank to try to sell another resale service, TicketsNow, according to people familiar with the matter.
Virtually every major concert tour today involves some official tickets that are priced and sold as if they were offered for resale by fans or brokers, but that are set aside by the artists and promoters, according to a number of people involved in the sales."

One of the interesting things about this story is how Ticketmaster and the artists seek to put some distance between themselves and the secondary market. Luke Coffman (who you can try to hire next year), has a paper that seeks to understand this: Intermediation Reduces Punishment .

As part of his investigation into how people view economic transactions, he runs experiments that show that charging a high price through an intermediary may be seen as less blameworthy than charging a high price directly, even if going through an intermediary means that the ultimate price charged is higher than it would have been with a direct sale. And, he finds, this doesn't seem to result from confusion; apparently putting some distance between yourself and an act that may be regarded as blameworthy dilutes the blame, even in the eyes of observers who understand that you are doing it for that reason.

The "middleman" view of scalping gets some support from Trent Reznor of the band Nine Inch Nails (courtesy of Eric Crampton's blog Offsetting Behavior, for which HT to MR).

Luke will be talking about his work on intermediation, and related work on how people perceive the moral content of economic transactions, in our Experimental Economics class today.

Match Day for new doctors

Today is the third Thursday in March, Match Day for young doctors seeking their first job through the National Resident Matching Program (NRMP).

Here is the NRMP press release. Almost 30,000 applicants (11,000 from foreign medical schools) sought the 22,427 first year positions available in this year's match. About 95% of the available positions were filled through the match, the rest are filled in a post-match "scramble." (The organization of the scramble is under discussion, and here's the WSJ's account of it.)

The NY Times covers match day with a story and a picture: A Medical Student’s Rite of Passage . As in many discussions of labor markets, the author finds that many medical students wish they had more control over where they are going. Some of them attribute this loss of control to the match process, while others know something about how the medical market worked before the match. (Among the online comments on the story is this one:
"I wish they did something like this for law students. The job experiences and training available to new lawyers are extremely uneven. Plus it is on the law student to secure that first job on the open market, with no real guarantees of getting hired."

There's a new book by Brian Eule, Match Day: One Day and One Dramatic Year in the Lives of Three New Doctors, that follows three women through the match, one of them now his wife. I haven't seen the book yet, but I talked to him a number of times while he was writing it, and he once gamely sat through a lecture in my Market Design class.

788 couples went through the match this year as couples (some others may go through without identifying themselves that way, and the NY Times story remarks that some were disappointed not to have gotten jobs together). For the technically inclined, here's an account of how the new couples algorithm works to allow couples to express their preferences over pairs of jobs (and of the design process that led to the new match algorithm that's been in use since 1998):
Roth, A. E. and Elliott Peranson, "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," American Economic Review, 89, 4, September, 1999, 748-780.

Black market kidney sales in the Phillipines

Last Friday I was part of a panel at Harvard at the National Undergraduate Bioethics Conference , at which a panel consisting of me, Frank Delmonico, and Nir Eyal, and moderated by Dan Brock, was asked to consider the question "Should willing sellers be permitted to sell body parts to willing buyers?".

Among other things, I defended the point that the performance of a potentially regulated legal market can’t be well predicted from the performance of unregulated, illegal markets. Frank largely disagrees with that, and expects that any regulation short of attempting to ban organ markets outright will inevitably deteriorate into the kinds of illegal markets we see in some parts of the developing world. Regardless, it's good to pay attention to the black and grey markets around the world. Here's an account of such a market in the Phillipines: No Turning Back. Some aspects of this market are quite black (the subject of the story is threatened with retribution if he changes his mind once medical tests have been paid for), and some are grey (quite a few medical tests are done, although perhaps not to the standard we would like), and some are not even so grey (the subject of the story is paid, and gets a motor vehicle and a house out of it, and would do it again).

"Lito, 23, a resident of Gumaca, Quezon, who sold one of his kidneys, knew the stakes just got higher when he was told before the transplant procedure that he could not back out anymore. A friend of his decided to pull-out. “They are hunting him down. They want to have him killed." ... "On February 14, 2007, the friend accompanied Lito to a house in Barangay Tikalan, a village in San Juan, Batangas where a man named “Junior” who was referred to by his men as the “manager,” housed other would-be donors.“Junior” is also an organ donor. The following day, Lito and nine others were brought to a private hospital laboratory in front of the National Kidney and Transplant Institute (NKTI) where many people were having their blood samples taken. They also underwent a number of tests. X-rays were also taken. Junior paid for the procedures. " ... "For over a month after the first tests, Lito shuttled back and forth from Batangas to Metro Manila in order to undergo various tests in different hospitals. In each of the trips, he was accompanied by either “Junior” or one of his men. The purpose, he was told, was to look for a match. ... "Back home in Gumaca, Lito found that money has a way of slipping easily between one’s fingers. In his case, it lasted only for six months. Almost half of the amount he got from selling his kidney—about P40,000—went to the payment of debts. With the rest of the money he was able to buy a tricycle and a small dwelling. Months later, however, he had to pawn the tricycle to pay for his daughter’s hospitalization. Lito does not regret going through the operation. “I was in dire straits,” he explained. If he did not go through it, he said, he would not have been able to pay his debts. Besides, he said, he did it for his family’s sake. “I am ready to give up my life, for the sake of my family.” "

