The Harvard Crimson on Michael Sandel on economists

One of the clearest reviews of Michael Sandel's thoughts on economics and economists appears in the Harvard Crimson (the student newspaper), written by Jonathan Zhou, and undergraduate, and titled Luddite of the Mind. (As is often the case, the url is more entertaining than the headline: http://www.thecrimson.com/column/homo-economicus/article/2013/2/13/Sandel-vs-Mankiw/ )

Zhou writes, in part:

"Professor Sandel criticizes economists for applying efficiency arguments to buying and selling kidneys without thinking about its moral consequence. If Sandel cares to talk to any economist at the Harvard Faculty Club, he will find that his colleagues not only think about such moral complexities, but have also devised solutions. Instead of cash incentives, the “kidney exchange” will use an algorithm to swap donated kidneys, so that people who cannot receive donated kidneys from a loved one can still get a donated kidney from a stranger. This can improve efficiency of kidney donation based on the economic principle of coincidence of wants, but not in a morally contentious way. The study of markets without financial incentives became such an important subfield of economics that its intellectual godfather, Harvard economist Alvin E. Roth, received the Nobel Prize in Economics last year for this contribution. It is intriguing that in Sandel’s book about economists’ fixation with monetary markets, he forgets to include such alternative markets offered by mainstream economists.

More broadly speaking, economists are no strangers to difficult discussions about civic life. The great economists Kenneth J. Arrow and Amartya Sen founded the field of social choice theory, a mathematical formalism for making collective decisions with consideration of fairness, rights, liberties, and human folly. Of course, such ideas would not be included in Professor Sandel’s hypothetical textbook, because he dismisses the “rigor of natural sciences” in economics as deviant from the discipline’s origin as moral philosophy."

Performativity as a critique of economics and market design

Yesterday's prize to Paul Milgrom for his work in market design (among other things) brings to mind a curious critique (and criticism) of economics in the economic sociology literature, namely that economics is "performative," in the sense that economic theories influence the real economy to become more like economic theory. (I blogged about one such paper here.)

As far as I am aware, the term originated in linguistics to distinguish those cases in which saying is also doing. Thus saying "it will rain tomorrow" is not performative, but saying  "I apologize" is: when you say it, you have done it, saying it makes it happen.  So the basic idea applied to economics is that e.g. creating an option pricing formula might change the way options are priced. Designing a kidney exchange might change the number of patients who get kidney transplants. Or in Paul's case, designing auctions might change the way the FCC sells radio spectrum licenses.

The criticism, such as it is, seems to take two forms. The first is that, since economics is performative, it isn't a 'real' science which describes things as they are. The second, often more between the lines, is that this is just part of the way that economics has been sucking the meaning out of life ever since the invention of agriculture and trade.

Of course, that economics is performative is a criticism that economists, especially market designers, might take as a compliment. (It's a little like criticizing body builders for working hard to have big muscles, and not just settling for the ones they could get without cheating by exercising.)

I was reminded of this on reading Brett Christophers, "Games and prizes in the economic (and geographical?) performance of markets: Nobel, Shapley, and Roth," in Environment and Planning A 2012, volume 44, pages 2542 – 2545, a critique and criticism of the 2012 Nobel economics prize. Market designers may be interested in (and either annoyed, puzzled or flattered by) what he has to say...

He writes:

"Talk of markets being ‘designed’ and of economists engaging in ‘engineering’ will undeniably strike a chord with many economic sociologists and with students of social studies of finance. The past fifteen years have seen the emergence amongst such scholars of a broad and expanding critique of the so-called ‘performativity’ of economics—a literature interested in, precisely, how economics designs, formats, and otherwise engineers real-world economic configurations in general and markets in particular. While economic ‘performativity’ means different things to different commentators, the central gist of the approach is captured in Donald MacKenzie’s (2006, page 12) assertion that economics is “an active force transforming its environment, not a camera passively recording it”; or that economics, in Michel Callon’s (2007, page 316) words, “contributes to the construction of the reality that it describes.” Notably, one of the most intensively discussed ‘successes’ of the market design or ‘design economics’ field—the Federal Communications Commission’s (FCC) auctions of US radio spectrum (eg, Roth, 2002)—is also one of the most heavily analyzed and debated ‘exemplars’ of economic performativity purportedly in action (eg, Guala, 2006; Nik-Khah, 2006; Santos and Rodrigues, 2009). Indeed, not for nothing does Ana Santos (2011, page 719) argue that “the efficacy of design economics ultimately hinges on determining the extent to which economists are able to implement their models in the real world and make reality conform to their theoretical constructs, that is, on determining the performativity of economics.”
...
He further writes of the
"profound ethical concern—over the penetration of market and market-like mechanisms into more and more areas not only of social life per se but also of society–nature relations. Such interests and concerns, distilled in a range of connected critiques of ‘neoliberalization’, ‘commodification’, and ‘marketization’, are of the utmost relevance in the context of the “economic engineering” lauded by the Swedish Academy. For, as Santos (2011, page 721) observes, Roth and other proponents of design economics “actually”—explicitly and overtly—“aim at inculcating economic calculus in human deliberation and introducing market-like forms of social interaction where they have been absent.” 

Chistophers then goes on to suggest that the very idea of markets is so flawed that probably they don't really even exist...

