Some dating services seek to match likes to likes, e.g. South Asians, or Ivy League graduates. But there's also a market for the traditional complements: beautiful women and rich men. Here's a story about a party for just such talents, by Katherine Bindley in the NY Times: Banker Seeks Beauty.
"The invitation to the latest Fashion Meets Finance party — an affair that shamelessly includes only women who work in fashion and men from Wall Street — declared that the dark days are over — not just for the economy, but in the dating market. “We are here to announce the balance is restoring itself to the ecosystem of the New York dating community,” the party organizers said on their cheeky Web site."
...
"“From my experience, I’ve dated lawyers and doctors and they’re nice; I just prefer finance,” Ms. Yanush said, before applying a fresh gloss of candy-apple-red lipstick in the ladies room. “My girlfriends who are in long-term relationships with finance guys are very happy.” "
...
"The idea behind Fashion Meets Finance began in 2007 with Beth Newill, a merchandiser for Ann Taylor at the time, who found the garment district was a poor neighborhood in which to meet men. After speaking with a male friend who worked in finance and had expressed the same frustration about the absence of eligible women in the financial district, Ms. Newill organized regular happy hours for the two groups."
...
"The text with the latest invitation, the first party since January, was typical: “We fear that news of shrinking bonuses, banks closing and the Dow plummeting confused the gorgeous women of the city who understood that their shelf life is quick and fleeting like a senator’s South American love affair. The uncertainty caused panic which caused irrational decisions — there’s going to be a two-year blip in the system where a hot fashion girl might commit to a pharmaceutical salesman.”
The women were encouraged to hold on because the recession is over, and it would only be a matter of time before a boyfriend in finance enabled them to quit their jobs to be “tennis moms.”
Jeremy Abelson, 29, the founder of an online luxury newsletter called Pocket Change, who creates most of the Web site’s copy, said, “It’s offensive but it’s very realistic.” "
The article closes by quoting someone who didn't meet the woman of his dreams: "“Let’s just say I’m not going to find my future ex-wife here,” he said."
Sunday, September 13, 2009
Saturday, September 12, 2009
Debtor's prison in Dubai
The NY Times reports on criminal justice in Dubai: For a Bounced Check in Dubai, the Penalty Can Be Years Behind Bars
Here's what I wrote about debtor's prison, in Repugnance as a Constraint on Markets:
"The changing repugnance of debt and of involuntary servitude have even interacted in changes to bankruptcy law. In colonial America and the early years of the Republic, insolvent debtors could be imprisoned, or sentenced to indentured servitude (Coleman, 1974 [1999]). But as involuntary servitude became more repugnant and debts less repugnant, bankruptcy laws were rewritten to be less punitive to debtors."(p. 40)
Here's what I wrote about debtor's prison, in Repugnance as a Constraint on Markets:
"The changing repugnance of debt and of involuntary servitude have even interacted in changes to bankruptcy law. In colonial America and the early years of the Republic, insolvent debtors could be imprisoned, or sentenced to indentured servitude (Coleman, 1974 [1999]). But as involuntary servitude became more repugnant and debts less repugnant, bankruptcy laws were rewritten to be less punitive to debtors."(p. 40)
Service versus self service
In some markets you serve yourself, in others you are served. Which is the luxury? It depends.
The recent decisions by some universities to manage their shortage of central-campus parking has raised some eyebrows:
Recession? Valet Parking Arrives.
And, indeed, that story makes it sound as if some of the parking decisions are meant to increase customer service where there's a shortage of conveniently located parking.
That being said, it's often more convenient to be able to park yourself rather than have to rely on someone else. But parking lots (and, in Manhattan, multi-story garages served by car elevators) in which the attendants park all the cars allow more cars to be accomodated in a given amount of space. It may be a luxury to leave your car for someone else to park, but it's seldom a luxury to wait while your car is brought out of parking.
Years ago, a colleague from Brazil remarked that one thing she liked about living in the United States was that she didn't have to deal with servants. I foolishly asked why in that case she couldn't just dispense with servants when she was in Brazil. The answer of course was that many things that are designed for self service here are more labor intensive there. I recall that one example was that chicken is sold shrink-wrapped and ready to cook in American supermarkets, but was apparently sold with pinfeathers still attached in Brazil (in those days).
The recent decisions by some universities to manage their shortage of central-campus parking has raised some eyebrows:
Recession? Valet Parking Arrives.
And, indeed, that story makes it sound as if some of the parking decisions are meant to increase customer service where there's a shortage of conveniently located parking.
That being said, it's often more convenient to be able to park yourself rather than have to rely on someone else. But parking lots (and, in Manhattan, multi-story garages served by car elevators) in which the attendants park all the cars allow more cars to be accomodated in a given amount of space. It may be a luxury to leave your car for someone else to park, but it's seldom a luxury to wait while your car is brought out of parking.
Years ago, a colleague from Brazil remarked that one thing she liked about living in the United States was that she didn't have to deal with servants. I foolishly asked why in that case she couldn't just dispense with servants when she was in Brazil. The answer of course was that many things that are designed for self service here are more labor intensive there. I recall that one example was that chicken is sold shrink-wrapped and ready to cook in American supermarkets, but was apparently sold with pinfeathers still attached in Brazil (in those days).
Friday, September 11, 2009
Medical match policies (NRMP)
The NRMP has some new rules for 2009, which suggests that there have been some new problems (I haven't been involved for a while).
