The market for music rights--all Bob Dylan's songs

 The NY Times has the story:

Bob Dylan Sells His Songwriting Catalog in Blockbuster Deal--Universal Music purchased his entire songwriting catalog of more than 600 songs in what may be the biggest acquisition ever of a single act’s publishing rights.  By Ben Sisario

"The deal, which covers Dylan’s entire career, from his earliest tunes to his latest album, “Rough and Rowdy Ways,” was struck directly with Dylan, 79, who has long controlled the vast majority of his own songwriting copyrights.

"The price was not disclosed, but is estimated at more than $300 million.

...

"Music publishing is the side of the business that deals in the copyrights for songwriting and composition — the lyrics and melodies of songs, in their most fundamental form — which are distinct from those for a recording. Publishers and writers collect royalties and licensing fees any time their work is sold, streamed, broadcast on the radio or used in a movie or commercial. 

...

"Streaming has helped lift the entire music market — publishers in the United States collected $3.7 billion in 2019, according to the National Music Publishers’ Association — which has drawn new investors attracted to the steady and growing income generated by music rights.

"Dylan’s deal includes 100 percent of his rights for all the songs of his catalog, including both the income he receives as a songwriter and his control of each song’s copyright. In exchange for its payment to Dylan, Universal, a division of the French media conglomerate Vivendi, will collect all future income from the songs."

Edward (Eddie) Lazear (1948-2020)

 My Stanford colleague Eddie Lazear passed away last month, from pancreatic cancer. (When he moved from the University of Chicago to Stanford around 1995 he told me that he moved when he did because he was aware that the academic market for professors became thin after one's 50th birthday.) 

Prominent among his many accomplishments were his studies of labor markets from the inside out, i.e. from the perspectives of workers inside firms.

His papers include

Lazear, Edward P. "Why is there mandatory retirement?." Journal of political economy 87, 6 (1979): 1261-1284.

Lazear, Edward P., and Sherwin Rosen. "Rank-order tournaments as optimum labor contracts." Journal of political Economy 89, 5 (1981): 841-864.

Lazear, Edward P. "Performance pay and productivity." American Economic Review 90, 5 (2000): 1346-1361.

He founded the Journal of Labor Economics, and its current issue, Volume 39, Number 1, January 2021, published just now, contains his most recent paper:

Why Are Some Immigrant Groups More Successful Than Others?

Abstract: "The composition of immigrants depends not only on immigrant choice but also on immigration policy, because slots are rationed. Policy determines immigrant attainment, as evidenced by immigrants from Algeria having higher educational attainment than those from Israel or Japan. Theory predicts and evidence confirms that immigrant attainment is inversely related to the number admitted from a source country and positively related to population and education levels at home. A parsimonious specification has only two variables yet explains a majority of the variation in educational attainment of US immigrant groups. The theory and predictions are bolstered by Swedish data."

Here is the memorial statement from the JOLE (with a link to a special issue in honor of Eddie's 65th birthday: IN MEMORIAM: EDWARD LAZEAR

He was an an influential policy advisor as well as an institution builder.  Here's his Stanford obituary:

NOVEMBER 24, 2020: Trailblazing economist and presidential adviser Edward Lazear dies at 72

Here's a photo I took of him in December 2011 at a conference in honor of the 20th anniversary of the Rationality Center in Jerusalem.

Eddie Lazear (1948-2020)

Jefferson University celebrates Dr. Ignazio Marino

Ignazio Marino, transplant surgeon (and former Mayor of Rome) has received the Achievement Award in Medicine from Thomas Jefferson University in Philadelphia.

You can see the award ceremony below (the tribute to Dr. Marino starts at about 43 minutes and goes until 51 minutes, at which point he makes some remarks until about 1:03).

Congratulazioni, Ignazio!

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Previous post:

Tuesday, September 4, 2018

Ignazio Marino on global kidney exchange

Should college admissions be organized like the medical residency match?

 The Chronicle of Higher Ed asks why not organize college admissions the way we organize the match for residency positions in medicine. (It considers the benefits and glides over the difficulties):

Can Algorithms Save College Admissions?  We’ve tried a system based on competition long enough. It isn’t working.  By Brian Rosenberg

"competition manifests itself in several ways, including large admissions staffs, growing marketing budgets, costly “yield management” consultants, the proliferation of programs, and what some refer to as an arms race in building construction. By far the most expensive and problematic effect of competition has been increasing reliance on what is euphemistically referred to as “merit aid,” which in fact means the awarding of tuition discounts to low- or no-need students in order to persuade them to attend a particular institution.

...

"What if we replaced the current and longstanding admissions process among private colleges with a match process, similar to what has for years been used to match medical-school graduates with residency and fellowship positions? What if, in other words, we used data and algorithms instead of travel, merit aid, and free food to drive college admissions?

...

"A similar system is used by the QuestBridge program, which asks applicants to rank 12 choices among the 42 colleges in the program and then matches qualifying students with a college. In order to qualify for the QuestBridge scholarship, students must enroll in the college with which they are matched.

...

"is the selection of a college on the basis of the friendliness of the tour guide or the cleverness of the marketing truly less random than being matched on the basis of priorities and interests?"

Allocating vaccines while they're still scarce--I'm interviewed by Stacy Vanek Smith on the Indicator from Planet Money

 Here's a podcast in which I'm interviewed by Stacey Vanek Smith about how vaccines might be allocated while still scarce:

Who Gets A Vaccine? A Conversation With Alvin Roth

The Indicator from Planet Money, December 15, 2020

("9-Minute Listen")

And here's the transcript.