"it is vital ... to be aware that the notion of economic performativity is a highly contested one. The mobilization of this concept has attracted often biting critique, both in relation to examples directly connected with ‘Rothian’ market design, and those not. Daniel Miller (2002), for instance, claims that capitalist economic transactions are so entangled in social relationships, and actual economic agents are so resistant to the type of economic rationality presumed in economists’ market models, that it is simply incorrect to think of real-world exchange practices in terms of ‘markets’—despite the attempts of economists, consultants, and others to (re)make the world in the image of their theories. Philip Mirowski and Edward Nik-Khah (2007) attack the performativity thesis from a related angle. As for Santos (2011), market design ultimately belongs, for Mirowski and Nik-Khah, to the realm of neoclassical economics; it retains the core principles of rationality and efficiency, notwithstanding its appeal to some elements of heterodox economics (such as the recognition that economic agents sometimes engage in opportunistic behaviours). This is crucial because, say Mirowski and Nik-Khah, neoclassical economics is so flawed that it simply cannot be made practically to ‘work’—to ‘perform’ markets, that is to say—other than in the most partial and ephemeral of senses.

Paul Milgrom wins the BBVA Foundation Frontiers of Knowledge Award

This morning Spain's BBVA Foundation announced that Paul Milgrom has one the Frontiers of Knowledge Award in Economics, Finance and Management.

In the accompanying video interview Paul cites Vickery and Wilson as his inspirations, and goes on to talk briefly about his current work on the FCC incentive auction, and how it has to be designed to satisfy the engineering constraints imposed by broadcasting, while being simple enough for bidders and addressing the revenue and efficiency concerns of the FCC.

Here is the prize announcement:

***************
The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category goes in this fifth edition to U.S. mathematician Paul Milgrom “for his seminal contributions to an unusually wide range of fields of economics including auctions, market design, contracts and incentives, industrial economics, economics of organizations, finance, and game theory,” in the words of the prize jury. This breadth of vision encompasses a business focus that has led him to apply his theories in advisory work with governments and corporations.

Milgrom (Detroit, 1948), a professor of economics at Stanford University, was nominated for the award by Zvika Neeman, Head of The Eitan Berglas School of Economics at Tel Aviv University.

 “His work on auction theory is probably his best known,” the citation continues. “He has explored issues of design, bidding and outcomes for auctions with different rules. He designed auctions for multiple complementary items, with an eye towards practical applications such as frequency spectrum auctions.”

Milgrom made the leap from games theory to the realities of the market in the mid 1990s. He was dong consultancy work for Pacific Bell in California to plan its participation in an auction called by the U.S. Federal Communications Commission, and was able to pinpoint errors in the auction design that produced a worse outcome for both organizers and bidders. He and Robert Wilson proposed an alternative method which the FCC agreed to try out. Their innovation, known as the simultaneous multiple round auction (SMR), replaced the traditional sealed envelope with an open bidding format, in which each company could observe what the rest were offering, supplemented by rules to prevent monopoly pricing. The auction – of electromagnetic spectrum for what was then the new generation of cell phones, pagers, and other wireless communication devices – raised the record sum of over seven billion dollars, and testified in the most practical way possible to the value of games theory in strategic decision-making.

SMR has since been used by governments the world over to auction not only airwaves but also natural gas, electrical power, etc.

Shortly after being informed of the Frontiers of Knowledge Award, Milgrom explained how this contribution came about: “I started out studying mathematics, but then moved to Stanford to study business and discovered the work of William Vickrey, who went on to win a Nobel prize for his work on auction theory. I was fascinated by this kind of mathematical approach to human behavior, and decided that was what I wanted to explore.”

Asked what makes the auction such an important mechanism, he replies: “Auctions determine how resources are shared out, they decide who gets what and at what price, at times even a lot of goods being offered simultaneously. They are important for the same reason that markets are important. Initially, no one can know what a given object is worth to each of its possible buyers, and we need a mechanism that gives us that information; a competition so buyers can show their interest through bidding and the resources go to the highest bidder, but also so resources end up in the hands of those who will put them to good use.”

Milgrom developed SMR to make this competitive process more efficient, as well as adaptable to non-price bidding mechanisms such as placing students into college courses, or reallocating airline slots in the event of bad weather at a crowded airport.

Auctionomics, the firm he created as an outlet for his research findings, has been engaged by regulators in the United States, United Kingdom, Canada, Australia, Germany and Mexico to advise on the design of auctions in strategic sectors.

This advisory role extends to both the organizers of auctions and those wishing to bid: “We help auction organizers to design them better. Normally the big challenge is to attract bidders. The auction has to be simple and easy to understand, but at the same time respect the complexities inherent to each situation, including technical and other constraints. If the client is a buyer, we help them understand the rules of the auction and think ahead to how much money they might need, what they can hope to get at what price, and what they can expect from competitors.” The technical guidance the firm provided to Comcast in a radio spectrum auction saved this client nearly $1.2 billion on its license purchases based on the prices paid by other large bidders.

Milgrom’s company is currently advising FCC on the incentive auction through which the Commission plans to reallocate part of the spectrum used for TV broadcasting to telephone operators, in an operation likely to be worth around 55 billion dollars.



Industrial organization

The jury also refers to another of the new laureate’s lines of work: “Professor Milgrom’s research in industrial organization includes influential studies on limit pricing, entry deterrence, predation, and advertising.”