- "Applicants who obtain positions through the Matching Program are prohibited from discussing, interviewing for, or accepting a concurrent year position with another program before a waiver has been granted by the NRMP.
- The deadline for an applicant to request a waiver based on change of specialty is the January 15 prior to the start of training in the matched program.
- Programs shall use the Applicant Match History in the Match Site to determine the match status of any applicant considered for appointment to the program.
- Applicants must provide complete, timely, and accurate information to programs.
- Programs are prohibited from requiring applicants to reveal ranking preferences or the names or identities of programs to which they have or may apply.
Thursday, September 10, 2009
Two-career job searches
When a couple needs two career-track jobs, they face a hard problem of coordination with each other and with their prospective employers. If they are in different industries, they need to find a four-way match, between the two of them and two different employers. If they are academics, they can at least try to find two jobs at the same university, but if they are in different disciplines the negotiations will involve different departments (and maybe different schools, i.e. different deans), and so the search and negotiation process can be complex, and can still involve potentially very different timing of searches and hiring.
The Chronicle of Higher Ed has a first person account of one such struggle, that ended successfully with two tenure-track assistant professorships at the same university: Lessons of a Dual Hire.
The (pseudonymous) author writes:"After three years of job searching for me in the geological sciences, and four years for my husband in engineering, we successfully maneuvered this year to find two tenure-track positions at the same university. Here's how it happened."
The article goes on to explain some of the difficulties that were overcome in the most recent, successful job search.
Here are two earlier related posts, both of which touch on my work on making the clearinghouse for new doctors, the National Resident Matching Program, more friendly to couples.
Job market for couples (which concerns law schools hiring of couples); and
Match Day for new doctors, which is specifically about couples who are both seeking jobs as new doctors.
Even the medical clearinghouse doesn't do much to help doctors whose spouses have non-medical careers (or even doctors whose spouses have medical careers with different years of graduation from medical school). Some years ago, I was asked to respond to an essay from a doctor's spouse which suggested that maybe the market would work better without a match, i.e. without any centralized clearinghouse. That essay, and my reply, were published in an online student edition of JAMA that no longer exists, on web pages that are no longer maintained. However I am linking to them below, on the remarkable internet archive also known as the Wayback Machine.
Mismatch, by Betsy Brody, University of Notre Dame
Response to Betsy Brody's "Mismatch" by Alvin E. Roth (both originally in MSJAMA, April 7, 1999.
Rereading my response, I would have written it a bit differently today, but the basic point still seems right. But two-career searches are tough, no doubt about it.
The Chronicle of Higher Ed has a first person account of one such struggle, that ended successfully with two tenure-track assistant professorships at the same university: Lessons of a Dual Hire.
The (pseudonymous) author writes:"After three years of job searching for me in the geological sciences, and four years for my husband in engineering, we successfully maneuvered this year to find two tenure-track positions at the same university. Here's how it happened."
The article goes on to explain some of the difficulties that were overcome in the most recent, successful job search.
Here are two earlier related posts, both of which touch on my work on making the clearinghouse for new doctors, the National Resident Matching Program, more friendly to couples.
Job market for couples (which concerns law schools hiring of couples); and
Match Day for new doctors, which is specifically about couples who are both seeking jobs as new doctors.
Even the medical clearinghouse doesn't do much to help doctors whose spouses have non-medical careers (or even doctors whose spouses have medical careers with different years of graduation from medical school). Some years ago, I was asked to respond to an essay from a doctor's spouse which suggested that maybe the market would work better without a match, i.e. without any centralized clearinghouse. That essay, and my reply, were published in an online student edition of JAMA that no longer exists, on web pages that are no longer maintained. However I am linking to them below, on the remarkable internet archive also known as the Wayback Machine.
Mismatch, by Betsy Brody, University of Notre Dame
Response to Betsy Brody's "Mismatch" by Alvin E. Roth (both originally in MSJAMA, April 7, 1999.
Rereading my response, I would have written it a bit differently today, but the basic point still seems right. But two-career searches are tough, no doubt about it.
Deceased organ donation: advice from Steve Jobs
Here's a 2-minute CNN video, at the beginning of which Apple CEO Steve Jobs, who recently received a deceased donor liver, advises us all to register to become donors.
If you have a Massachusetts driver's license you can register online to be an organ donor, right now, right here.
If you have a Massachusetts driver's license you can register online to be an organ donor, right now, right here.
Wednesday, September 9, 2009
Law clerks for Massachusetts courts, continued
In MA, the Proposal to let law-firm hires help state courts is dropped.
"The state judiciary has abandoned a controversial proposal to fill coveted law clerk jobs at no cost to the government with newly hired private lawyers whose firms have pushed back their start dates because of the recession."
...
"Mulligan had proposed the arrangement in the spring because of two related employment trends. Tight finances had forced the state to rescind job offers it had made in December to at least 24 recent law school graduates who wanted to work as law clerks. And the bad economy had prompted some law firms to defer bringing on first-year associates at full salaries.
Many firms around the country are paying such “deferred associates’’ stipends of about $60,000, less than half their regular starting salaries of about $150,000, to hold onto them until the economy improves.
Some firms have recommended that the fledgling lawyers volunteer at nonprofit groups or engage in public service. And several local firms asked Mulligan whether their associates in waiting could perform their public service as law clerks.
Some legal specialists had said an arrangement that involves a law firm paying a judicial employee raised thorny ethical questions; firms that donate lawyers to the courts might appear to be currying favor or expect preferential treatment.
...