Below is the latter part of the interview, about vaccines (edited by me to take out excess "you know's," you know?):

SMITH: What are - when you're looking at the vaccine situation now, there are a limited number of COVID vaccines available, at least at this moment. What do you see when you look at that market right now? Not that it's a market per se but you know what I mean.

ROTH: Any time we're allocating scarce resources,  I think it's fair to talk about that as the marketplace. It's waiting for a scarce resource to become available. So what we do with [deceased donor] organs is we form waiting lists and each organ has a different kind of waiting list. So that's a little bit like what we're going to see with a vaccine. Different states are going to have different rules of how to get vaccines. They also have different supply and demand. It might be that lots of people in New York will want to have a vaccine. And it's possible - and I'm purely speculating - that a smaller percentage of people in Tennessee will want it, right? We have a lot of vaccine hesitancy in the United States.

SMITH: Yeah.

ROTH: So one thing that reminds me of kidney exchange a little bit is exchange. Supposing it turns out that we allocate to the states proportional to population, which I think we may be doing this morning. And suppose it turns out that in New York, there's a giant shortage, that there are lots of health care workers, and they're eager to get it. And then after that, there are lots of old people and vulnerable people of various sorts. And New York will develop a priority list.

At the same time, they might discover that in Tennessee, they've gotten more vaccines than they can get rid of on the first day because of vaccine hesitancy or maybe people aren't eager to try it out so early. So you could imagine an exchange, that we'll send you 100,000 doses today and call them in two months when we think we'll need them.

SMITH: What would - like, what do you think is sort of an ideal way for states and I guess - and countries to start approaching this? Because it is complicated, and everybody wants this vaccine, right? A lot of people want this vaccine right now. The demand is greater than the supply. Like, what would you I guess like to see happen or like to see start happening for countries and states kind of making this decision?

ROTH: One thing that people have said is, health care workers are important because they help us contain the disease. But they're also vulnerable to it  - especially if we talk about the health care workers who are treating people who are ill with COVID. So it might make sense to prioritize them so that the hospitals don't shut down, things like that.

But then you might also say, people who are at risk in various ways should get a high priority because getting a vaccine might save their life. But then we might want to go in a different direction. We might want to say - who is likely to be a superspreader? Who  is exposed by the nature of their work? Maybe the essential workers who drive the trucks and deliver the goods and coming to your door and maybe getting your signature.

SMITH: Right, right 'cause this is a little different than a kidney because we're talking about a virus that can spread. So that's in there, too. Like, people who are more likely to - 'cause if we can vaccinate, let's say, like, people who do deliveries, then that could pay sort of exponential dividends.

ROTH: Right. And then we could also think about what's costly to us about the precautions we're taking. One of those things, of course, is child care. If you have school-age children and they're now at home and especially if they're quite young, so they can't even really do Zoom classes without your help, well, then someone in your household is not working very hard 'cause they're providing a service that teachers used to provide. So we might think about what set of vaccinations would be required to open up schools again 'cause that would be a big weight lifted off the economy.

SMITH: Oh, right. That would be - that would help in, like, other ways because then it could help people go back to work, yeah.

ROTH: You'd like there to be the biggest multiplier effect you can get for each vaccine that not only does good for the person getting the jab, you know, the needle in his upper arm but that jab should also do the most good for the most other people.

SMITH: Dr. Alvin Roth is a professor of economics at Stanford University and winner of the 2012 Nobel Prize in Economics.

This episode of THE INDICATOR was produced by Nick Fountain, fact-checked by Sean Saldana. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.

Copyright © 2020 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

*************

A quick note on interviews.  These 9 minutes came from a one hour interview, so lots of decisions about what to include were made by NPR. (That’s why I come off as a solitary hero in the initial discussion of kidney exchange.)  But, aside from that, the editors did a pretty good job on this one, imho...)

Eduardo Laguna Müggenburg explores the repugnance of price gouging, and defends his dissertation

 Eduardo Laguna successfully defended his Ph.D. dissertation last month. One of the papers he presented  (with Justin Holz and Rafael Jiménez-Duran) was an online experiment in which Amazon sellers of face masks and sanitizer at high prices were sampled, and subjects in the experiment were offered the opportunity to pay to have items be purchased from those sellers and donated to hospitals, and also to pay to have those sellers reported as price gougers to the  Department of Justice National Center for Disaster Fraud.  Some subjects were willing to buy, some were willing to pay to report, and some were willing to pay to avoid having sellers reported.

Here's the paper 

Quantifying repugnance to price gouging with an incentivized reporting experiment 

by Justin Holz, Rafael Jiménez-Duran and Eduardo Laguna-Müggenburg

Abstract: "Anti-price gouging laws are ubiquitous and people take costly actions to report violators to law-enforcement agencies, which suggests that they value punishing price increases during emergencies. We argue with a model that consumer reports contain information about repugnance to price gouging, or willingness to prevent third-party transactions (Roth, 2007). We conduct a field experiment during the first wave of COVID-19 to measure individuals’ willingness to pay to report sellers who increase prices of personal protective equipment. The willingness to pay to report is non-negligible, polarized, and responsive to the seller's price. We also find that repugnance is partly due to distaste for seller profits, depending on the product."

Remarkably, "Half of subjects who are willing to pay to report sellers are also willing to forgo the $5 gift card to have us donate PPE from a price-gouging seller."

***************

That is, there are substantial numbers of participants who are willing to pay to report the seller, but are also willing to pay for the experimenters to purchase from the seller and donate the PPE to a hospital.  