Best known perhaps are his reflections on the complementarities between a company’s strategy and organizational design, and on the design of incentives for workers in multitask jobs.

His theoretical insights in this field were brought together in the 1992 publication Economics, Organization and Management, co-authored with John Roberts and now a standard textbook in schools of economics throughout the world.

“When I teach my students theory, I encourage them to challenge me by asking me how it is useful. It’s healthy for them to ask, and it’s not hard for me to answer because I always have real-world examples in mind when I am working on my theories,” Milgrom observes.

And here too his ideas have found a home in the corporate sector, where he has advised Google on its IPO auction of shares, Yahoo! on the design of an advertising market and Microsoft Networks on sponsored search auctions.

Talking about the Google launch, Milgrom explains: “When companies are preparing an initial public offering, they think about investment banks and other strategies, they never think about it as an auction. Google wanted to do things differently. They wanted to design an auction that was inviting for clients who were not versed in financial markets, and also to know the risks involved.”

“In addition, Milgrom has added important novel insights to finance, particularly in connection to speculative trading and market micro-structure. The common theme of his works on auctions, industrial strategies, and financial markets is that economic actors infer from prices and other observables information about the fundamental market values,” according to the award certificate.

The jury also highlighted the laureate’s contribution to agency theory “by describing conditions under which linear incentives are optimal, and by developing a tractable mode of multitask agency relationships. His work in contract and organization theory has been very influential in management science.” Finally, it concluded, “Professor Milgrom has contributed to mathematical economics and game theory, with studies on reputation and adaptive learning.”



Bio notes

Paul Milgrom (Detroit, Michigan, 1948) completed a BA in mathematics at the University of Michigan, before moving to Stanford, where he specialized in statistics and earned a PhD in business. He began his research and teaching career at Northwestern University (Illinois), where he would later occupy a series of professorial posts. In 1987, after five years at Yale, he returned to Stanford University, where he is currently the Shirley and Leonard Ely Professor of Humanities and Sciences, as well as professor by courtesy in the Stanford Graduate School of Business.

His scientific papers and books have been cited more than 53,000 times, according to Google Scholar. He had occupied editorial positions at international journals including American Economic Review, Econometrica and Journal of Economic Theory, and is a fellow of the Econometric Society and a member of both the U.S. National Academy of Sciences and the American Academy of Arts and Sciences.



International jury

The jury in this category was chaired by Kenneth J. Arrow, Nobel laureate in Economics and Professor of Economics and of Management Science and Engineering, Emeritus, at Stanford University (United States), with José Manuel González-Páramo, Visiting Professor at IESE Business School (Spain), acting as secretary. Remaining members were Andreu Mas-Colell, Professor of Economics at Pompeu Fabra University (Spain); Joel Mokyr, Robert H. Strotz Professor of Arts and Sciences and Professor of Economics at Northwestern University (United States); Albrecht Ritschl, Professor of Economic History at the London School of Economics (United Kingdom); and Jean Tirole, Chairman of the Board of the Fondation Jean-Jacques Laffont at Toulouse School of Economics (TSE)and Scientific Director of Toulouse University’s Institute for Industrial Economics (France)
***************
Here's the Spanish press release.

Using chimpanzees for medical research is becoming repugnant

The attraction and the repugnance of doing medical research on chimps both arise from the same fact: chimps are sort of like people... The NIH takes note: Agency moves to retire most research chimps

"Almost all of the 451 chimpanzees owned or supported by theNational Institutes of Health that are now at research facilities should be permanently retired from research and moved to sanctuaries, with planning for the move to start immediately, a report from an N.I.H. council unanimously recommended Tuesday."

Prisoner's dilemma, exam grading, and social media

Long long ago I wrote an undergraduate exam that included a prisoner's dilemma question framed as the question of whether to study or not for a particular exam, with your payoff on the exam depending in part on what other people did.  Here is that story brought to life, complete with how it was organized by social media, and enforced by a contingent strategy that depended on mutual observation. (The url is more informative than the headline:

http://www.insidehighered.com/news/2013/02/12/students-boycott-final-challenge-professors-grading-policy-and-get


"Since he started teaching at Johns Hopkins University in 2005, Professor Peter Fröhlich has maintained a grading curve in which each class’s highest grade on the final counts as an A, with all other scores adjusted accordingly. So if a midterm is worth 40 points, and the highest actual score is 36 points, "that person gets 100 percent and everybody else gets a percentage relative to it,” said Fröhlich.

"This approach, Fröhlich said, is the "most predictable and consistent way" of comparing students' work to their peers', and it worked well.

"At least it did until the end of the fall term at Hopkins, that is.

"As the semester ended in December, students in Fröhlich’s "Intermediate Programming", "Computer Science Fundamentals," and "Introduction to Programming for Scientists and Engineers" classes decided to test the limits of the policy, and collectively planned to boycott the final. Because they all did, a zero was the highest score in each of the three classes, which, by the rules of Fröhlich’s curve, meant every student received an A.

“The students refused to come into the room and take the exam, so we sat there for a while: me on the inside, they on the outside,” Fröhlich said. “After about 20-30 minutes I would give up.... Then we all left.” The students waited outside the rooms to make sure that others honored the boycott, and were poised to go in if someone had. No one did, though.