"But Mulligan won the approval of the Committee on Judicial Ethics of the Supreme Judicial Court after he proposed a special “double blind’’ arrangement.
The Flaschner Judicial Institute, which provides continuing education to state judges, would have dealt with the law firms that supplied the clerks. Judges and court officials would have had no contact with the donating firms, and the firms would have been instructed not to identify the clerks on their websites. The clerks would have been barred from disclosing which firms were paying their stipends."
Here is my earlier post on the proposal: Law clerks for Massachusetts courts
"The state judiciary has abandoned a controversial proposal to fill coveted law clerk jobs at no cost to the government with newly hired private lawyers whose firms have pushed back their start dates because of the recession."
...
"Mulligan had proposed the arrangement in the spring because of two related employment trends. Tight finances had forced the state to rescind job offers it had made in December to at least 24 recent law school graduates who wanted to work as law clerks. And the bad economy had prompted some law firms to defer bringing on first-year associates at full salaries.
Many firms around the country are paying such “deferred associates’’ stipends of about $60,000, less than half their regular starting salaries of about $150,000, to hold onto them until the economy improves.
Some firms have recommended that the fledgling lawyers volunteer at nonprofit groups or engage in public service. And several local firms asked Mulligan whether their associates in waiting could perform their public service as law clerks.
Some legal specialists had said an arrangement that involves a law firm paying a judicial employee raised thorny ethical questions; firms that donate lawyers to the courts might appear to be currying favor or expect preferential treatment.
...
"But Mulligan won the approval of the Committee on Judicial Ethics of the Supreme Judicial Court after he proposed a special “double blind’’ arrangement.
The Flaschner Judicial Institute, which provides continuing education to state judges, would have dealt with the law firms that supplied the clerks. Judges and court officials would have had no contact with the donating firms, and the firms would have been instructed not to identify the clerks on their websites. The clerks would have been barred from disclosing which firms were paying their stipends."
Here is my earlier post on the proposal: Law clerks for Massachusetts courts
Market for new lawyers
Graduating in a recession is no fun, and aspects of the way lawyers are hired and promoted may make that particularly so not only for this year's law grads, but for next year's, since many law firms essentially hire after the second year of law school: Downturn Dims Prospects Even at Top Law Schools .
"Discussions at industry roundtables and casual talk among officials at leading schools and firms suggest a consensus that interview dates should be pushed back to the spring of the second year, if not the third year. The recent problems have arisen, reform-minded critics say, because the legal industry essentially hires two full years ahead of when employees begin to work. And because young lawyers have to be advanced by lockstep every year, it is difficult to make recruiting changes that are responsive to shocks in business.
“There’s a long list of issues that need re-examining,” said Ralph Baxter, the chairman of Orrick. “The current economic circumstances have helped people see the economic inefficiencies we’ve been living with.”
Even lockstep, as sacred a pillar of Big Law as the billable hour, has been undermined by the hiring headaches of the last year, some argue. Orrick and another major firm, Howrey, have introduced innovative programs for associates based on apprenticeships or tiered systems that depart from the traditional “up or out” partner-track models. Some industry observers say their moves represent first steps that may ultimately give firms greater flexibility in hiring."
"Discussions at industry roundtables and casual talk among officials at leading schools and firms suggest a consensus that interview dates should be pushed back to the spring of the second year, if not the third year. The recent problems have arisen, reform-minded critics say, because the legal industry essentially hires two full years ahead of when employees begin to work. And because young lawyers have to be advanced by lockstep every year, it is difficult to make recruiting changes that are responsive to shocks in business.
“There’s a long list of issues that need re-examining,” said Ralph Baxter, the chairman of Orrick. “The current economic circumstances have helped people see the economic inefficiencies we’ve been living with.”
Even lockstep, as sacred a pillar of Big Law as the billable hour, has been undermined by the hiring headaches of the last year, some argue. Orrick and another major firm, Howrey, have introduced innovative programs for associates based on apprenticeships or tiered systems that depart from the traditional “up or out” partner-track models. Some industry observers say their moves represent first steps that may ultimately give firms greater flexibility in hiring."
Tuesday, September 8, 2009
Matching for school choice
School choice has received some extended coverage lately, with articles intended to appeal to a broad audience interested in education issues and mathematics, respectively. Both focus on work that Atila Abdulkadiroglu, Parag Pathak, Tayfun Sonmez and I have had the opportunity to help put into practice (and both are related to ongoing work in CA being spearheaded by Muriel Niederle and Clayton Featherstone).
Over at Education Sector, the September 2009 issue of their feature Ideas at Work covers the new school choice mechanisms for Boston Public Schools and New York City high schools:
MATCHMAKING: ENABLING MANDATORY PUBLIC SCHOOL CHOICE IN NEW YORK AND BOSTON, By Thomas Toch and Chad Aldeman. (It also comes with a 10 minute podcast you can listen to: "A Closer Look at Mandatory School Choice", in which Aldeman interviews me and Atila...)
Joseph Malkevitch has written one of the American Mathematical Society's Monthly Essays, called School Choice.
It's an introduction to Gale and Shapley's basic deferred acceptance algorithm, with a discussion of some applications, with attention paid to the fact that the student proposing algorithm makes it safe for families to reveal their preferences.
Over at Education Sector, the September 2009 issue of their feature Ideas at Work covers the new school choice mechanisms for Boston Public Schools and New York City high schools:
MATCHMAKING: ENABLING MANDATORY PUBLIC SCHOOL CHOICE IN NEW YORK AND BOSTON, By Thomas Toch and Chad Aldeman. (It also comes with a 10 minute podcast you can listen to: "A Closer Look at Mandatory School Choice", in which Aldeman interviews me and Atila...)