We often think of repugnance as partitioning the population—there are people who want to transact, and others who think the transaction shouldn’t happen.  The fact that some individuals can simultaneously have both these feelings is, I think,  one of the most striking results of this experiment—it shows just how complex repugnance can be. These are people who recognize that buying goods at inflated prices (and donating them to hospitals) may be efficient, and worth doing given the shortage,  but would still like to see the sellers fined or jailed.  

I'm reminded of this (third hand) story about a N. Carolina hurricane, in which people waiting in line to buy ice at high prices nevertheless applauded when police arrived to arrest the sellers for price gouging... They Clapped: Can Price-Gouging Laws Prohibit Scarcity?

************

    Here's a picture from Eduardo's dissertation defense, conducted over Zoom:

Top: Matt Jackson, Eduardo Laguna, Al Roth

   Bottom: Larry Goulder, Chenzi Xu, Melanie Morten

Welcome to the club, Eduardo.

Some more Nobel links for Wilson and Milgrom

 This was a Nobel year unlike any in recent memory, since the Covid pandemic prevented the festivities from being held in Stockholm as they usually are.  The Nobel lectures by Milgrom and Wilson were recorded at Stanford, and they received their medals from the Swedish consul in a private ceremony.

Here's the text of the Award Ceremony Speech by Tommy Andersson

Here's Bob Wilson's Nobel lecture:

Here's Paul Milgrom's Nobel lecture: 

**************

Paul Milgrom posted some reflections on his website:

2020 Nobel Prize Firsts and Lectures

1. "It was the first to be awarded outdoors and the first outside of Stockholm.
2. It was the first economics prize awarded to a student (Paul) with his disseration adviser (Bob).
3. It was the first awarded jointly to two people living across the street from one another.
4. Paul became the first to give TWO Nobel prize lectures, having already lectured on behalf of Vickrey in 1996.
5. The backyard ceremony was held behind a residence that had housed two economics laureates (Paul Milgrom & Joe Stiglitz), plus 3-time SuperBowl winning coach Bill Walsh!

"Also unusual is that, by focusing on Paul's auction contributions, the Nobel Committee had left unmentioned ten of Paul's twelve most highly cited publications."

*********

Here's an essay by Jacob Goeree:

How market design is transforming the role of economists into engineers

"there are many cases where the “invisible hand” does not work. Prof. Wilson’s analysis of the winner’s curse in common-value auctions is a prominent example. “Sometimes the invisible hand needs a bit of help, and that’s where market design comes in – for instance, making sure bidders can update their value estimates during the bidding process itself” 

*************

Here (live streamed today on Dec. 16) is an event originating in Vienna, including a video interview in which I talk to Ben Greiner. (It starts at 6pm CET, i.e. 9am PST):

The Nobel Prize in layperson’s terms

"This event is being organized by the WU Department of Economics

"Nobel Prizes are awarded every year in December, on the anniversary of Alfred Nobel’s death. Nobel laureates are celebrated in the media, but hardly anyone knows anything about the research that goes on behind the scenes. We plan to change that. In cooperation with experts, we will be introducing the work of the winners of this year’s Nobel Prize in Economic Sciences in terms that even laypeople can understand. We will analyze the innovative power of the work and discuss its significance and potential applications in practice.

Welcoming words: Tatjana Oppitz, Vice-​Rector for Infrastructure and Digitalization

Discussion: Maarten Janssen, Professor of Economics, University of Vienna

Maarten Janssen is Professor of Microeconomics at the University of Vienna. Among many others, his research interests are in the fields of game theory, industrial organization and competition policy, and in particular auctions. He is particularly interested in the implications of information asymmetries in markets and market design.

Stefan Felder, Rundfunk und Telekom Regulierungs-​GmbH: RTR

Stefan Felder studied at Technical University and University of Economics and Business in Vienna. He worked in the telecommunications industry and at the University of Vienna. As of 1998, he has been a member of the Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR). He is an expert on spectrum auctions, competition analysis, and mobile communications. He is Head of Spectrum and Mobile Market at RTR.

Moderation: Maria Marchenko, WU

Maria Marchenko is an Assistant Professor at the WU Department of Economics. Her research lies in the fields of applied and theoretical econometrics using state-​of the art techniques and theoretical concepts with applications to networks and labor market.

Video interview: Alvin E. Roth, Winner of the Nobel Prize 2012; Professor of Economics, Stanford University

Alvin E. Roth is Professor of Economics at Stanford University. In 2012, he won the Nobel Prize in Economic jointly with Lloyd Shapley “for the theory of stable allocations and the practice of market design.’’

Update: here's the video: https://www.youtube.com/watch?v=oE2e6HynPvg&feature=youtu.be

 

Another mail order catalog throws in the towel (Sic transit gloria mundi .)

 The mail order catalogs of Sears Roebuck and Montgomery Ward were as innovative in the late 1800's as Amazon is today, bringing retail shopping to customers who otherwise had relatively little access to the wide variety of goods available in major cities.  Those catalogs lasted more than a century before giving way to other business models.

Now, IKEA is discontinuing its catalog.  The WSJ has the story:

The IKEA Catalog Defined Home for Millions. Now It’s Gone.  Flat-pack giant says it will discontinue publication of the book as readership declines  By Saabira Chaudhuri

"IKEA’s decision to stop publishing its annual catalog marks the end of a tome that served as much as an aspirational lifestyle guide for millions as it did a marketing tool for the flat-pack furniture giant.

"After 70 years, the catalog had become a relic in the digital age, the company said, calling the decision “emotional but rational.” The 2020 edition, which was sent out earlier this year, will be the last. The catalog will also no longer be published online.