Market for information

Mostly we think it is good for information to be freely available, but one place where we often do not is in the adversarial system of trial by jury. The rules of evidence permit judges to decide what evidence is admissable, and what is not. I have served on juries in which we were instructed not to read news accounts of the trial we were part of. Sometimes juries are sequestered, so that they cannot have much contact with the outside world. That has all gotten a little harder to enforce, now that everyone has Google in their pocket: Mistrial by iPhone: Juries’ Web Research Upends Trials .

"Last week, a juror in a big federal drug trial in Florida admitted to the judge that he had been doing research on the case on the Internet, directly violating the judge’s instructions and centuries of legal rules. But when the judge questioned the rest of the jury, he got an even bigger shock.
Eight other jurors had been doing the same thing. The federal judge, William J. Zloch, had no choice but to declare a mistrial, wasting eight weeks of work by federal prosecutors and defense lawyers."

Patents Versus Markets: a Market Design Experiment

The March 16 issue of Science contains a laboratory experiment concerned with a market design question (subscription required): Promoting Intellectual Discovery: Patents Versus Markets by Debrah Meloso, Jernej Copic, and Peter Bossaerts.

(Science is one of those journals with a pre-publication news embargo designed to promote press coverage; here is the corresponding Cal Tech press release (HT to Alex Tabarrok at MR).

While a lot of market design work is prompted by very specific markets, this paper deals with a more abstract question: could a market system without patents do as well as a patent system in encouraging innovation, if innovators could use their private information to make investments that would have unusually high returns?

Here is the abstract:
"Because they provide exclusive property rights, patents are generally considered to be an effective way to promote intellectual discovery. Here, we propose a different compensation scheme, in which everyone holds shares in the components of potential discoveries and can trade those
shares in an anonymous market. In it, incentives to invent are indirect, through changes in share prices. In a series of experiments, we used the knapsack problem (in which participants have to determine the most valuable subset of objects that can fit in a knapsack of fixed volume) as a
typical representation of intellectual discovery problems. We found that our “markets system” performed better than the patent system."

The key experimental treatment is described thus:
"In the markets system, participants were given an equal number of shares in each of the items of the particular KP, as well as cash. They could trade these shares in an anonymous, electronic exchange platform during a preset amount of time (840 s). The allowed time was double that of the prize system to compensate for the fact that subjects needed to perform two tasks: to solve the KP and to trade (to exploit the knowledge they gained from solving the KP). The platform was organized as a continuous double-sided open book (Fig. 1B), like most purely electronic stock markets in the world. The accumulation of orders generated the first transactions after about 100 s. Thereafter, trading remained brisk in virtually all markets (Fig. 1C). After markets closed, each share in an item that was in the optimal solution paid a liquidating dividend of $1; shares corresponding to items not in the optimal solution expired worthless."

The main results:
"The correct solution was found under the markets system whenever this was the case under the prize system. Therefore, if the concern is to design a system that produces the optimal solution, the markets and prize systems are equivalent. In one important respect, however, the markets system outperformed: Significantly more participants reported the correct solution than under the prize system (Fig. 2A). For both systems, the fraction of participants who reported the correct solution declined with problem difficulty (Fig. 2B). The fraction may seem to decline faster for the markets treatment, but the difference in slopes was not significant. An outlier influenced the fits: Nobody ever solved the most difficult problem (difficulty = 6). It was solved in follow-up experiments [ran to check for robustness (11)], but only with the markets system, further corroborating its superiority.
"In the prize system, only the first to find the optimal solution is compensated, which may discourage many from spending effort. In the markets system, everyone could be compensated in principle, which may be sufficient to explain why more participants find the optimal solution. Alternatively, prices may convey information that facilitates problem solving for participants who would never find the optimal knapsack on their own. Figure 3A shows that prices indeed do provide a potential channel of communication: Prices of shares of items that were part of the optimal knapsack (“in” items) tended to be higher than shares of items that were not part of it (“out” items); the mean transaction price of in items was significantly higher than that of out items (P < 0.01)."

HT Joshua Gans of Core Economics

The marketplace for peer reviewed economics

Journals are the clearinghouses of academic economics, providing the proximate demand for the articles that economists supply. In my previous post (Science journals and science journalism) I discussed the fact that economics journals have a much longer delay between submission and publication than journals in science and medicine. Some of this has to do with the reviewing process.