Joseph Malkevitch has written one of the American Mathematical Society's Monthly Essays, called School Choice.
It's an introduction to Gale and Shapley's basic deferred acceptance algorithm, with a discussion of some applications, with attention paid to the fact that the student proposing algorithm makes it safe for families to reveal their preferences.
Federal Judges Law Clerk Hiring
Today, the day after Labor Day, as law students begin their third and final year of law school, is the time when Federal judges are supposed to begin hiring their law clerks for next year. (A clerkship, particularly with an appellate court judge, is a very career enhancing first job for a new law grad.)
While the very beginning of the third year of law school might seem early to be sorting out the plum jobs, in fact it is quite late by the historical standards of this market. Over the last few decades, hiring has periodically unraveled back well into the second year of law school. And so, not for the first time, judges are trying to restrain themselves. Here's the current plan and it's key dates: Federal Judges Law Clerk Hiring Plan with Critical Dates .
Tuesday, Sept. 8 is the "first date when applications may be received." Judges are then supposed to wait until Friday Sept. 11 before contacting candidates to schedule interviews, and to wait until the following Thursday, Sept. 17, before actually conducting any interviews or making any offers. Offers, often exploding offers that must be answered immediately, can be made at the interview, and so much of the market is over by the end of the first day. (Yesterday's post included my favorite exploding offers story.)
One more thing. Judges cheat. (My coauthors tell me I'm not supposed to say that, rather, some judges do not comply with the guidelines.) So a nonnegligible part of the market is over before it's supposed to be over. Some part of the market may even be over before it's supposed to have begun. In our 2007 Chicago Law Review article The New Market for Federal Judicial Law Clerks, a third of the judges acknowledged that they cheated. But for the time being they were largely cheating by only a few days, so that the Labor Day focal point has remained.
The law blogs are full of contemporary reports about this year's market. See e.g. Getting Your Clerkship Before Labor Day? It's Not Just for Graduates Anymore and Clerkship Application Season: Open Thread
There are also some blogs that will post news in real time, including when particular judges have begun to hire, and when they finish. They open a window on the amount of "non-compliance." See Law Clerk Addict, and Clerkship Notification Blog .
The situation well before the current attempt to organize the clerkship market is described here: Federal Court Clerkships in Roth, A.E. and X. Xing, "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, 84, September, 1994, 992-1044
The more proximate history of the market before the current attempt is here:
Avery, Christopher, Christine Jolls, Richard A. Posner, and Alvin E. Roth, "The Market for Federal Judicial Law Clerks" University of Chicago Law Review, 68, 3, Summer, 2001, 793-902.(online at SSRN)
The just-prior attempt to organize the market is described here, and investigated experimentally:
Haruvy, Ernan, Alvin E. Roth, and M. Utku Unver, “The Dynamics of Law Clerk Matching: An Experimental and Computational Investigation of Proposals for Reform of the Market,” Journal of Economic Dynamics and Control, 30, 3 , March 2006, Pages 457-486. (With appendices and experimental instructions here.)
And the early experience with the current market organization is described here (with lots of illustrative quotes from clerkship applicants).
Avery, Christopher, Jolls, Christine, Posner, Richard A. and Roth, Alvin E., "The New Market for Federal Judicial Law Clerks" . University of Chicago Law Review, 74, Spring 2007, 447-486.
While the very beginning of the third year of law school might seem early to be sorting out the plum jobs, in fact it is quite late by the historical standards of this market. Over the last few decades, hiring has periodically unraveled back well into the second year of law school. And so, not for the first time, judges are trying to restrain themselves. Here's the current plan and it's key dates: Federal Judges Law Clerk Hiring Plan with Critical Dates .
Tuesday, Sept. 8 is the "first date when applications may be received." Judges are then supposed to wait until Friday Sept. 11 before contacting candidates to schedule interviews, and to wait until the following Thursday, Sept. 17, before actually conducting any interviews or making any offers. Offers, often exploding offers that must be answered immediately, can be made at the interview, and so much of the market is over by the end of the first day. (Yesterday's post included my favorite exploding offers story.)
One more thing. Judges cheat. (My coauthors tell me I'm not supposed to say that, rather, some judges do not comply with the guidelines.) So a nonnegligible part of the market is over before it's supposed to be over. Some part of the market may even be over before it's supposed to have begun. In our 2007 Chicago Law Review article The New Market for Federal Judicial Law Clerks, a third of the judges acknowledged that they cheated. But for the time being they were largely cheating by only a few days, so that the Labor Day focal point has remained.
The law blogs are full of contemporary reports about this year's market. See e.g. Getting Your Clerkship Before Labor Day? It's Not Just for Graduates Anymore and Clerkship Application Season: Open Thread
There are also some blogs that will post news in real time, including when particular judges have begun to hire, and when they finish. They open a window on the amount of "non-compliance." See Law Clerk Addict, and Clerkship Notification Blog .