"Like an international version of the Sears catalog, which ceased publication in 1993, the IKEA book sold not only housewares, but a lifestyle."

Designing centralized marketplaces that work gracefully with pre-existing decentralized ones, in Management Science, by Benjamin Roth and Ran Shorrer

 In Management Science (online ahead of print):

Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design

 Benjamin N. Roth , Ran I. Shorrer 

Published Online:8 Dec 2020 https://doi.org/10.1287/mnsc.2020.3643

Abstract: Often market designers cannot force agents to join a marketplace rather than using pre-existing institutions. We propose a new desideratum for marketplace design that guarantees the safety of participation: dominant individual rationality (DIR). A marketplace is DIR if every pre-existing strategy is weakly dominated by some strategy within the marketplace. We study applications to the design of labor markets and the sharing economy. We also provide a general construction to achieve approximate DIR across a wide range of marketplace designs.

Introduction: "Many marketplaces operate in a broader economic environment, and often participants cannot be forced to use a marketplace rather than the pre-existing institutions it was meant to displace. For instance, although most hospitals and residents use the clearinghouse known as the National Residency Matching Program (NRMP) to coordinate job offers, there is no legal barrier that prevents members of either side of the market from finding matches outside of the clearinghouse.1 In school choice, charter schools sometimes opt not to participate in clearinghouses, instead recruiting students in a decentralized manner. In the private sector, marketplaces that comprise the gig and sharing economies demonstrate the primacy of attracting participants who have many outside alternatives. In each of these settings marketplaces are actively engaging with the challenge of recruitment. In other words, these are marketplaces in which participation is not always safe.

...

"A designer may introduce a mediator (alternatively referred to as a marketplace), to which players may delegate their decision rights (i.e., participate in the marketplace). The mediator comprises a message space and a mapping from messages to outcomes (strategy profiles for the delegators). Players who delegate their decision rights select a message to send to the mediator, who then acts on their behalf according to the outcome mapping, as a function of the whole set of messages it receives. The mediator is voluntary in the sense that players may choose one of their original (outside) actions instead of sending it a message. And the mediator is restricted to condition the actions of participants only on the messages of other participants and not on the outside actions of nonparticipants.

"This framework highlights the endogeneity of the individual rationality constraint with respect to both the set of players who sign away their decision rights and the actions they take. We show by example that mediators that satisfy attractive criteria such as incentive compatibility and efficiency assuming that everyone participates may no longer do so in equilibria with partial participation. This motivates the search for mediators that can guarantee the safety of participation. In Section 3 we present our key desideratum: dominant individual rationality (DIR)."

Milgrom's "Discovering Prices" reviewed in the JEL by Kominers and Teytelboym

 In the December Journal of Economic Literature:

The Parable of the Auctioneer: Complexity in Paul R. Milgrom's Discovering Prices

by Scott Duke Kominers and Alexander Teytelboym, JOURNAL OF ECONOMIC LITERATURE, VOL. 58, NO. 4, DECEMBER 2020, (pp. 1180-96)

Abstract: Designing marketplaces in complex settings requires both novel economic theory and real-world engineering, often drawing upon ideas from fields such as computer science and operations research. In Discovering Prices: Auction Design in Markets with Complex Constraints, Milgrom (2017) explains the theory and design of the United States' "incentive auction" that reallocated wireless spectrum licenses from television broadcasters to telecoms. Milgrom's account teaches us how economic designers can grapple with complexity both in theory and in practice. Along the way, we come to understand several different types of complexity that can arise in marketplace design."

And from the conclusion:

"So what have we discovered from Prices? Modern marketplace design increasingly wrestles with complexity; as it does so, we need novel, tailor-made theory as well as supporting infrastructure. Complexity has real economic meaning—and can take multiple forms."

The Einstein Foundation Award for Promoting Quality in Research (apply or nominate now...)

 Here's the announcement of a new award, for promoting research integrity, reproducibility, and or other elements of research quality.

The Einstein Foundation Award for Promoting Quality in Research

"Objective

The Einstein Foundation Award for Promoting Quality in Research aims to provide recognition and publicity for outstanding efforts that enhance the rigor, reliability, robustness, and transparency of research, and stimulate awareness and activities fostering research quality among scientists, institutions, funders, and politicians. To acknowledge the outstanding role early career researchers (ECRs) have in promoting research quality, ECRs will be invited to propose projects that foster research quality and value. Projects will be competitively selected for funding and internationally showcased.

Find out more about the objectives.

Award Categories

Individual Award: Individual scientist or small teams of collaborating scientists can be nominated. The laureate will be awarded €200,000.

 

Institutional Award: Governmental and non-governmental organizations, institutions, or other entities can apply or be nominated. The award-winning organization or institution will receive €200,000. If governmental organizations or institutions are the recipients of the award, they will not receive any funds in addition to the award itself.

 

Early Career Award: Early career researcher can submit a project proposal for an award of €100,000.

Find out more about the nomination and application requirements in the different categories."

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See a full description at the link...

Concerns about remote interviewing for the surgery match

 I don't doubt that every year people are nervous about the residency Match, and worries this year are related to the special situation of the Covid pandemic, in which interviews will be remote.

Irene Wapnir forwards the following:

From the AM College of Surgeons Bulletin: Interview crisis:

It May Be Too Late toAvoid a Crisis in the Surgery Match This Year

Ronald J. Weigel, MD, PhD, FACS; Steven C. Stain, MD, FACS; and L. Scott Levin, MD, FACS, FAOA

Are you hearing that outstanding medical students applying for surgical residencies are being wait-listed for an interview at top training programs? The problem may be yet another unfortunate consequence of the COVID-19 pandemic.

