A landmark market design paper, on school choice in NYC, by Abdulkadiroglu, Agarwal, and Pathak

When market design was young, it was a game played by game theorists.  As it matured, and we wanted market designs be adopted, implemented, and maintained, it became a kind of economic engineering. But for market design to become a fully mature part of economics, not only must designs move into practice, and be monitored and maintained, they must also be evaluated.*

So I find myself thinking again about this paper from the December AER that I already blogged about:

Abdulkadiroglu, Atila, Nikhil Agarwal, and Parag A. Pathak, “The WelfareEffects of Coordinated Assignment: Evidence from the New York City High SchoolMatch,”American Economic Review, 107(12), December 2017, 3635–3689.

I think of it as the third of three papers: the first two were about the engineering aspects of the NYC high school match, the first school choice design of its kind:

Abdulkadiroglu, Atila , Parag A. Pathak, and Alvin E. Roth, "The New York City High School Match," American Economic Review, Papers and Proceedings, 95,2, May, 2005, 364-367.

and

Abdulkadiroglu, Atila , Parag A. Pathak, and Alvin E. Roth, "Strategy-proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match,'' American Economic Review, 99, 5, Dec. 2009, pp1954-1978. 

Now, in this third paper, two of the original designers (Abdulkadiroglu and Pathak) together with one of the new generation of market design investigators  (Agarwal) evaluate the impact on students of the current centralized school choice system (it uses a deferred acceptance algorithm) in comparison to the decentralized ("uncoordinated") system it replaced.  

The new system produces a stable matching, which good evidence suggests is helpful in keeping the system healthy in the long term in a school system like NYC, in which the school principals are also strategic players.  But aside from being long lasting, how good is the system for students?

Using the (ordinal) rank order lists submitted by students in the new system, the paper measures welfare by estimating a cardinal random  utility model, with (cardinal) tradeoffs among school attributes being measured in terms of the additional distance a student is willing to travel to be at a more preferred school.

The uncoordinated system suffered from congestion, with many students having to be placed administratively in a school for which they had expressed no preference.  They find that these schools were by and large significantly less desirable.

They find that the new system improves welfare over the old by 80% of the gains that could be achieved by a utility-maximizing allocation made independent of other constraints. They further find that changes in the algorithm (e.g. choosing a different stable matching, among the multiple that arise from random tie-breaking) would have very little effect on welfare.

The biggest difference is that under the old system, only about half the students were placed in the "main round" (now occupied by the deferred acceptance algorithm), whereas in the new system this number immediately climbed to over 80% (with some additional subsequent gains). So students who used to be administratively assigned are now largely assigned instead to a school over which they have expressed a preference. That turns out to be very good for them.

Market design is coming of age...
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* Of course, not all steps in the market design process have to be accomplished by the same individuals, but in this case that's an extra plus.  And of course other  school choice markets have been investigated by these and other investigators, but in most cases those markets were not designed by economists, so that's another extra bonus here too, especially since features of the design (which encourage truthful reporting of preferences) add to the ability to estimate welfare gains. 

Parag Pathak interview on designing theories for the real world

Here's the introduction, click on the link to read more, or to hear the audio recording.

Designing theories for the real world
The AEA interviews 2018 John Bates Clark Medalist Parag Pathak.
by Chris Fleisher

He’s been hailed for pushing the boundaries of market design theory while making it practical to real-world situations.

Parag Pathak is this year’s winner of the John Bates Clark Medal. The 37-year-old MIT professor has worked to improve the assignment of students to public schools, notably in Boston, and also evaluated the impacts of school choice systems on student outcomes.

And while his theoretical work has won him widespread praise, he says his engineering-oriented approach to economics has helped him figure out which problems are of greatest practical importance.  

The AEA spoke with Pathak about his research, the influence of his mentor and former AEA president Al Roth, the criticisms against economic theorists, and the opportunities to shape public policy.

An edited transcript follows and the full-length interview can be heard by clicking on the media player..."

Data access makes research on schools (and school choice) hard

Courtesy of the Freedom of Information Act, an intrepid reporter lets us in on some of the emails about data access between the Louisiana Department of Education and school choice researchers Parag Pathak and Atila Abdulkadiroglu. These shed light on a controversy and some name calling having to do with a study showing some early problems in Louisiana's school voucher program. The name calling involved accusations that the researchers rushed to publish without waiting for more data. The emails show that they tried unsuccessfully to get more data from the D of E, without success.

Who Gets Access to School Data? A Case Study in How Privacy, Politics & Budget Pressures Can Affect Education Research  by Matt Barnum
"Just who gets access to education data? A case study in La. after a critical early study on school vouchers"

"In the early days of 2016, a study by MIT and Duke University researchers showing the first year of Louisiana’s school voucher program led to marked decreases in student achievement landed in the press and policy worlds with a degree of attention that went beyond the usual wonky provinces of education research.
...
"John White, the state’s high-profile schools superintendent whose pro-school choice policies had long been scrutinized, publicly accused the Duke and MIT researchers of improperly rushing to publish their results and The Wall Street Journal condemned them for similar reasons in an editorial.

The criticism turned on whether the researchers should have waited for additional data before publishing their findings. But even that assertion, it turns out, was complicated. Not long after the headline-grabbing study was released, Louisiana ended its data-sharing relationship with the MIT and Duke researchers, according to emails obtained by The 74 through a public records request.

...

“For a program that’s ongoing, there are real issues of who gets to evaluate the program. Is it open to many teams, which I think is a good model. Or is it restricted to partners?” said MIT professor Parag Pathak, part of the team that studied Louisiana’s voucher program. “There are real broad issues in social science — it’s something that we’re all wrestling with.”