"Andrew Kelly, a student in Fröhlich’s Introduction to Programming class who was one of the boycott’s key organizers, explained the logic of the students' decision via e-mail: "Handing out 0's to your classmates will not improve your performance in this course," Kelly said.
"So if you can walk in with 100 percent confidence of answering every question correctly, then your payoff would be the same for either decision. Just consider the impact on your other exam performances if you studied for [the final] at the level required to guarantee yourself 100. Otherwise, it's best to work with your colleagues to ensure a 100 for all and a very pleasant start to the holidays."

"Kelly said the boycott was made possible through a variety of technological and social media tools. Students used a spreadsheet on Google Drive to keep track of who had agreed to the boycott, for instance. And social networks were key to "get 100 percent confidence that you have 100 percent of the people on board" in a big class.

"Fröhlich took a surprisingly philosophical view of his students' machinations, crediting their collaborative spirit. "The students learned that by coming together, they can achieve something that individually they could never have done," he said via e-mail. “At a school that is known (perhaps unjustly) for competitiveness I didn't expect that reaching such an agreement was possible.”
Although Fröhlich conceded that he did not include such a “loophole” in the policy “with the goal of students exploiting it,” he decided to honor it after the boycott.

"Despite awarding As to all the students who participated in the boycott, the experience has led Fröhlich to alter his long-held grading policy.
“I have changed my grading scheme to include ‘everybody has 0 points means that everybody gets 0 percent,’ ” Fröhlich said,  “and I also added a clause stating that I reserve the right to give everybody 0 percent if I get the impression that the students are trying to ‘game’  the system again.”

News story on sorority matching, quoting two Roths

Here's a news story from the Daily Pennsylvanian, that is notable for quoting two Roths, without any suggestion that they are related (Roth is a common name...:)

Sorority, medical residency recruitment similar: Applicants are matched with organizations through an algorithm for both

The back story, I gather, is that the student reporter first contacted Penn computer science professor Aaron Roth to comment on the use of an algorithm in matching applicants to sororities, and he mentioned to her that there was an economics paper on sorority matching.

School choice in New Orleans, evolving

Here's an article from the Times-Picayune about school choice in New Orleans, which will be expanding to include more schools.   One of the paramount issues is communicating effectively with parents.

New Orleans parents need easier access to school choices: John Ayers

"Efforts to include more schools in OneApp, along with improved communication about the application and enrollment process, are critical steps toward a successful school choice system in New Orleans.

"But we can do more.

"In order for school choice policy to be effective, it must respond to the way in which parents navigate the school system, what they value and desire in schools, and how they feel about the education their children are receiving. First, it is critical that the application process be streamlined to include all schools, including School Board charter schools. Additionally, the districts must invest in ongoing clear communication with parents and through parents, recognizing that parents rely most on information from each other.

"Of course, choice among limited high-quality options may not feel like choice at all. New Orleans must continue to focus on improving the quality of its public schools to ensure all parents have access to great school choices close to home. Until then, school choice will do an inadequate job providing parents with access to the best schools for their children. Markets are never perfect, but we can make this one better."

Wagaroo: A matching market for pet dogs from responsible sources

Christine Exley, a graduate student in Economics at Stanford, writes me about a new matching market, Wagaroo, that aims to cut the search costs for finding pet dogs from responsible sources. (NB, the site may not yet work with all browsers.) She writes:

"It is estimated that 23.5 million people plan to acquire a pet every year.  Of this, 1.5 million intend to buy their pet from a breeder, 5 million are committed to adopting their pet, and 17 million are undecided about the source for their new pet. At the same time, 3 million dogs and cats are killed every year in shelters because they cannot find a home. When you account for people acquiring dogs from shelters, rescue groups, the street (i.e., strays), friends, family members and purebred breeders, there are still over 6 million people acquiring dogs and cats from “other” sources. These other sources (as well as some of the listed sources) are likely puppy mills – places that mass-produce dogs for profit in horrid conditions.  

"Why do people get dogs from puppy mills and hence increase the demand for this inhumane practice in the face of so many adoptable dogs being killed in shelters? There are two leading answers.  First, separately identifying puppy mills from responsible breeders is challenging.   Both puppy mills and responsible breeders sell purebreds for upwards of $1,000, and puppy mills are quick to imitate responsible breeders by falsely advertising that their dogs are bred and cared for in good conditions.   Second, the search costs of acquiring dogs from responsible sources are incredibly high since no unified market exists.   While you may need to search dozens of responsible organizations before you find an available Black Labrador puppy, a quick Google search is guaranteed to show an available Black Labrador puppy from a puppy mill.  Wagaroo will change this through an online listing of dogs from all responsible sources – shelters, rescue groups, responsible breeders and owners needing to re-home their dogs. No puppy mills allowed!   While Wagaroo is in early stages, (ideas on how to perfectly separate puppy mills from responsible breeders are welcome), we look forward to building such a comprehensive listing and providing people with a simple, reputable way to find a dog from responsible sources.  If we make it easy, then we know that people will do the right thing.  "

Human consumption of horse meat...some religious origins of repugnance

In the United States, the repugnance felt towards the human consumption of horse meat probably stems from our regard for horses as pets, and perhaps also from a feeling that they play a role in our national mythology, concerning e.g. the settling of the West.  But elsewhere, the repugnance may have a religious origin, or so says an article in the Canadian Veterinary Journal:

"Food avoidances and taboos have historically been based on religion, or have functioned to demonstrate social status differences between individuals and social groupings (18). Although Leviticus is silent on the specific issue of horse (19), in 723, Pope Gregory III indicated that the eating of horses was a ‘filthy and abominable custom’ in his instructions to Boniface, Bishop to the Germans (20). In Ireland, the Canones hibernenses, which date from the 7th century, impose an unusually harsh penance of 4 y on bread and water for the consumption of horsemeat (20). The explanation of this nonbiblically based Canon Law is that the consumption of horsemeat was associated with pre-Christian Celtic and Teutonic religious sacrifice (20,21). The church condemnation of horsemeat consumption was directed to suppressing pagan practices and distinguishing the Christian from the heathen (20,21)."

(From The United States’ prohibition of horsemeat for human consumption: Is this a good law?
Terry L. Whiting, Can Vet J., v.48(11); Nov 2007 )

Hat tip to Vanessa Wong of Bloomberg Businessweek, who interviewed me on the subject: What's So Bad About Horse Meat, Anyway?

Horse meat (unlabelled) in Britain and elsewhere in Europe

There has been a lot of press on the fact that horse meat has been discovered mis-labeled as beef in Britain, and now elsewhere in Europe. This (probably criminal) mis-labeling of a cheap and unregulated food product as something else is compounded by the fact that, in Britain at least, people prefer to ride ponies than to eat them. So, the main story line doesn't seem to involve repugnance per se (i.e. the reluctance of people towards other people eating horse meat). But it certainly involves some disgust.

Here are some of the stories:

The British Hate Horse Meat. The French Love Horse Meat. Americans? Meh.


Horse Meat in Food Stirs a Furor in the British Isles
"The labeling of horse meat as beef has breached one of the great culinary taboos of Britain and Ireland, two countries that pride themselves on their love of certain animals, particularly horses. The fact that the source of the meat appears to have been mainland Europe, where the consumption of horse meat is far more common, has raised suspicions of fraud because beef is more expensive than meat from horses."

Waiter, There's a Horse in My Lasagna

Horse meat and the economics of disgust

Real estate ads in Britain: "no upward chain"

Some time ago I blogged about how transactions in tight real estate markets might produce chains (or even cycles) of transactions, in which some owners might have to buy a house before they could vacate theirs (and in slow markets in which some owners might have to sell their house before they could buy one).

It turns out that right now in England, a not-so-rare feature of ads to sell houses is the phrase "No upward chain." What it means, apparently, is that this house is available to be bought/sold right now, without the owner having to wait to buy a new house before closing on the deal.

HT: Brit Grosskopf

Art project on matching in Berkeley today

File this under "I'm not sure what to make of this"

SONYA RAPOPORT

"ImPOSSIBLE CONVERSATIONS?" Data Gathering Event 

One Day Only!

Sunday, February 10th, 2013 from 1 to 4 pm

Martina }{ Johnston would like to invite you to a one-day special Data Gathering Event for artist Sonya Rapoport's project "ImPOSSIBLE CONVERSATIONS?" on Sunday, February 10th, 2013 from 1 to 4 pm.

Sonya Rapoport will be presenting a new interactive project and invites viewers to come and participate in a simple matching experiment under controlled conditions. The results of this experiment will become part of "ImPOSSIBLE CONVERSATIONS?" and will be exhibited at the Fresno Art Museum in May of this year.

"ImPOSSIBLE CONVERSATIONS?" is structured by Alvin Roth and Lloyd Shapley's "Market Design and Matching Theory", which won the 2012 Nobel Prize in Economics. This theory explores how people, institutions, and companies find and select each other to create stable matches. The work takes the form of a series of collages; each consists of a black and white photograph of a "pattern painting" that Rapoport created and exhibited in the late 60's, overlaid on a contemporary newspaper advertisement, and juxtaposed with a short text appropriated from the media.

Based in the Bay Area, Sonya Rapoport has exhibited her conceptual and new media artwork internationally. She recently had retrospective exhibitions at the Kala Institute in Berkeley and Mills College Art Museum. She received her MFA from UC Berkeley in 1949. Many of her web-based digital pieces can be experienced on her website, and she maintains an active blog about her work.

We hope to see you on Sunday, February 10th!

*Martina }{ Johnston is an artist-run house gallery located at:
1201 6th St., 2nd Floor, 
Berkeley, CA 94701
510.221.8315
martinajohnston@gmail.com
www.martinajohnston.org

Hoxby and Avery on a glitch in matching low income high achieving students to selective colleges

Caroline Hoxby and Chris Avery report that there are low income students whose achievements predict that they would do well in selective colleges, but who never apply:

The Missing 'One-Offs': The Hidden Supply of High-Achieving, Low Income Students

Caroline M. Hoxby 

Stanford University; National Bureau of Economic Research (NBER); Hoover Institution; Stanford University