In normal years, programs have cancellations because there is a physical limitation for how many interviews a student can do. This year, the pandemic forced programs to go to virtual interviews, and a small group of top students nationally appear to be filling all the interview slots for the top programs. If this is true, then many of those programs may go unfilled in the match.

For example, if the average number of interviews offered by a program is 100, and these programs are all competing for the same pool of 100 intern applicants, the pool of top students interviewed may be too small to fill all the slots in these programs. Additionally, the current interview process may create disadvantages for minority applicants and students from schools that are not considered "top tier."

With virtual interviews allowing students to interview at a larger number of programs, we may need a different system nationally for the allocation of interview slots, such as rolling acceptances for interviews with students being required to commit only to a set number of programs, which would allow additional students the opportunity to be interviewed. The solution will require program directors and surgical leaders nationally to discuss this issue. It may be too late to avoid a crisis in the match this year.

Surgery Match: Considerations and Possible Solutions

In their article, "It May Be Too Late to Avoid a Crisis in the Surgery Match," Drs. Weigel, Stain and Levin highlight challenges with this year's surgery match. Regarding this, the ACS proposes that program directors, deans and chairs, as well as candidates, consider the following to ensure as fair and equitable a process as possible during this extraordinary time:

Program Directors, Deans, Chairs

• Review the consequences that oversubscribing to slots has to programs and other candidates with students
• Don't offer slots to more candidates until those offered have a reasonable time to respond
• Make lists of candidates of interest who are not interviewed to ensure slots are offered when available

Candidates

• Consider limiting the number of interviews scheduled to a reasonable amount. Consider the impact on your colleagues of taking up too many interview slots—be fair to other applicants
• Release interview slots if you know you will not use them
• Release slots when you have completed enough interviews and experienced reciprocal interest that you are confident you have a well-prepared rank list

 

Susan Athey wins the CME Group-MSRI Prize in Innovative Quantitative Applications

 The seminar is tomorrow, it appears that registration is required.

CME Group-MSRI Prize in Innovative Quantitative Applications: Virtual Seminar Honoring Stanford Professor Susan Athey

DATE: December 11, 2020 TIME: 10:15 a.m. CT 8:15 a.m. PT

 

The virtual event honoring Athey will feature presentations focused on topics related to market design, including how food banks use markets and the intersection of markets with the COVID-19 pandemic response. Several distinguished economists and academics will be participating in the program, including:

• Scott Kominers – MBA Class of 1960 Associate Professor, Entrepreneurial Management Unit, Harvard Business School
• Paul Milgrom – Shirley and Leonard Ely professor of Humanities and Sciences in the Department of Economics at Stanford University; 2017 CME Group-MSRI Prizewinner; 2020 Nobel Laureate in Economic Sciences   
• Canice Prendergast – W. Allen Wallis Distinguished Service Professor of Economics, University of Chicago Booth School of Business
• Christopher Snyder – Joel Z. and Susan Hyatt Professor in the Economics Department, Dartmouth College 

Advance Market Commitments for Vaccines

 David Warsh, in his weekly Economic Principals (not a mis-spelling, it's often about economists, and newspapers) writes about Advance Market Commitments for vaccines, as we await the rollout of the various vaccines for Covid-19: A Victory for Vaccine Market Design (and a scoop for a well-designed newspaper as well)

"the mechanism known as advanced market commitment is of comparatively recent origin. It is the discovery, if that is the word, of University of Chicago economist Michael Kremer, in a series of papers he wrote while teaching at the Massachusetts Institute of Technology and Harvard University some twenty years ago, culminating in the publication, in 2004,  of Strong Medicine: Creating Incentives for Pharmaceutical Research on Neglected Diseases, with his wife, Rachel Glennerster, in 2004.

"The new mechanisms they advocated were similar to those that in the eighteenth century gave rise to the development of the naval chronometer, necessary to determining longitude at sea. Governmental “pull” methods could complement the inherently risky “push” of private research and development.  AMCs – legally binding commitments to buy specified quantities of as yet unavailable vaccines at specified prices – were the most promising of the lot for bringing into existence medicines that otherwise might not pay. 

...

"I asked Kremer last week if he had been involved in the Warp Speed journey, The answer was no.  He and co-authors had spoken to staff at the Council of Economic Advisors in the run-up to the creation of Operation Warp Speed. They had co-authored an op-ed article in the NYTimes in May. But they had not met with Slaoui. He seems to have imbibed the basic idea as long ago as 2013, when he organized a session on the industry’s stock of common knowledge for the Aspen Ideas festival

"Kremer was recognized with a Nobel Prize in economics, with two others, in 2018, for work on policy evaluation, including the work on vaccines. But I was struck when Wall Street Journal editorial-page columnist Daniel Henninger suggested last week that the scientists at the pharmaceutical companies who developed vaccines against Covid-19 were “the obvious recipient for 2021’s Nobel Peace Prize.”

******************

It would be exciting to see an economist win two Nobels, one of them in Peace. Michael Kremer would be a great choice...

In the meantime, here's the latest in Kremer's string of papers on AMC, this one a theoretical treatment:

Designing Advance Market Commitments for New Vaccines

Michael Kremer, Jonathan D. Levin & Christopher M. Snyder

NBER WORKING PAPER 28168 DOI 10.3386/w28168    December 2020

Abstract: Advance market commitments (AMCs) provide a mechanism to stimulate investment by suppliers of products to low-income countries. In an AMC, donors commit to a fund from which a specified subsidy is paid per unit purchased by low-income countries until the fund is exhausted, strengthening suppliers' incentives to invest in research, development, and capacity. Last decade saw the launch of a $1.5 billion pilot AMC to distribute pneumococcal vaccine to the developing world; in the current pandemic, variations on AMCs are being used to fund Covid-19 vaccines. 

