Market design for everyone (from libertarians to socialists)

Organized markets inevitably have rules, which establish the playing field rather than determine outcomes, which is what makes market design different from, say, central planning. (One metaphor I like is that a free market is like a wheel that can rotate freely because it has an axle and well-oiled bearings...another is that boxing became a sport rather than a brawl, safe enough to play, only after the rules endorsed by the Marquess of Queensbury were adopted to cut down on deaths in the ring...)

It turns out that market design can be liked by everyone from socialists to libertarians.

Here's Friedrich Hayek anticipating the subject, in The Road to Serfdom:

“There is … all the difference between deliberately creating a system within which competition will work as beneficially as possible and passively accepting institutions as they are. Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all the principle of laissez faire.”
 …
“The attitude of the liberal towards society is like that of the gardener who tends a plant and, in order to create the conditions most favorable to its growth, must know as much as possible about its structure and the way it functions.”

both quotes are from p71 of this edition, which you can search
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And here's the Socialist Party of Great Britain (on the occasion of the recent Nobel economics prize for market design):

"As socialism will be a non-market society where the price mechanism won’t apply to anything, the winners’ research will be able to be used for certain purposes even after the end of capitalism...
"No doubt it would continue to be used to allocate organs to transplant patients and students to rooms. In fact, this last could be extended to allocating housing to people living in a particular area. While they may not get their first choice, people would get something for which they had expressed some preference and that corresponded to their needs and circumstances.

Cooking the Books: A Nobel Prize for Non-Economics | The Socialist Party of Great Britain »

Organs and elections in Israel

Assaf Romm wrote to me yesterday about a plan to solicit registrations for Israel's deceased organ donor list at today's national elections. If it works, it might make sense to rethink whether recruitment of deceased donors in the US should be mostly at the Department of Motor Vehicles...

"Adi (the Israeli organ donor card foundation) has decided to use election day (tomorrow) as an opportunity to register people as organ donors. 

"Here is the ynet article (in Hebrew): 

לראשונה: עמדות החתמה לכרטיס אדי בקלפיות

Assaf summarizes:
"This is a joint project invented by someone at the National Transplantation Center and approved by the Ministry of Health.

About 750 Adi representatives will stand near the voting booths and will help citizens to sign the organ donor card at the same time they come to vote. This is the first time it has been done in Israel (and I couldn't find examples in other countries by searching in Google). Due to the recent advertising campaign for the (relatively) new priority law and increased attention in the public, Adi foundation expects about 720-750 thousand new organ donors during election day (and if they'll do half of that, it will still be an outstanding achievement in my opinion)."
++++++++++++++++

Post-election update:
Assaf writes:

"First, either I made a mistake reading, or they made a mistake when they wrote the article which they fixed later on. The numbers were supposed to be from 720,000 to 750,000 but not as an estimate but as a difference (which makes much more sense), that is, they expected about 30,000 new organ donor card holders.

"Second, The actual output was 15,000 new organ donor card holders, so about half as much as they expected. That also means about 20 donors per representative, which is about one donor every half an hour. Frankly, I think this is embarrassing and I wouldn't expect any less than that by putting an Adi booth at any crowded shopping mall... They are still very happy of course." 

Mechanisms of Matching: Stability and Applications (Lars Ehlers in French in Ottawa)

Lars Ehlers will be presenting a talk on Mechanisms of Matching: Stability and Applications, in connection with the 2012 Nobel prize. The announcement is in French...and I'm guessing the talk will also be.  Ehlers is a distinguished matching theorist in any language, so if you are in Ottawa tomorrow...