The situation well before the current attempt to organize the clerkship market is described here: Federal Court Clerkships in Roth, A.E. and X. Xing, "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, 84, September, 1994, 992-1044
The more proximate history of the market before the current attempt is here:
Avery, Christopher, Christine Jolls, Richard A. Posner, and Alvin E. Roth, "The Market for Federal Judicial Law Clerks" University of Chicago Law Review, 68, 3, Summer, 2001, 793-902.(online at SSRN)
The just-prior attempt to organize the market is described here, and investigated experimentally:
Haruvy, Ernan, Alvin E. Roth, and M. Utku Unver, “The Dynamics of Law Clerk Matching: An Experimental and Computational Investigation of Proposals for Reform of the Market,” Journal of Economic Dynamics and Control, 30, 3 , March 2006, Pages 457-486. (With appendices and experimental instructions here.)
And the early experience with the current market organization is described here (with lots of illustrative quotes from clerkship applicants).
Avery, Christopher, Jolls, Christine, Posner, Richard A. and Roth, Alvin E., "The New Market for Federal Judicial Law Clerks" . University of Chicago Law Review, 74, Spring 2007, 447-486.
Monday, September 7, 2009
Exploding offers
My favorite exploding offer story is probably this one:
"I received the offer via voicemail while I was in flight to my second interview. The judge actually left three messages. First, to make the offer. Second, to tell me that I should respond soon. Third, to rescind the offer.
It was a 35 minute flight." −2005 applicant for federal judicial clerkships (p448 of "The New Market for Federal Judicial Law Clerks" )
Exploding offers can have a malign effect on market performance. Here's a just-published experimental investigation that focuses on how exploding offers contribute to the unraveling of a market:
Niederle, Muriel, and Alvin E. Roth, “Market Culture: How Rules Governing Exploding Offers Affect Market Performance," American Economic Journal: Microeconomics, 1, 2, August 2009, 199-219.
(In case you were always wondering how lawyers and gastroenterologists are similar, and different, these two papers will give you some clues, at least for when they are looking for jobs...)
Here's the Abstract of the AEJ Micro paper: Many markets encounter difficulty maintaining a thick marketplace because they experience transactions made at dispersed times. To address such problems, many markets try to establish norms concerning when offers can be made, accepted and rejected. Examining such markets suggests it is difficult to establish a thick market at an efficient time if firms can make exploding offers, and workers cannot renege on early commitments. Laboratory experiments allow us to isolate the effects of exploding offers and binding acceptances. In a simple experiment, we find inefficient early contracting when firms can make exploding offers and applicants’ acceptances are binding.
"Death pools", coming to life again
The NY Times reports on efforts to buy and securitize life insurance policies, that would be sold to investors by people with terminal illnesses: Wall Street Pursues Profit in Bundles of Life Insurance . The idea is simple enough:
"Defenders of life settlements argue that creating a market to allow the ill or elderly to sell their policies for cash is a public service. Insurance companies, they note, offer only a “cash surrender value,” typically at a small fraction of the death benefit, when a policyholder wants to cash out, even after paying large premiums for many years.
Enter life settlement companies. Depending on various factors, they will pay 20 to 200 percent more than the surrender value an insurer would pay. "
...
"Mr. Terrell was the co-head of Bear Stearns’s longevity and mortality desk — which traded unrated portfolios of life settlements — and later worked at Goldman Sachs’s Institutional Life Companies, a venture that was introducing a trading platform for life settlements. He thinks securitized life policies have big potential, explaining that investors who want to spread their risks are constantly looking for new investments that do not move in tandem with their other investments.
“It’s an interesting asset class because it’s less correlated to the rest of the market than other asset classes,” Mr. Terrell said. "
But life insurance is the kind of product that has always had at least a tinge of repugnance, which is why many states have "insurable interest" laws saying that someone can only purchase insurance on your life if they have a reason to want you to be alive. "As discussed by Justice Oliver Wendell Holmes Jr. in a 1911 Supreme Court case: “A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end” "
That's from my paper Repugnance as a Constraint on Markets , where I went on to say"The insurance industry lobbies against Stranger (or Investor) Owned Life Insurance (SOLI) and “viatical settlements,” which are third party markets and funds that purchase life insurance policies from elderly or terminally ill patients who wish to realize the cash value of their policies while still alive. The arguments against such funds often focus on the repugnance of having life insurance held by an entity that profits from deaths (in contrast to insurance companies, which make money when their customers continue living). Of course, sellers of annuities also profit from untimely deaths."(p41)
Some of the quotations from the NY Times story make me wonder whether the securitizers have fully mastered the potential repugnance issue of this kind of investment, and whether that might ultimately affect its success. See if any of these lines strike you as courting a reaction of repugnance.
"Goldman Sachs has developed a tradable index of life settlements, enabling investors to bet on whether people will live longer than expected or die sooner than planned....Spokesmen for Credit Suisse and Goldman Sachs declined to comment. "
...
"In addition to fraud, there is another potential risk for investors: that some people could live far longer than expected.
It is not just a hypothetical risk. That is what happened in the 1980s, when new treatments prolonged the life of AIDS patients. Investors who bought their policies on the expectation that the most victims would die within two years ended up losing money.
It happened again last fall when companies that calculate life expectancy determined that people were living longer. "
...
"The solution? A bond made up of life settlements would ideally have policies from people with a range of diseases — leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet. "
...
"But even with a math whiz calculating every possibility, some risks may not be apparent until after the fact. How can a computer accurately predict what would happen if health reform passed, for example, and better care for a large number of Americans meant that people generally started living longer? Or if a magic-bullet cure for all types of cancer was developed? If the computer models were wrong, investors could lose a lot of money."
"Defenders of life settlements argue that creating a market to allow the ill or elderly to sell their policies for cash is a public service. Insurance companies, they note, offer only a “cash surrender value,” typically at a small fraction of the death benefit, when a policyholder wants to cash out, even after paying large premiums for many years.