"This paper undertakes the first formal analysis of AMCs. We construct a model in which an altruistic donor negotiates on behalf of a low-income country with a vaccine supplier after the supplier has sunk investments. We use this model to explain the logic of an AMC—as a solution to a hold-up problem—and to analyze alternative design features under various economic conditions (cost uncertainty, supplier competition). A key finding is that optimal AMC design differs markedly depending on where the product is in its development cycle."

From the introduction:

"Mechanisms such as patents and prizes that stimulate research and development (R&D) for products sold in high-income markets may fall short in low-income markets. Patents generate deadweight loss along with the monopoly rents intended to incentivize investment; furthermore, the monopoly rents may be limited in countries with mostly poor consumers, particularly if the country or aid agency acting on its behalf ignores these patents or uses bargaining power or public pressure to push down prices. Prizes may lead to the development of products that, while meeting the letter of the competition’s technical specifications, fail to meet consumers’ true needs.

"The difficulty in meeting the needs of poor countries is particularly apparent in the marketfor vaccines. Vaccines are a highly cost-effective tool to improve global public health.1 Yet the provision of vaccines in poor countries lags widespread use in rich countries and the development of vaccines targeting diseases of poor countries has been disappointingly slow.2 This situation has sparked a host of initiatives to catalyze vaccine markets in developing countries. Among the most prominent has been an Advance Market Commitment (AMC) piloted last decade for a pneumococcal vaccine."

Top trading cycles (and recollections of New Orleans), in AER:Insights, by Abdulkadiroğlu, Che, Pathak, Roth and Tercieux

A decade ago I was part of the team that designed the new school choice system for the New Orleans Recovery School District.  On the District side, the effort was led by Gabriela (Gaby) Fighetti. The design team was organized by the (then) Institute for Innovation in Public School Choice (IIPSC), led by Neil Dorosin. The heavy lifting on the design was done by Atila Abdulkadiroğlu and Parag Pathak.  Until the district expanded and developed more complex requirements for expressing priorities (and we had to switch to a deferred acceptance algorithm) the design was based on a top trading cycles (TTC) mechanism. It was the first time I know of that TTC was adopted and deployed in a widely used market design. It came to be called OneApp (since it replaced the old system of applications to each school with one application followed by the matching algorithm).

Some of the data from that system make their way into this new (primarily theory) paper, about some of the distinctive virtues of top trading cycles. The paper itself is a merged effort between the New Orleans design team, and work on TTC initiated separately by various combinations of Che, Tercieux and Abdulkadiroğlu.

Efficiency, Justified Envy, and Incentives in Priority-Based Matching†

By Atila Abdulkadiroğlu, Yeon-Koo Che, Parag A. Pathak, Alvin E. Roth and Olivier Tercieux, 

American Economic Review: Insights, December, 2020, 2, (4), 425–442.

Abstract: Top Trading cycles (TTC) is Pareto efficient and strategy-proof in priority-based matching, but so are other mechanisms including serial dictatorship. We show that TTC minimizes justified envy among all Pareto-efficient and strategy-proof mechanisms in one-to-one matching. In many-to-one matching, TTC admits less justified envy than serial dictatorship in an average sense. Empirical evidence from New Orleans OneApp and Boston Public Schools shows that TTC has significantly less justified envy than serial dictatorship. 

The first footnote of the paper suggests something of it's long history, and says in part:

"This paper supersedes “The Role of Priorities in Assigning Indivisible Objects: A Characterization of Top Trading Cycles,” cited by others as Abdulkadiroglu, Atila, and ˇ Yeon-Koo Che (2010) or Abdulkadiroglu, Atila, ˇ Yeon-Koo Che, and Olivier Tercieux (2010), and “Minimizing Justified Envy in School Choice: The Design of New Orleans’ OneApp” (2017) by Abdulkadiroglu, Atila, ˇ Yeon-Koo Che, Parag A. Pathak, Alvin E. Roth, and Olivier Tercieux. Roth is a member of the scientific advisory board of the Institute for Innovation in Public School Choice (IIPSC). IIPSC was involved in designing OneApp in New Orleans. Abdulkadiroglu, Pathak, and Roth also advised Boston Public Schools and New York City’s Department of Education on designing their student assignment systems, discussed herein. This article does not represent the views of the New Orleans Recovery School District or any other school district."

And here's a paragraph that offers a different kind of historical context:

"In 2011–2012, the New Orleans Recovery School District pioneered a unified enrollment process called OneApp, integrating admissions to all types of schools under a single offer system. Officials identified three major priority groups: sibling, applying from a closing school, and geography. The discussion about mechanism centered on the trade-off between efficiency and eliminating justified envy, and eventually TTC was selected based on the desire for “as many students as possible to get into their top choice school” (New Orleans Recovery School District 2012a). Vanacore (2011) and Vanacore (2012) provide additional details."

In conclusion:

"In the field, there is growing momentum for DA over TTC (see Abdulkadiroglu 2013 and Pathak 2017). This trend may be driven by a first-mover advantage of DA and its use in other contexts. New York City and Boston adopted DA in 2003 and 2005, and DA is widely used in residency matching (Roth and Peranson 1999). In 2013, New Orleans also switched from TTC to DA. One of the most important reasons for this switch involved challenges in explaining how TTC handles priorities.  Under DA, officials could explain that an applicant did not obtain an assignment at a higher ranked seat because another applicant with higher priority was assigned to that seat. At the time of the change, a clear explanation of how TTC reflects priorities was not available.