Preston McAfee, a veteran editor, has written a wise and not so funny* article about the editing process, based on his long experience at the AER and, more recently, Economic Inquiry (where he initiated a policy of allowing authors to opt for an accept or reject decision without revision).

I recommend the article, even though it is difficult to summarize. It is not an apologia; he says:
"The way economists operate journals is perhaps the most inefficient operation I encounter on a regular basis."

*He also says "There is a lot of heartbreak in journal editing since most of the job is rejecting papers. If you are looking for amusing anecdotes, subscribe to Readers’ Digest."

Science journals and science journalism

After my recent post The production of news: The NEJM news cycle about the effects of the New England Journal of Medicine's news embargo policy on the production of news stories, I corresponded with two of the young leaders in the new economics of media, Matt Gentzkow and Jesse Shapiro. They pointed out that, aside from increasing the number of stories, an embargo might increase their quality, by preventing a "race to the bottom" in which the shortest, least well reported stories can come out before more carefully researched stories. With an embargo, reporters don't have an incentive to rush to publish, they know they can work on their story up until the embargo expires.

A separate issue was raised in an article Matt pointed me to, one that I had already noticed sharply distinguishes scientific journals like the NEJM and Science, which publish short articles weekly, from journals like the ones economists normally publish in, which publish longer articles, much less frequently, and with much longer delay. In Ingelfinger, Embargoes, and Other Controls on the Dissemination of Science News, Vincent Kiernan explores not only the effect of embargos, but also of the "Ingelfinger rule" (named after a former NEJM editor), which is that NEJM, Science, etc. won't publish an article that has in any substantial way been made available before publication. So, in particular, papers appearing in those journals can't first be posted on the web as working papers.

This is in stark contrast to the way economists work; the usual practice these days for an economist who finishes a paper is to put it up on the web even before it has been submitted for publication. Economics journals function as the archival sources of papers, not as the place they are first distributed. And this predates the internet; economists have communicated via pre-publication working papers at least since I entered the business, after the invention of the printing press, but before the word processor.

Partly this difference has to do with the speed of publication. A paper accepted by Science or the NEJM will likely appear not too many months after it has been submitted, while the process at most economics journals takes well over a year (and two is not so unusual). As a result, the weekly science journals seek to be a combination of science journals and science news sources, in a way that economics journals do not.

The difference between the two was first brought home to me in 1990, when I received a call from the then editor of Science, which turned into a proposal that I write an article for them summarizing work I had done studying various labor markets for new doctors. I had circulated a working paper on that subject in 1989, and at the time of the phone call from Science it was forthcoming in the American Economic Review, in 1991. I told the editor of Science that I would have to check with the AER, but that if I wrote the article, it would state clearly that it was a summary of the longer AER article. He replied that he would like to have the article, provided the short summary in Science came out before the original article in the AER.

I called Orley Ashenfelter, who was then the editor of the AER, and he said something very close to "go ahead and give Science the summary, a five page paper can't scoop a twenty five page paper." His feeling was that as long as the AER had the definitive version, there was no problem. And that is how I came to have two papers on that subject, published out of order, in

Roth, A.E., "New Physicians: A Natural Experiment in Market Organization," Science, 250, 1990, 1524-1528.
and
Roth, A.E., "A Natural Experiment in the Organization of Entry Level Labor Markets: Regional Markets for New Physicians and Surgeons in the U.K.," American Economic Review, Vol. 81, June 1991, 415-440.

(These papers were posted to the web so long ago that they are html versions made from the original text files, rather than pdf versions of the actual publications.)

Personalized advertising

As the world wide web is increasingly accessed by mobile devices (equipped with GPS, and used largely by a single individual) the ability to narrowly target advertisements is increasing: Advertisers Get a Trove of Clues in Smartphones .
"Advertisers will pay high rates for the ability to show, for example, ads for a nearby restaurant to someone leaving a Broadway show, especially when coupled with information about the gender, age, finances and interests of the consumer. "

"Applications that use GPS can offer even more specificity, including Loopt, Yelp, Urbanspoon, Where and almost any iPhone application that shows the pop-up box saying it “would like to use your current location.” Several firms are experimenting with a program called AisleCaster that can offer specials based on a person’s exact location in a supermarket aisle or mall.
Advertising systems can track not only the location of the phone, but also that person’s travel pattern: uptown New York to Nob Hill in San Francisco, for instance."

"For now, there are not enough people using smartphones to make it worthwhile for advertisers to use highly specific criteria. But as more people switch to smartphones, that will happen more frequently."

The article also discusses the privacy issue, and whether customers will be "creeped out" by ads that reveal how specifically they have been targeted. (I wonder if people will find it equally creepy to be targeted by a computer from a big database that no human looks at as by a human being at a dinner time call center...)