Enter life settlement companies. Depending on various factors, they will pay 20 to 200 percent more than the surrender value an insurer would pay. "
...
"Mr. Terrell was the co-head of Bear Stearns’s longevity and mortality desk — which traded unrated portfolios of life settlements — and later worked at Goldman Sachs’s Institutional Life Companies, a venture that was introducing a trading platform for life settlements. He thinks securitized life policies have big potential, explaining that investors who want to spread their risks are constantly looking for new investments that do not move in tandem with their other investments.
“It’s an interesting asset class because it’s less correlated to the rest of the market than other asset classes,” Mr. Terrell said. "
But life insurance is the kind of product that has always had at least a tinge of repugnance, which is why many states have "insurable interest" laws saying that someone can only purchase insurance on your life if they have a reason to want you to be alive. "As discussed by Justice Oliver Wendell Holmes Jr. in a 1911 Supreme Court case: “A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end” "
That's from my paper Repugnance as a Constraint on Markets , where I went on to say"The insurance industry lobbies against Stranger (or Investor) Owned Life Insurance (SOLI) and “viatical settlements,” which are third party markets and funds that purchase life insurance policies from elderly or terminally ill patients who wish to realize the cash value of their policies while still alive. The arguments against such funds often focus on the repugnance of having life insurance held by an entity that profits from deaths (in contrast to insurance companies, which make money when their customers continue living). Of course, sellers of annuities also profit from untimely deaths."(p41)
Some of the quotations from the NY Times story make me wonder whether the securitizers have fully mastered the potential repugnance issue of this kind of investment, and whether that might ultimately affect its success. See if any of these lines strike you as courting a reaction of repugnance.
"Goldman Sachs has developed a tradable index of life settlements, enabling investors to bet on whether people will live longer than expected or die sooner than planned....Spokesmen for Credit Suisse and Goldman Sachs declined to comment. "
...
"In addition to fraud, there is another potential risk for investors: that some people could live far longer than expected.
It is not just a hypothetical risk. That is what happened in the 1980s, when new treatments prolonged the life of AIDS patients. Investors who bought their policies on the expectation that the most victims would die within two years ended up losing money.
It happened again last fall when companies that calculate life expectancy determined that people were living longer. "
...
"The solution? A bond made up of life settlements would ideally have policies from people with a range of diseases — leukemia, lung cancer, heart disease, breast cancer, diabetes, Alzheimer’s. That is because if too many people with leukemia are in the securitization portfolio, and a cure is developed, the value of the bond would plummet. "
...
"But even with a math whiz calculating every possibility, some risks may not be apparent until after the fact. How can a computer accurately predict what would happen if health reform passed, for example, and better care for a large number of Americans meant that people generally started living longer? Or if a magic-bullet cure for all types of cancer was developed? If the computer models were wrong, investors could lose a lot of money."
Sunday, September 6, 2009
Matching children to classes
If the only thing that mattered about an elementary school class was the teacher, then matching children to classes would be simpler than it is (and more like school choice as we usually think of it). But it is a more complex problem when you take into account that it would be good if your child could be in a classroom with his friends, but without the kids who fight with him.
Slate has a story, Should parents meddle in their kids' classroom assignments?, which in turn prompted a post, the class matching problem, by Joshua Gans on his economics-and-parenting blog Game Theorist. (Gans' contribution to the "-onomics" library is called Parentonomics. He's also a prolific contributor to the econ- literature, and is likely to be a sabbatical visitor at Harvard in 2010. See my earlier post Market for ideas.)
In elementary school, kids have only one class. In high school, you have to assign each kid a bundle of classes. That makes the problem both harder—because bundles are hard, and there are complementarities—and easier, because one class isn’t divisible, but bundles are…you can give a high school kid some good classes and some bad ones, and have it come out to an ok schedule. Eric Budish has made some progress on this, although without worrying about putting friends in the same class (see my earlier post Course allocation, by Eric Budish )
Slate has a story, Should parents meddle in their kids' classroom assignments?, which in turn prompted a post, the class matching problem, by Joshua Gans on his economics-and-parenting blog Game Theorist. (Gans' contribution to the "-onomics" library is called Parentonomics. He's also a prolific contributor to the econ- literature, and is likely to be a sabbatical visitor at Harvard in 2010. See my earlier post Market for ideas.)
In elementary school, kids have only one class. In high school, you have to assign each kid a bundle of classes. That makes the problem both harder—because bundles are hard, and there are complementarities—and easier, because one class isn’t divisible, but bundles are…you can give a high school kid some good classes and some bad ones, and have it come out to an ok schedule. Eric Budish has made some progress on this, although without worrying about putting friends in the same class (see my earlier post Course allocation, by Eric Budish )
Roommate matching
"Male or female? Smoker or nonsmoker?
Those two questions have long been the basis for the University of Arizona’s roommate-pairing formula. But a year ago the university decided to give incoming students seeking deeper compatibility another option: shopping for their roommates on the Web."
That's the first paragraph of an interesting story at Inside Higher Ed about using the web to improve roommate matching: Match at First Site .
"Arizona is one of a small but growing number of colleges that have contracted with RoommateClick, a service that lets students take the lead on a task that has historically fallen to campus housing officials by browsing and communicating with future classmates who have also signed up for the service. Students who have hit it off online can then request to bunk with each other."
For a different market, see my earlier post Housemate match .