"It remains to be seen whether TTC will be used in the field again. But policymakers cannot ignore efficiency, which TTC delivers but DA does not. For this reason, TTC should remain a serious policy option. Our formal results may make it easier to explain how TTC incorporates priorities. It’s possible that TTC would have been chosen in some settings with knowledge of this result, and at the very least, advocates now have a new argument in its favor."

************

Some long ago posts on school choice in New Orleans:

Saturday, November 19, 2011

School choice in New Orleans

Thursday, February 2, 2012

School choice design in New Orleans Recovery School District

Tuesday, February 7, 2012

New Orleans launches its new school choice process

Tuesday, April 17, 2012 

School Choice in New Orleans with top trading cycles

Friday, May 11, 2012

New Orleans school choice goes live

Thursday, September 27, 2012

New Orleans School Choice: bringing one application process to all schools

Friday, February 15, 2013

School choice in New Orleans, evolving

Sunday, May 12, 2013

Looking back at the first year of New Orleans' One App school choice system

Tuesday, October 1, 2013

New Orleans School Choice in the WSJ

Wednesday, February 11, 2015

School Choice Index from Brookings

Tuesday, August 18, 2015

A look back at school choice in New Orleans

*******************

†Code for: Efficiency, Justified Envy, and Incentives in Priority-Based Matching

Principal Investigator(s):  r Principal Investigator(s) Atila Abdulkadiroglu, Duke University; Yeon-Koo Che, Columbia University; Parag Pathak, MIT; Alvin Roth, Stanford University; Olivier Tercieux, Paris School of Economics

 

Interfaith marriage under attack in India--"love jihad"

 The Washington Post has the story:

It was never easy being an interfaith couple in India. Now some states are making it harder

"Marrying across religious lines has always been a challenge in India, a vast multifaith democracy where the pull of family and tradition remains strong.

"Now politicians in India’s ruling party are contemplating laws to thwart such unions, driven by a conspiracy theory that views them as a tool for conversions.

"At a rally last month, the leader of the country’s largest state warned of the danger of “love jihad,” an inflammatory slur referring to an alleged plot by Muslim men to convert Hindu women through marriage."

Officer assignment in the U.S. Army

In a recent post I discussed the NAS report on the military labor force, focusing on the new Talent Marketplaces, and some of the difficulties they are facing in the Air Force, and (more briefly) in the Army.  

The Modern War Institute at West Point has a related article, published last month, on the implementation of these labor market clearinghouses in the Army, by Major Kyle Greenberg, Lieutenant Colonel Mark Crow  and Colonel Carl Wojtaszek. (They all have Ph.D.s in economics, and are associated with the Army's Office of Economic and Manpower Analysis (OEMA).)

Winning In The Marketplace: How Officers And Units Can Get The Most Out Of The Army Talent Alignment Process 

by Kyle Greenberg, Mark Crow and Carl Wojtaszek 

"Not too many years ago, if the Army had wanted you to have an opinion about your next assignment, it would have issued you one with your duffel bag. The same had been true for units, as well. Leaders at every level largely left it to the Army to fill their formations with individuals based not on talent, but on having the right rank, branch, and availability date. In 2019, this changed when the Army introduced a market into its assignment system.

...

"Officers can greatly influence their chances of receiving the jobs they prefer in the market. Most importantly, moving officers should build their resumes in AIM 2.0. If officers are the engine of the marketplace, then the information they share on their AIM 2.0 resumes is the fuel that keeps it humming along smoothly. Complete and informative resumes allow units to better identify officers with backgrounds or experiences that are a particularly good fit for a specific job or type of work. Surprisingly, though, only 60 percent of officers in last fall’s marketplace took the time to describe their talents within the AIM 2.0 resumes. Choosing not to do so is a missed opportunity as officers with resumes benefited significantly, receiving 40 percent more #1 votes from units than officers without detailed resumes.

...

"moving officers should interview with units they are interested in joining. In a survey given to all units at the end of last year’s marketplace, 35 percent said that interviews were the most important factor in determining how to rank officers in the market. Even though AIM 2.0 is online, the marketplace is designed to facilitate person-to-person interaction, albeit predominately via phone or video conference. Moving officers who reach out to unit POCs and schedule interviews early in the marketplace have better chances of finding the jobs they want than officers who wait for units to contact them.

"A third way an officer can maximize the benefit of ATAP is to submit truthful preferences to the assignment market. While this is not immediately obvious, it becomes clearer once an officer understands how they are paired to jobs after the marketplace closes. The Army uses a deferred acceptance algorithm to match officers to jobs. While that might sound complicated, it is a relatively straightforward process—but one that works best when officers and units submit truthful preferences. ... "officers cannot achieve a better outcome by misreporting their actual preferences, or “gaming the system.” In fact, officers often hurt themselves when they do this. The design is intentional and allows officers to list “reach assignments” without penalty. So, go ahead and reach for that dream job knowing your chances of success in the market will not be diminished. (You can learn more about deferred acceptance algorithms at here or here.)

"There is substantial evidence that officers did not understand this point in the 2019 market. Post-marketplace surveys revealed that 31 percent of officers admitted that they did not place their true first preference #1 in the marketplace. Furthermore, roughly 75 percent admitted that at least some of their preferences were not truthful.

...