Christopher Avery 

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)
December 2012

NBER Working Paper No. w18586 
Abstract:      
We show that the vast majority of very high-achieving students who are low-income do not apply to any selective college or university. This is despite the fact that selective institutions would often cost them less, owing to generous financial aid, than the resource-poor two-year and non-selective four-year institutions to which they actually apply. Moreover, high-achieving, low-income students who do apply to selective institutions are admitted and graduate at high rates. We demonstrate that these low-income students' application behavior differs greatly from that of their high-income counterparts who have similar achievement. The latter group generally follows the advice to apply to a few "par" colleges, a few "reach" colleges, and a couple of "safety" schools. We separate the low-income, high-achieving students into those whose application behavior is similar to that of their high-income counterparts ("achievement-typical" behavior) and those whose apply to no selective institutions ("income-typical" behavior). We show that income-typical students do not come from families or neighborhoods that are more disadvantaged than those of achievement-typical students. However, in contrast to the achievement-typical students, the income-typical students come from districts too small to support selective public high schools, are not in a critical mass of fellow high achievers, and are unlikely to encounter a teacher or schoolmate from an older cohort who attended a selective college. We demonstrate that widely-used policies–college admissions staff recruiting, college campus visits, college access programs–are likely to be ineffective with income-typical students, and we suggest policies that will be effective must depend less on geographic concentration of high achievers.

Same sex marriage legislation under consideration in Britain, France and Rhode Island

Three legislature, three bills, three pictures...



Gay Marriage Bill Approved in Rhode Island House Vote (now on to the State Senate)

And across the sea, Thousands Rally in Paris For Same-Sex Marriage (as the legislature prepares to consider a bill supported by the new government).

and
British House of Commons Approves Gay Marriage (not wit)hout a lot of dissent from the governing party

update: and it's not over til it's over:

Tory rebels may scupper gay marriage in the Lords

David Cameron faces another bitter battle over his plans to introduce gay marriage, with more than half of Conservative peers expected to vote against the move.

Michael Sandel on "The Perils of Thinking Like an Economist"

It seems to me his title  "The Perils of Thinking Like an Economist" may be missing a comma.

I enjoy trying to follow his train of thought, though as time goes on he seems to be digging himself in deeper and deeper. See my previous posts on Michael Sandel here.

HT: László Sándor

Marsilius Lecture in Heidelberg Feb 7: Kidney Exchange and other market and near-market approaches to transplantation

Marsilius-Vorlesung: "Kidney Exchange and other market and near-market
approaches to transplantation"
Prof. Alvin Roth, Nobelpreis für Ökonomie 2012
Stanford University/USA
Recent advances in the organization of kidney exchange have increased the opportunities
for patients to receive live donor kidney transplants even when their own donors are
incompatible. But kidneys for transplant remain a scarce resource around the world. I will
discuss various ways in which the economics of market design can contribute to easing the
shortage, and how it can inform the debate about what to do next.


Das Marsilius-Kolleg der Universität Heidelberg lädt
herzlich ein zur Marsilius-Vorlesung mit
Alvin Roth
Nobelpreis für Ökonomie 2012
am Donnerstag, 7. Februar 2013, 16.00 Uhr
in der Alten Aula der Universität Heidelberg
Grabengasse 1, 69117 Heidelberg
Programm
Musikalischer Auftakt
Begrüßung
Bernhard Eitel
Rektor der Universität Heidelberg
Einführung
Jörg Oechssler, Fellow am Marsilius-Kolleg
Marsilius-Vorlesung
“Kidney Exchange and other market and near-market
approaches to transplantation“
Alvin Roth, Stanford University, USA
Musikalisches Intermezzo
Verleihung der Marsilius-Medaille
Musikalischer Abschluss
Anschließend Empfang in der Bel Etage
Vortragssprache: Englisch

Google translate:

The Marsilius Kolleg, University of Heidelberg invites
cordially invited to Marsilius Lecture with
Alvin Roth
Nobel Prize for Economics 2012
on Thursday, 7 February 2013, 16.00 clock
in the Great Hall of the University of Heidelberg
Grave 1, 69117 Heidelberg
program
musical prelude
welcome
Bernhard Eitel
Rector of the University of Heidelberg
introduction
Jörg Oechssler, Fellow at the Marsilius Kolleg
Marsilius Lecture
"Kidney Exchange and other market and near-market
approaches to transplantation "
Alvin Roth, Stanford University, USA
musical interlude
Awarding the medal Marsilius
musical statements
Followed by a reception in the Bel Etage
Lecture Language: English

http://www.marsilius-kolleg.uni-heidelberg.de/md/einrichtungen/mk/veranstaltungen/mk_einladung_roth_171212_02.pdf

My talk at U of Birmingham: 3 minute summary

I gave a public lecture and a department seminar: here's a three minute summary of the public lecture.

ESRC Game Theory Workshop: Matching Under Preferences, Feb 6 at the LSE

http://www.maths.lse.ac.uk/ESRC_Game_Theory_Workshop.html

 Wednesday, February 6, 2013, London School of Economics

ESRC Game Theory Workshop
"Matching Under Preferences"

The 2012 Nobel Memorial Prize in Economic Sciences was awarded to Alvin E. Roth and Lloyd S. Shapley "for the theory of stable allocations and the practice of market design". The LSE Department of Mathematics has a strong research group on Game Theory and Discrete Mathematics. At the occasion of the Nobel prize, it organises this workshop, sponsored by a grant from the Economic and Social Research Council (ESRC) on "Games and Economic Behaviour".

The highlight of this workshop is a popular talk by Alvin Roth himself: "Who Gets What? The New Economics of Matchmaking and Market Design", and its summary shows the practical importance of the topic of the workshop.