L’ASSOCIATION DES ÉCONOMISTES QUÉBÉCOIS DE L’OUTAOUAIS, EN COLLABORATION AVEC LE DÉPARTEMENT DE SCIENCE ÉCONOMIQUE DE L’UNIVERSITÉ D’OTTAWA,VOUS INVITE À UN COCKTAIL-CONFÉRENCE AYANT POUR THÈME :


« MÉCANISMES D’APPARIEMENT: STABILITÉ ET APPLICATIONS»
La conférence portera sur la contribution de Alvin Roth et Lloyd Shapley,
Lauréats du Prix Nobel en économie 2012
MARDI LE 22 JANVIER 2013, 17 h 30 à 19 h 30
À L’UNIVERSITÉ D’OTTAWA
120 rue Université, Faculté des sciences sociales (FSS), pièce 4007
Un cocktail et un léger buffet suivront
CONFÉRENCIER
Professeur Lars Ehlers, Département de science économique,
Université de Montréal
PRÉSIDENTE DE SÉANCE
Professeure Vicky Barham, Directrice, Département de science économique,
Université d’Ottawa
PRÉSENTATION ET DISCUSSION: 17H30 À 18H45


Monsieur  Lars Ehlers, professeur titulaire au Département de science économique de l’Université de Montréal, s’intéresse notamment à la manipulation des mécanismes d’appariement sur les marchés du travail et l’allocation d’objets indivisibles.  Il a remporté en 2012 le prestigieux ‘Social Choice and Welfare Prize’ reconnaissant sa contribution exceptionnelle à la théorie du choix social et de l'économie du bien être. Il est aussi membre du conseil d’administration de la ‘Society for Economic Design’, un organisme académique qui s’intéresse précisément au domaine de recherche pour lequel le prix Nobel 2012 a été décerné.  Dans le cadre de la compétition pour les Subventions ordinaires de recherche 2003 du Conseil de recherche en sciences humaines (CRSH), c’est d’ailleurs sa proposition de recherche qui a remporté la première place au Canada. Cette année, il a aussi été élu, et ce pour une durée de cinq ans, au  Council of the Society for Social Choice and Welfare. Ses travaux sur les mécanismes d’appariement ont notamment été publiés dans le Journal of Economic Theory.

Unraveling of college job hunting (and internships too)

Businessweek reports on the recruiting of undergrads, particularly undergrad business majors:

A Speedier Timetable for the College Job Hunt

"It used to be that undergraduate students could wait until winter or spring to conduct job searches. Students who plan to do that during the present school year may find that they’re out of luck.

"As the job market has improved, a growing number of employers are shifting most of their college recruiting to the fall. This year, employers said they planned to conduct about two-thirds, or 68 percent, of their college recruiting in the fall, up from 60 percent in the 2010-11 academic year, according to the National Association of Colleges & Employers’ Job Outlook 2013 report.

"The trend is more pronounced at undergraduate business schools, where recruiters from Fortune 500 companies, banks, and consulting firms are racing onto campuses to get access to top student talent as early as possible. Some are showing up as early as the end of August or September to talk to students, say college career services directors.
...
"The timetable for internship recruiting also has been pushed up to the fall over the last year or two, meaning that juniors must be ready to apply for internships almost as soon as they get on campus, say career services directors at business schools. At the Carlson School, the number of companies recruiting interns at the same time jumped 11 percent this fall over last, Kinross-Wright says.

"Steve Canale, manager of global recruiting and staffing services for General Electric (GE), says his company hires nearly all its full-time hires and about 75 percent of its interns in the fall. The company used to do more intern recruiting in the spring, but has shifted course in the last few years, he says.

“We do our internship hiring in the fall now because it is so darn competitive,” he says. “Once one company started doing it, we had to do it, too, because the good students go quickly.”

HAL R. VARIAN CHAIR IN INFORMATION ECONOMICS

Berkeley has a great new endowed chair, joint in Economics and the I-School, named for (and partly endowed by) the remarkable Google chief economist and former I-School Dean Hal Varian.