"Just like officers benefit if they truthfully preference as many jobs as possible, units benefit by ranking as many officers as possible. Units that rank all of the officers they are interested in will do better than units that only consider officers who rank their jobs #1. 

...

"A second suggestion for units is to put your best foot forward and professionalize your hiring processes. Many officers in last year’s market found little more than boilerplate job descriptions and had difficultly contacting units and scheduling interviews.

...

"Finally, there are several changes the Army should implement to make the marketplace more effective for both officers and units. First, the Army should better educate the force on how officers pair to units. 

...

"Second, the Army should limit the number of “signals” officers can send to units to indicate their interest. During last year’s marketplace, officers adjusted their preferences multiple times to signal interest to different units at different times. This resulted in an unlimited number of signals for officers to use and generated substantial problems. It also frustrated many units who could no longer be certain which officers were genuinely interested in them and which officers were likely to change their preferences immediately after a phone call or interview.

"The Army should give every officer a specific number of “market coins” to be sent to units of their choosing independent of their preference list. This would help units learn which officers are interested in their jobs without requiring officers to repeatedly change their preferences. The method of using signals to quickly identify interested participants has a proven record of making other matching markets more efficient.

************

In an email, Major Greenberg elaborates:

"The Army determines officer assignments through the Army Talent Alignment Process, which is implemented through an online portal known as the Assignment Interactive Module, Version 2.0. Within AIM2, officers can rank jobs they are eligible for and units can rank officers who are eligible for their unit’s jobs. Units are not able to observe an officer’s exact preference for their jobs, but they are able to observe if an officer ranked one of their jobs among the officer’s top 10% of all possible choices.  Likewise, officers cannot observe the exact rankings units give them, but they are notified if a unit ranked them at all. Officers and units are free to interact and adjust their preferences at all times while the marketplace is open. The marketplace closes at a pre-announced time, at which time both officer and unit preferences “lock.” After the marketplace closes, officers are matched to jobs according to a deferred acceptance algorithm (this is still a relatively new phenomenon, as the Army just started testing the DAA last year).

"One of the problems we are noticing is that a large number of officers are not being truthful with their preferences. It appears that units will frequently press officers to rank one of their jobs as their number one choice, and will often make their ranking for officers conditional on the officer’s ranking for one of the unit’s jobs. Army officers can always respond to these requests with cheap talk, but most dislike doing this: maybe because integrity is critical to our profession, or maybe because officers feel there is a reasonable chance they will one day have to work with the unit representative who is interviewing them.  To make the marketplace more safe for officers, OEMA advocates for removing all signals that are a function of officer preferences, but replacing them with a limited number of signals that officers can send to units, completely separate from preferences."

*************

Here's my earlier post:

Tuesday, December 1, 2020

The labor market that is the military: a report from the National Academies of Science, Engineering, and Medicine   

"To summarize, the Talent Marketplace has to also become an information marketplace that allows position owners and Airmen to make appropriate information available to each other in order to develop informed, accurate preferences."

The international scope of kidney disease

 During the Covid-19 pandemic we've all become aware of the importance of public messaging--about wearing masks and other behaviors that reduce the spread of infection, etc.  For those of us interested in transplantation, communication about the prevalence and international scope of kidney disease is important

Here's an article from Kidney International (from a year ago) that focuses on just that:

A single number for advocacy and communication—worldwide more than 850 million individuals have kidney diseases by Kitty J. Jager, Csaba Kovesdy, Robyn Langham, Mark Rosenberg, Vivekanand Jha, Carmine Zoccali

"On a world scale the total number of individuals with chronic kidney disease (CKD), acute kidney injury (AKI), and those on renal replacement therapy (RRT) exceeds 850 million, a truly concerning figure that is twice the estimated number of people with diabetes worldwide and >20 times higher than the number of individuals affected by AIDS/HIV worldwide. Thus kidney diseases are one of the most common diseases worldwide.

"CKD is now an unquestionable global public priority.1,  2 Even though the prevalence of CKD and its impact on health has been mainly studied in economically developed countries, the burden of this disease is even greater in developing countries.3,  4 In 2016, this disease was 13th on the list of causes of death on a world scale,5 and in 2040, it is expected to be the 5th leading cause of years of life lost.6 In 2010, 2.6 million individuals were receiving some form of kidney replacement therapy worldwide, but an almost equal number might have died during the same year because of a lack of access to dialysis and transplantation.7 This scenario contrasts with that of other major chronic diseases, such as cardiovascular diseases and respiratory diseases, whose effects on mortality are declining."

HT: Mike Rees

Marijuana in the House (but not yet in the Senate)

 The NY Times has the story:

House Passes Landmark Bill Decriminalizing Marijuana  By Catie Edmondson, Dec. 4, 2020

"The House passed sweeping legislation that would decriminalize marijuana and expunge nonviolent marijuana-related convictions. The measure is all but doomed in the Republican-led Senate.

"The 228-164 vote to approve the measure was bipartisan, and it was the first time either chamber of Congress had ever endorsed the legalization of cannabis. The bill would remove the drug from the Controlled Substances Act and authorize a 5 percent tax on marijuana that would fund community and small business grant programs to help those most impacted by the criminalization of marijuana.

...

"The legislation intends to give states power and incentives to enact their own reforms, and its passage came as states around the county, including some conservative-leaning ones, have become increasingly open to decriminalizing marijuana amid a growing consensus that the war on drugs has been destructive. Fifteen states have legalized recreational cannabis, and voters in five states last month voted on legalization issues, bringing the number of states where medical marijuana is legal to 35."