Speakers:

Sophie Bade (Royal Holloway)	Lars Ehlers (Université de Montreal)	Aytek Erdil (Cambridge)
Flip Klijn (Institute for Economic Analysis, Barcelona)	David Manlove (Glasgow)	Alvin Roth (Stanford)

Location: Shaw Library (6th floor, Old Building, LSE)

Maps of the LSE campus can be found here: http://www2.lse.ac.uk/mapsAndDirections/findingYourWayAroundLSE.aspx

Everybody is welcome and participation is free. However, due to the expected popularity of the event, in particular the talk by Alvin Roth at 4:10pm, it is compulsory to register on a FIRST REGISTERED, FIRST SERVE basis by email to Rebecca Lumb at R.C.Lumb@lse.ac.uk.
Please note that participation for the following talks is now fully booked and reservations can no longer be taken:
Erdil at 2pm; Bade at 2:45pm; Roth at 4:10pm.Refreshments and lunch will be provided to registered participants.

Schedule and Abstracts

(2-page downloadable PDF)

10:05 welcome

10:15 Flip Klijn (Institute for Economic Analysis, Barcelona)
"A Many-to-Many Rural Hospital Theorem"

Abstract:
We show that the full version of the so-called "rural hospital theorem" generalizes to many-to-many matching problems where agents on both sides of the problem have substitutable and weakly separable preferences. In contrast with the existing literature, we reinforce our result by showing that when agents' preferences satisfy substitutability, the domain of weakly separable preferences is also maximal for the rural hospital theorem to hold.
(Joint work with Ayse Yazici.)

11:00-11:30 coffee break

11:30 Lars Ehlers (Université de Montreal, Canada)
"Strategy-Proofness Makes the Difference: Deferred-Acceptance with Responsive Priorities"

Abstract:
In college admissions and student placements at public schools, the admission decision can be thought of as assigning indivisible objects with capacity constraints to a set of students such that each student receives at most one object and monetary compensations are not allowed. In these important market design problems, the agent-proposing deferred-acceptance (DA-)mechanism with responsive strict priorities performs well and economists have successfully implemented DA-mechanisms or slight variants thereof. We show that almost all real-life mechanisms used in such environments--including the large classes of priority mechanisms and linear programming mechanisms--satisfy a set of simple and intuitive properties. Once we add strategy-proofness to these properties, DA-mechanisms are the only ones surviving. In market design problems that are based on weak priorities (like school choice), generally multiple tie-breaking (MTB) procedures are used and then a mechanism is implemented with the obtained strict priorities. By adding stability with respect to the weak priorities, we establish the first normative foundation for MTB-DA-mechanisms that are used in New York City.
(Joint work with Bettina Klaus.)

12:15 David Manlove (Glasgow)
"Junior Doctor Allocation and Kidney Exchange: Theory and Practice"

Abstract:
Matching problems typically involve assigning agents to commodities, possibly on the basis of ordinal preferences or other metrics. These problems have large-scale applications to centralised clearinghouses in many countries and contexts. Moreover, these problems have received much exposure in recent months due to the award of the Nobel Prize in Economic Sciences to Al Roth and Lloyd Shapley.
In this talk I will describe the matching problems featuring in two centralised clearinghouses in the UK that have involved collaborations between the National Health Service and the University of Glasgow. One of these deals with the allocation of junior doctors to Scottish hospitals, and the other is concerned with finding kidney exchanges among incompatible donor-patient pairs across the UK.
In each case I will describe the applications, briefly outline the theoretical underlying problems, discuss the algorithmic techniques for their solution, and give an overview of results arising from real data connected with the matching schemes in recent years.
(Joint work with Rob Irving and Gregg O'Malley.)

13:00-14:00 lunch (buffet at the Shaw Library)

14:00 Aytek Erdil (Cambridge)
"Prioritizing Diversity in School Choice"

Abstract:
Promoting diversity in schools has recently emerged as an important policy goal. Typically school choice programs take into account student preferences and allocate scarce schools on the basis of priorities, using stability as the solution concept. Therefore a notion of prioritizing diversity is essential. We introduce a rich class of priorities which capture intuitive notions of diversity. Substitutable priorities with ties not only ensure existence of stable assignments, but also allow students of same types to be treated equally. Moreover we describe an algorithm which finds an optimal stable assignment.
(Joint work with Taro Kumano.)

14:45 Sophie Bade (Royal Holloway)
"Pareto Optimal, Strategy Proof, Non-Bossy and Anonymous Random Matching Mechanisms"

Abstract:
Take any Pareto optimal, strategy proof and non-bossy matching mechanism for a housing problem. Define a uniform randomization over this mechanism by drawing the assignment of agents to the roles in the mechanism from a uniform distribution over all possible such assignments. I show that any such uniform randomization is equivalent to random serial dictatorship. According to random serial dictatorship the probability of a matching is calculated as the fraction of all orders of dictators according to which said matching arises divided by the grand set of all possible orders of dictators. This extends the Abdulkadiroglu and Soenmez' (1998) celebrated equivalence result between the uniform randomization over Gale's top trading cycles mechanism and random serial dictatorship to the entire set of all Pareto optimal, strategy proof and non-bossy matching mechanisms. 15:30-16:05 coffee break

15:30-16:00 coffee break

16:10 Alvin Roth (Stanford)
"Who Gets What? The New Economics of Matchmaking and Market Design"

Abstract:
What are markets and marketplaces? How do they work? How do they fail? How can we fix them when they are broken? In recent years economists have stepped forward as market designers to try to craft answers to these questions. These questions are particularly difficult for matching markets, which are markets in which you cannot just choose what you want, but also have to be chosen. If a market has an application or selection procedure then it is a matching market, and matching markets determine some of the most important transitions in life. Who goes to which schools and universities? Who gets which jobs? Who gets scarce organs for transplant? I'll illustrate with examples of recent market designs, in school choice, labor markets, and kidney exchange.