I SCHOOL'S FIRST ENDOWED CHAIR WILL BE THE HAL R. VARIAN CHAIR IN INFORMATION ECONOMICS

Hal R. Varian

More information:

• Hal R. Varian
• The Hewlett Challenge

January 19, 2012

The School of Information is delighted to announce the creation of its first endowed chair, the Hal R. Varian Chair in Information Economics, thanks to a generous gift from Hal R. Varian and matching funds from the William and Flora Hewlett Foundation.
“This is terrific for the school,” said I School Dean AnnaLee Saxenian, “and it’s fitting that the founding dean of the school is endowing its first chair. This will be a wonderful legacy for Hal.”
The Hal R. Varian Chair in Information Economics will fund the work of an eminent faculty member, with a joint appointment in the School of Information and the Department of Economics, whose work involves research and teaching in the area of Information Economics.
“I made this donation to support teaching and research in Information Economics,” explained Varian. “Information is the lifeblood of the economy. Everybody who works in the information field should know something about economics, and every economist should know something about information.”
Varian was the founding dean of the I School (then known as the School of Information Management & Systems) and is now the Chief Economist at Google, where he has been involved in auction design, econometric analysis, finance, corporate strategy, and public policy. He is also a UC Berkeley professor emeritus in business, economics, and information management.
A world-renowned economist, Varian has published numerous papers in economic theory, industrial organization, financial economics, econometrics, and information economics. He is the author of two major economics textbooks and the co-author of a bestselling book on business strategy,Information Rules: A Strategic Guide to the Network Economy. Varian also wrote a monthly column for the New York Times from 2000 to 2007.
“No area of research could be more exigent than the economics of information,” said Carla Hesse, the university’s Dean of Social Sciences. “This is a pathbreaking gift from a pathbreaking scholar.”
Dean Saxenian agreed. “The field of Information Economics is very important for understanding information and information behavior,” she said. “We couldn’t be where we are without a strong foundation in economics.”
The School of Information and the Department of Economics plan to hire a new faculty member by Fall 2013 to fill the endowed chair.
Varian’s gift allows the school to take advantage of a matching gift from the William and Flora Hewlett Foundation, through the Hewlett Challenge. The Hewlett Challenge is a $110-million challenge grant — the largest gift in the university’s history — to endow a total of 100 new faculty chairs across the university.
“The Hewlett matching grant offered a once-in-a-lifetime opportunity, and provided me a strong incentive to make a donation now,” said Varian. With the creation of the Hal R. Varian Chair in Information Economics, the Hewlett Challenge has now funded more than 90 of the 100 professorships and is on target to reach the full 100 soon.
“I have written a couple of papers on the incentive effect of matching grants,” commented Varian, “so in this case, it seems that ‘life imitates art.’”

**************
And here's the ad: you could apply for the position...
HAL R. VARIAN CHAIR IN INFORMATION ECONOMICS

Lunch (with me) for a good cause, to be auctioned on eBay

The auction will start this weekend...

The fundraiser auction for Jewish Family Services of Silicon Valley, for a lunch date with me (or with one of these real celebrities), is about to begin. The auction goes live on eBay this (Friday) evening, January 18, at 7:45 pm, and ends Monday evening, January 28, 2013. 

The webpage  http://www.jfssv.org/celebrities-Jan2013.html shows links to the auctions, which will work after the auction begins. If you try the links prior to then, eBay returns a message saying the auction has ended or is unavailable.

My auction link is  http://www.ebay.com/itm/261153805382 This link should only work beginning 7:45 pm on Friday January 18, and ending 7:45 pm Monday January 28, 2013.

Kidney exchange and market design at the NBER

The NBER has disseminated a lot of the work on kidney exchange, and asked me to summarize that work, in the December 2012 issue of the NBER Reporter: Kidney Exchange

The same issue also contains these brief profiles of me and of three other NBER research associates.

The NBER has been at the forefront of recognizing market design as a distinct new area in economics, with a Market Design Working Group organized in 2008, directed by Susan Athey and Parag Pathak.

You can browse the NBER working papers on market design here: Working Papers by NBER Working Group - MD

Economics papers in top 5 journals

A new NBER working paper by David Card and Stefano Della Vigna  offers a window on publishing in "top-5" economics journals, and how it has changed over time. For one thing, the number of submissions has gone up, while the number of papers published has gone down (and the number of top-5 journals seems to have remained constant...)