Those two questions have long been the basis for the University of Arizona’s roommate-pairing formula. But a year ago the university decided to give incoming students seeking deeper compatibility another option: shopping for their roommates on the Web."
That's the first paragraph of an interesting story at Inside Higher Ed about using the web to improve roommate matching: Match at First Site .
"Arizona is one of a small but growing number of colleges that have contracted with RoommateClick, a service that lets students take the lead on a task that has historically fallen to campus housing officials by browsing and communicating with future classmates who have also signed up for the service. Students who have hit it off online can then request to bunk with each other."
For a different market, see my earlier post Housemate match .
Saturday, September 5, 2009
Weeding as market regulation
We have what our friend Bettina Klaus calls a Sisyphus garden: we can weed for an hour whenever we want, and get trashbags full of biomass.
Weeding is a bit like being a regulator, you have to decide what counts as a weed, where. This always gets me thinking about what constitutes "unfair" competition, or maybe "competition in restraint of" what we would like the garden to be.
I am a permissive regulator; if we have planted some ground cover in one place, and it also takes root where we have planted a different ground cover, let competition decide the winner. "Unfair" competition takes the form of parasitism (vines that reach for sunlight by climbing over their slower growing hosts) or shallowly rooted, ephemeral tall plants that spring up between the roots of longer lived plants, but compete with them for sunlight and water.
Weeding is a bit like being a regulator, you have to decide what counts as a weed, where. This always gets me thinking about what constitutes "unfair" competition, or maybe "competition in restraint of" what we would like the garden to be.
I am a permissive regulator; if we have planted some ground cover in one place, and it also takes root where we have planted a different ground cover, let competition decide the winner. "Unfair" competition takes the form of parasitism (vines that reach for sunlight by climbing over their slower growing hosts) or shallowly rooted, ephemeral tall plants that spring up between the roots of longer lived plants, but compete with them for sunlight and water.
Friday, September 4, 2009
Market Design Blog: the second year
Peter Coles and I began this blog in September 2008 to provide some additional motivation and context for our market design course. We weren't sure what we would blog about, except that we knew that we'd link to news stories related to market design either as a verb (designing markets) or as a noun (how the design of a market influences its performance). I also anticipated I'd follow up my interest in repugnant transactions, i.e. transactions that aren't represented in the marketplace because, even though some people might like to engage in them, others object.
Judging from the keywords we assigned to blog posts, repugnance turned out to be the modal subject. Other popular keywords have been (with some overlap): the academic marketplace, auctions, college admissions, compensation for donors, kidney exchange, market design, marriage, matching, and school choice. I retrospectively added a keyword, entrepreneurial market design, which is Peter's phrase.
We kept the blog going even after the course ended (it turns out I like to blog), and picked up some readers over the course of the year, some endorsements from much more famous bloggers (e.g. here and here), and even some friendly advice on how to get more readers (for which, thanks, although I'll probably keep it going as is for a while).
So, if you're taking the course, or if you're new to the blog for some other reason, welcome aboard. We're still figuring out what the blog is for, but it turns out that market design is everywhere, so there's lots to blog about. I'm looking forward to year 2.
Thursday, September 3, 2009
Kidney donations, incentives, sales, legislation
An interview including Alex Tabarrok, Sally Satel, and Frank Delmonico, covering the range of viewpoints on the subject.
"Last year Pennsylvania Senator Arlen Specter floated a draft bill that could have cleared the way for states to offer non-cash incentives. ...
But groups including the National Kidney Foundation rejected Specter's proposal, now a spokeswoman for the Senator says he has no plans to introduce the bill."
Here is one draft of Senator Specter's proposed bill (on the site of the American Society of Transplant Surgeons--it was never introduced into the formal legislative process): Organ Donation Clarification Act of 2008 - Proposed Specter Bill
The current issue of the American Journal of Transplantation contains a survey of the ASTS membership, which finds that a majority of the surgeons responding support various income tax credits, insurance, and reimbursement for funeral expenses and lost wages, but oppose cash payments to the donor, donor's family or estate. (Rodrigue et al., "Stimulus for Organ Donation: A Survey of the American Society of Transplant Surgeons Membership," AJT, 2009, 9, 2172-2176.
"Last year Pennsylvania Senator Arlen Specter floated a draft bill that could have cleared the way for states to offer non-cash incentives. ...
But groups including the National Kidney Foundation rejected Specter's proposal, now a spokeswoman for the Senator says he has no plans to introduce the bill."
Here is one draft of Senator Specter's proposed bill (on the site of the American Society of Transplant Surgeons--it was never introduced into the formal legislative process): Organ Donation Clarification Act of 2008 - Proposed Specter Bill
The current issue of the American Journal of Transplantation contains a survey of the ASTS membership, which finds that a majority of the surgeons responding support various income tax credits, insurance, and reimbursement for funeral expenses and lost wages, but oppose cash payments to the donor, donor's family or estate. (Rodrigue et al., "Stimulus for Organ Donation: A Survey of the American Society of Transplant Surgeons Membership," AJT, 2009, 9, 2172-2176.
Bebchuk on bonuses
Bonus Guarantees Can Fuel Risky Moves by Lucian Bebchuk in the WSJ:
"Financial firms seeking to attract and retain talent are reported to be making a substantial use of guaranteed bonuses, and the French Economy Minister recently called for limits on guaranteed bonuses. While many now focus on how using guaranteed bonuses affects the level of pay, it is important to recognize their effect on incentives. Guaranteed bonuses create perverse incentives to take excessive risks, and they consequently could well be worse for incentives than straight salary."