17:15-18:30 reception in the Senior Common Room (5th floor)

---

This workshop is part of an ESRC sponsored series of one-day workshops. At LSE these are organised by Olivier Gossner and Bernhard von Stengel.

School choice in Chicago and England, and some ideas about comparing manipulabiliby

The current (February 2013) issue of the AER has the following paper by Parag Pathak and Tayfun Sonmez, which combines some incisive observation with some new theory:

School Admissions Reform in Chicago and England: Comparing Mechanisms by Their Vulnerability to Manipulation

Parag A. Pathak and Tayfun Sönmez Abstract:

"In Fall 2009, Chicago authorities abandoned a school assignment mechanism midstream, citing concerns about its vulnerability to manipulation. Nonetheless, they asked thousands of applicants to re-rank schools in a new mechanism that is also manipulable. This paper introduces a method to compare mechanisms by their vulnerability to manipulation. Our methodology formalizes how the old mechanism is at least as manipulable as any other plausible mechanism, including the new one. A number of similar transitions took place in England after the widely popular Boston mechanism was ruled illegal in 2007. Our approach provides support for these and other recent policy changes.  "

Here's their story of school choice in England (where I am today):


"In England, forms of school choice have been available for at least three decades.  The nationwide 2003 School Admissions Code mandated that Local Authorities, an operating body much like a US school district, coordinate their admissions practices. This reform provided families with a single application form and established a common admissions timeline, leading to a March announcement of placements for anxious 10 and 11 year-olds on National Offer Day. The next nationwide reform came with the 2007 School Admissions Code. While strengthening the enforcement of admissions rules, this legal code also prohibited authorities from using what they refer to as ‘‘unfair oversubscription criteria’’ in Section 2.13:

In setting oversubscription criteria the admission authorities for all 
maintained schools must not: give priority to children according to the order of other schools 
named as preferences by their parents, including ‘first preference first’ arrangements.

A first preference first system is any ‘‘oversubscription criterion that gives priority to children according to the order of other schools named as a preference by their parents, or only considers applications stated as a first preference’’ (School Admissions Code 2007, Glossary, p. 118). The 2007 Admissions Code outlaws use of this system at more than 150 Local Authorities across the country, and this ban continues with the 2010 Code. The best known first preference first system is the Boston mechanism, and since 2007 it is banned in England.  The rationale for this ban, as stated by England’s Department for Education and Skills, is that ‘‘the ‘first preference first’ criterion made the system unnecessarily complex to parents’’ (School Code 2007, Foreword, p. 7). Moreover, Education Secretary Alan Johnson remarked that the first preference first system ‘‘forces many parents to play an ‘admissions game’ with their children’s future.’’

Opt-out for organ donation faces opposition in Maryland

Religious groups oppose Maryland organ donation bill

"Maryland residents would have to opt out of the state's organ donation system under legislation before the General Assembly, angering religious groups that oppose it for ostensibly placing the state's law above God's.

"The measure would require Marylanders to opt out of organ donation when they applied for a driver's license or state ID, as opposed to the current system, in which they can volunteer to opt in.

"The government does not have a lien on our bodies," said Catholic League President Bill Donohue. "The whole idea of opting out is offensive, because the predicate here is that the state has some claim on our organs."

"The Catholic League joined Orthodox Jewish groups to defeat a similar New York bill in 2010.

"It cheapens the whole culture because the way we look at human life from conception to natural death becomes coarser and coarser," Donohue said. "The premise is that somehow the government owns your body unless you opt out ... if we accept that, what's next?"

"The bill, sponsored by Sen. Ron Young, D-Washington and Frederick counties, would require the Motor Vehicle Administration to notify people applying for or renewing driver's licenses or IDs that they will be an organ donor unless they expressly choose not to. It doesn't specify how the MVA must notify applicants. Donor organs and tissue can be used for transplants, therapy, or medical research and education.

"A House version is being sponsored by Del. Galen Clagett, D-Frederick County. Neither Young nor Clagett returned calls.

...

"About half of Maryland adults are registered organ donors, ranking it 27th among states, according to a 2012 report by organ donation group Donate Life.

"Libby Wolfe, executive director of Donate Life Maryland, said 2,300 people in Maryland are awaiting a donation, with 116,000 waiting nationwide. Donate Life Maryland opposes the "presumed consent" bill because countries with opt-out systems have seen a decrease in donors.

"If Maryland passes the bill, it would be the first state to have such a law. The legislatures in Virginia and New Jersey are also considering bills to create presumed-consent organ donation systems, according to the University of North Carolina Kidney Center, which tracks transplant-related bills."