 These figures are from  NINE FACTS ABOUT TOP JOURNALS IN ECONOMICS
by David Card, and Stefano DellaVigna
Working Paper 18665, http://www.nber.org/papers/w18665

Market design as the visible hand

In Stanford Magazine, Marina Krakovsky has a profile of me and market design: The Visible Hand--A new breed of economist, Alvin Roth brings an engineering sensibility to fixing markets.

Josh Angrist and Parag Pathak on charter schools

A profile of MIT economist Josh Angrist in the MIT Technology Review discusses, among other things, some of his work on schools with Parag Pathak: The Natural Experimenter


"How far Angrist can take this research may depend on how many school districts will share useful data with him. Boston and Massachusetts, he says, are unusual in that "we have a great data infrastructure and wonderful coöperation with the city, the schools, and the state."

"That openness allowed him, Pathak, and other collaborators to produce some recent papers that he considers among his best. Boston has used a lottery system to determine which interested students will attend charter schools; when the number of applicants for a school exceeds the space available, the researchers are able to compare the performance of students accepted to a charter school with that of equally motivated students who were not chosen. In a 2009 report, they found that certain Boston charter schools had produced an average gain of roughly 15 percentile points for middle-school students on the state math exams.

"Two years later, however, Angrist and colleagues found that in Massachusetts districts outside Boston, charter-­school students did no better on average than students at other public schools. Angrist thinks charter schools may be too different from one another to justify sweeping conclusions about whether they provide better education, even though the best ones seem to adhere to the formula of extended instruction time, a focus on core math and reading skills, and an emphasis on good behavior."

Pet food on the farm in Switzerland: dogs and cats for human consumption

Sven Seuken alerts me to some food choices in Switzerland that are legal  so long as they are non-commercial: Dog And Cat Meat Is Being Served Up By Farmers In Switzerland - And It's Legal

"According to Tages Anzeiger newspaper, farmers in the Appenzell and St Gallen areas regularly dine on the animals, as is popular in China, Korea and Vietnam.

"One farmer, speaking under anonymity for fear of reprisals from animal rights activists, said it was "nothing unusual" to eat dog or cat meat.

...

"While there are no official figures of how many of the common pets end up on dinner plates, the practice is legal - provided the animal is killed humanely and the meat is not sold commercially.

"Yet while dining on what many of us regard as treasured companions is permitted, it is largely looked down upon."

Nice sentence about unraveling of college admissions

I'm not sure that I would give the same advice on college admissions that Frank Bruni gives to his niece in his Sunday NYT op-ed, but I admire this graceful sentence about the unraveling of that particular matching process:

"Last week was the deadline to apply to many colleges and universities, though the admissions dance — the dreaming, scheming, waiting and worrying — has really become a year-round, nonstop phenomenon, starting well before the final stretch of high school. Leslie’s a junior and has already visited half a dozen campuses, to see how they feel."

That's from How to Choose a College

Time to end the war on drugs?

Gary Becker and Kevin Murphy, in the WSJ, consider the case for decriminalizing drug use, and drug sales.
Have We Lost the War on Drugs?

They seem to suggest that the major effect of drug laws on demand work by keeping street prices high. But their argument makes sense even if you think that social opprobrium and risk of prison are important parts of the high price.

Here are what struck me as the key paragraphs:

"Some evidence is available on the effects of Portugal's decriminalization of drugs, which began in 2001. A study published in 2010 in the British Journal of Criminology found that in Portugal since decriminalization, imprisonment on drug-related charges has gone down; drug use among young persons appears to have increased only modestly, if at all; visits to clinics that help with drug addictions and diseases from drug use have increased; and opiate-related deaths have fallen.