"Financial firms seeking to attract and retain talent are reported to be making a substantial use of guaranteed bonuses, and the French Economy Minister recently called for limits on guaranteed bonuses. While many now focus on how using guaranteed bonuses affects the level of pay, it is important to recognize their effect on incentives. Guaranteed bonuses create perverse incentives to take excessive risks, and they consequently could well be worse for incentives than straight salary."
Policing the lobster commons
Lobsters are caught in traps that sit on the sea floor, marked by (and recovered via) buoys that float above, connected to the trap by a rope. Lobstermen in Maine are known for policing who sets traps where by cutting the lines (or threatening to cut the lines) of lobstermen who set traps outside of their territory. From time to time there's a question about whether the state should limit certain areas to local lobstermen. Now is such a time:
In Maine, Tensions Over Ailing Lobster Industry
"Officially, anyone with a Maine lobster license can set traps almost anywhere in state waters. Most lobstermen are allowed 800 traps each, making for a crowded ocean floor.
But unofficially, each harbor has its own boundaries, determined by local lobstermen over the decades. Newcomers often find their buoys snatched or their trap lines cut. The lobstermen who live on Maine’s rugged islands are especially territorial and known for practicing frontier justice; in one notorious case in 2000, two lobstermen fought over turf with a pitchfork and a fish gaff."
...
"The idea of a resident-only lobstering zone is not without precedent. The state approved a two-mile “conservation zone” around Monhegan Island in 1998, restricting access to local lobstermen, who had complained about interlopers from the mainland. "
...
"George Lapointe, the state’s commissioner of marine resources, said he had not yet decided whether to endorse a resident-only zone for Matinicus and had to consider the constitutional rights of all of the state’s roughly 5,800 licensed lobstermen.
“I’ve had three other islands say they’re interested in getting their own zone if we create one for Matinicus,” Mr. Lapointe said. “One of the concerns is the balkanization of lobster territories along the coast.”
He said that enforcing the zone around Monhegan had proved expensive for the state, and that while the shooting on Matinicus had put the island’s problems under a magnifying glass, lobstermen up and down Maine’s coast were hurting."
In Maine, Tensions Over Ailing Lobster Industry
"Officially, anyone with a Maine lobster license can set traps almost anywhere in state waters. Most lobstermen are allowed 800 traps each, making for a crowded ocean floor.
But unofficially, each harbor has its own boundaries, determined by local lobstermen over the decades. Newcomers often find their buoys snatched or their trap lines cut. The lobstermen who live on Maine’s rugged islands are especially territorial and known for practicing frontier justice; in one notorious case in 2000, two lobstermen fought over turf with a pitchfork and a fish gaff."
...
"The idea of a resident-only lobstering zone is not without precedent. The state approved a two-mile “conservation zone” around Monhegan Island in 1998, restricting access to local lobstermen, who had complained about interlopers from the mainland. "
...
"George Lapointe, the state’s commissioner of marine resources, said he had not yet decided whether to endorse a resident-only zone for Matinicus and had to consider the constitutional rights of all of the state’s roughly 5,800 licensed lobstermen.
“I’ve had three other islands say they’re interested in getting their own zone if we create one for Matinicus,” Mr. Lapointe said. “One of the concerns is the balkanization of lobster territories along the coast.”
He said that enforcing the zone around Monhegan had proved expensive for the state, and that while the shooting on Matinicus had put the island’s problems under a magnifying glass, lobstermen up and down Maine’s coast were hurting."
Wednesday, September 2, 2009
Craigslist and spam
Wired has a long article about Craigslist and its founder; the tone is simultaneously admiring and baffled: Why Craigslist Is Such a Mess. It's well worth reading.
Here's one paragraph that stood out:
"The battle flows back and forth. Captchas—distorted words that can be interpreted by humans more easily than by machines—tamed spam on craigslist for a while. Then it came back full force, not because the spammers had solved the difficult problem in artificial intelligence but because they had hacked an easier problem in global economics. I recently established a friendly email dialog with a young man in Dhaka, Bangladesh, who works on a 13-person team that creates craigslist spam. He fills in Captchas, creates new accounts with masked IP addresses, and posts ads all day long using text from a database provided by his employer, an anonymous spam king. The going price for a spam post on craigslist is about 50 cents, with large discounts for volume. When I told Buckmaster about my new friend, he took the news calmly. "These are technically sophisticated people who take pride in their work, and when we knock them down they don't just decide to go find something else to do. You could say we are breeding the perfect spammer." "
Here's one paragraph that stood out:
"The battle flows back and forth. Captchas—distorted words that can be interpreted by humans more easily than by machines—tamed spam on craigslist for a while. Then it came back full force, not because the spammers had solved the difficult problem in artificial intelligence but because they had hacked an easier problem in global economics. I recently established a friendly email dialog with a young man in Dhaka, Bangladesh, who works on a 13-person team that creates craigslist spam. He fills in Captchas, creates new accounts with masked IP addresses, and posts ads all day long using text from a database provided by his employer, an anonymous spam king. The going price for a spam post on craigslist is about 50 cents, with large discounts for volume. When I told Buckmaster about my new friend, he took the news calmly. "These are technically sophisticated people who take pride in their work, and when we knock them down they don't just decide to go find something else to do. You could say we are breeding the perfect spammer." "
Subscribe to:
Posts (Atom)
Posts