"Decriminalization of all drugs by the U.S. would be a major positive step away from the war on drugs. In recent years, states have begun to decriminalize marijuana, one of the least addictive and less damaging drugs. Marijuana is now decriminalized in some form in about 20 states, and it is de facto decriminalized in some others as well. If decriminalization of marijuana proves successful, the next step would be to decriminalize other drugs, perhaps starting with amphetamines. Gradually, this might lead to the full decriminalization of all drugs.

"Though the decriminalization of drug use would have many benefits, it would not, by itself, reduce many of the costs of the war on drugs, since those involve actions against traffickers. These costs would not be greatly reduced unless selling drugs was also decriminalized. Full decriminalization on both sides of the drug market would lower drug prices, reduce the role of criminals in producing and selling drugs, improve many inner-city neighborhoods, encourage more minority students in the U.S. to finish high school, substantially lessen the drug problems of Mexico and other countries involved in supplying drugs, greatly reduce the number of state and federal prisoners and the harmful effects on drug offenders of spending years in prison, and save the financial resources of government.

"The lower drug prices that would result from full decriminalization may well encourage greater consumption of drugs, but it would also lead to lower addiction rates and perhaps even to fewer drug addicts, since heavy drug users would find it easier to quit. Excise taxes on the sale of drugs, similar to those on cigarettes and alcohol, could be used to moderate some, if not most, of any increased drug use caused by the lower prices."

Marriage markets and credit markets

 With attitudes about money being an important ingredient of marital compatibility, is it any wonder that a readily available index for one is (apparently) increasingly being used to judge the other? The NY Times is on the story: Even Cupid wants to know your credit score


"The credit score, once a little-known metric derived from a complex formula that incorporates outstanding debt and payment histories, has become an increasingly important number used to bestow credit, determine housing and even distinguish between job candidates.

"It’s so widely used that it has also become a bigger factor in dating decisions, sometimes eclipsing more traditional priorities like a good job, shared interests and physical chemistry. That’s according to interviews with more than 50 daters across the country, all under the age of 40.

“Credit scores are like the dating equivalent of a sexually transmitted disease test,” said Manisha Thakor, the founder and chief executive of MoneyZen Wealth Management, a financial advisory firm. “It’s a shorthand way to get a sense of someone’s financial past the same way an S.T.D. test gives some information about a person’s sexual past.”
...
"A handful of small, online dating Web sites have sprung up to cater specifically to singles looking for a partner with a tiptop credit score. “Good Credit Is Sexy,” says one site,Creditscoredating.com, which allows members to view the credit scores of potential dates who agree to provide the numbers.

"On another site, Datemycreditscore.com, a member posted on the Web site’s home page that others should to “stop kidding” themselves and realize that credit scores do matter."

Death and privacy (and transplantation and market design)

The latest issue of the AJT Report, a news summary in the American Journal of Transplantation, concerns The Unintended Consequences of Privacy, reporting on a recent decision by the Social Security Administration to decline to share some data about deaths, due to privacy concerns.

Apparently this decision will mean that the Health Resources and Service Administration (HRSA) will no longer be able to disclose to transplant centers the deaths that occur of patients on the waiting list for deceased donor organs, or after transplantation.

This could turn into a big problem, unless it is resolved soon, because information about deaths is critical for managing the transplant system at all levels.

"According to Patricia W. Potrzebowski, PhD, executive director of the National Association of Public Health Statistics and Information Systems (NAPHSIS), “SSA never had the authority
to release state death records through the public DMF. This is because state records are governed by state statutes and regulations. State statutes and regulations vary as to who may access death record information. In some states, death record information is publicly available; in others, even the fact of death is held in strict confidence.”
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It is becoming increasingly clear that privacy is a big issue in market design in general. The AJT report coincidentally juxtaposes the two issues by including some Nobel news at the end of the report.

Israel bans excessively skinny models

Israel bans excessively skinny models: New law taking effect with start of 2013 requires models to have Body Mass Index (BMI) of at least 18.5.

"Too thin is no longer "in" when it comes to the fashion industry in Israel as with the start of 2013 the so-called “models law” has come into effect, banning underweight models in advertisements.

The law, approved by the Knesset in March, requires models to have a Body Mass Index (BMI) of at least 18.5, considered to be the minimum for a healthy person.

Robert Aumann on Shapley and Roth and matching and market design

Bob Aumann writes in the February 2013 Notices of the American Mathematical Society (in a column hosted by Elaine Kehoe): Shapley and Roth Awarded Nobel Prize in Economics

After summarizing Shapley's work, Aumann (who shared the 2005 Nobel Economics prize) concludes "On each of these counts, Shapley has done more than all the previous game theory Nobelists, even when taken together."

I should add that I find myself moved to be saluted by Aumann in the same article (and not just because he praises me too extravagantly:). When I was a young game theorist in the 1970's, Bob Aumann and Bob Wilson were for me the welcoming faces of game theory, and I resolved, if I thrived, to try to be as supportive of young people as they were. I hope I've succeeded in that too.

Not every new discipline has the welcoming, community-of-scholars culture that game theory enjoyed in those days. I hope that market design continues to thrive in this way (as well as being a team sport).

My guess from my limited personal experience is that the "culture" of a discipline is particularly important when it is still new...that might be something for historians and sociologists of science to look into.

Roberto Serrano on Lloyd Shapley

I had the unexpected pleasure of running into Roberto Serrano and Vince Crawford in Stockholm, where they were guests of the Nobel Foundation.

 Now here is a forthcoming paper by Roberto, on Lloyd Shapley's contributions:

R. Serrano, “Lloyd Shapley’s Matching and Game Theory,” Scandinavian Journal of Economics, forthcoming.

High bids for tuna at Tsukiji fish market celebrate the new year

Bluefin tuna sells for record $1.76 million at Tokyo auction, 3 times previous record

"A bluefin tuna sold for a record $1.76 million at a Tokyo auction Saturday, nearly three times the previous high set last year
...
"In the year’s first auction at Tokyo’s sprawling Tsukiji fish market, the 222-kilogram (489-pound) tuna caught off northeastern Japan sold for 155.4 million yen
...
The winning bidder, Kiyoshi Kimura, president of Kiyomura Co., which operates the Sushi-Zanmai restaurant chain, said “the price was a bit high,” but that he wanted to “encourage Japan,” according to Kyodo News agency. He was planning to serve the fish to customers later Saturday.

"Kimura also set the old record of 56.4 million yen at last year’s New Year’s auction, which tends to attract high bids as a celebratory way to kick off the new year — or get some publicity.

Advice on interviewing at the job market meetings

Good luck to all those interviewing at the job market meetings in San Diego!

Here's some advice, written by an historian, that applies well to economics too (and probably any academic job market): Advice for the Job Season: Interviewing

"My primary advice for interviewing is to tell candidates that THE SEARCH COMMITTEE MEMBERS WANT YOU TO DO WELL!!!
...
"I promise you, we did not just slog through hundreds of pages of recommendation letters and your prose, pick you out of hundreds of applicants, fly to some god-forsaken icy city, and swill cheap coffee and bagels in a cold hotel room waiting for you because we are eager to humiliate you. While it is possible that there is someone in that room who doesn’t like your work, the majority of the committee has gone to the mat to get you onto the interview list, and those search committee members are secretly praying that you will hit a home run. They are on your side.

"You may well not know which members those are, though, so do not make any assumptions about who are your friends and who are potential enemies on a committee. Treat everyone as interested colleagues. Even the old jerk in the corner asking impossible questions might be on your side. And if not, the chances are good that everyone else in the room recognizes that s/he’s an old curmudgeon, and are hoping that you will handle her/him with aplomb.
The committee members want you to do well, so help them out. Almost certainly there will be faculty members from different fields in the room who only know your field generally. So explain immediately what you do, and why it is important to someone outside your specialty. Do not make them plead with you to articulate why what you do is significant. (Clearly, they think it is, or they would not have brought you in for an interview."