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Read it all...you can see why access to data can be hard.

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Update: the first comment below points to this critical blog post by Professor Jay Greene:
The Chutzpah of Abdulkadiroglu, Pathak, and Walters

A comment by Christopher Walters points to  this reply by Abdulkadiroglu, Pathak, and Walters:
Statement on Allegations of Academic Fraud by Jay P. Greene
Atila Abdulkadiroglu, Duke; Parag Pathak, MIT; Christopher Walters, UC Berkeley
August 5, 2017

A hard (theoretical) look at school choice, in the AER by Chris Avery and Parag Pathak

 What are some of the difficulties that might hamper school choice from achieving educational equality (or at least substantially reducing inequality)?  Here's a model by Chris Avery and Parag Pathak.  The theoretical intuitions of top experts in college and school assignments are the sort of thing that can keep you awake at night.  In a sentence, if school choice narrows the quality gap between the best and worst municipal schools, it may also narrow the gap in housing prices, and higher housing prices at the low end may drive poorer families to move to other school districts, just as lower quality at the high end drives richer families to suburbs with excellent schools. ("White flight" has been the subject of many papers, so the issue being raised here is that an improvement at the low end of school quality may also raise prices of less expensive housing and drive out poorer residents.)

The Distributional Consequences of Public School Choice  by Christopher Avery and Parag A. Pathak AMERICAN ECONOMIC REVIEW, VOL. 111, NO. 1, JANUARY 2021, (pp. 129-52)

"Abstract: School choice systems aspire to delink residential location and school assignments by allowing children to apply to schools outside of their neighborhood. However, choice programs also affect incentives to live in certain neighborhoods, and this feedback may undermine the goals of choice. We investigate this possibility by developing a model of public school and residential choice. School choice narrows the range between the highest and lowest quality schools compared to neighborhood assignment rules, and these changes in school quality are capitalized into equilibrium housing prices. This compressed distribution generates an ends-against-the-middle trade-off with school choice compared to neighborhood assignment. Paradoxically, even when choice results in improvement in the lowest-performing schools, the lowest type residents need not benefit."

"Our analysis contributes to a recent literature on school choice mechanisms, which has focused on the best way to assign pupils to schools given their residential location in a centralized assignment scheme. In particular, research has examined the best way to fine-tune socioeconomic or income-based criteria in choice systems. Cities have now experimented with complex school choice tie-breakers in an effort to achieve a stable balance (Kahlenberg 2003). 17 By incorporating feedback between residential and school choices, our model suggests that analysis of school assignment that does not account for possible residential resorting may lead to an incomplete understanding about the distributional consequences of school choice.

"A common rationale for school choice is to improve the quality of school options for disadvantaged students. But, our analysis shows that feedback from residential choice can undercut this approach, for if a school choice plan succeeds in narrowing the range between the lowest and highest quality schools, that change should compress the distribution of house prices in that town, thereby providing incentives for the lowest and highest types to exit from the town’s public schools. This intuition extends to the idealized case of a symmetric model of many towns and partisans, where each town adopts school choice and all schools within a given town have the same quality. Although there is an equilibrium in this idealized model where schools in all towns have the same quality, this equilibrium would likely be unstable, and instead we would expect to observe an equilibrium with differentiation of school qualities and housing prices across towns. That is, the within-town diversity observed in equilibrium under neighborhood assignment could be replicated in cross-town diversity under school choice.

A broader implication of our model is that systemic changes beyond the details of the school assignment system may be necessary to reduce inequalities in educational opportunities."

NBER Market Design: 2016 Methods Lectures, Tuesday July 26 (Abdulkadiroglu, Agarwal, Ashlagi, Pathak, and Roth)

Atila Abdulkadiroglu, Nikhil Agarwal, Itai Ashlagi, Parag Pathak and I will be delivering a set of "Methods Lectures" on Market Design as part of the NBER Summer Institute sessions on Labor Economics, which will be held July 25-29, 2016 at the Royal Sonesta Hotel in Cambridge MA.
The program for the whole week is here, and below is the Tuesday afternoon Market Design program.

NBER Market Design: 2016 Methods Lectures
1:15 pm	Welcome
1:20 pm	Al Roth: Game Theory and Market Design
2:05 pm	Parag Pathak and Atila Abdulkadiroglu: Design of Matching Markets
2:50 pm	Break
3:00 pm	Atila Abdulkadiroglu and Parag Pathak: Research Design meets Market Design
3:45 pm	Nikhil Agarwal: Revealed Preference Analysis in Matching Markets
4:30 pm	Break
4:40 pm	Itai Ashlagi: Matching Dynamics and Computation
5:30 pm	Adjourn

Market Design at 25, May 14-15 in Washington DC

The NBER is holding a conference in May, in Washington.

"The conference, which has been organized by Irene Lo, Michael Ostrovsky, and Parag Pathak, is timed to roughly commemorate the 25th anniversary of the first FCC spectrum auction, in 1994, the redesign of the National Resident Match Program (begun in 1995, completed in 1998), and the launch of the sulphur dioxide allowance-trading program under Title IV of the Clean Air Act Amendments (amended in 1990, initiated in 1995).  The conference goal is to assess the key contributions of market design in a number of specific fields and policy areas, and to identify key open questions that are priorities for future research."

Market Design @ 25

Authors Please upload your paper and slides here.

Irene Y. Lo, Michael Ostrovsky, and Parag A. Pathak, Organizers

May 14-15, 2020

JW Marriott Hotel, 1331 Pennsylvania Avenue, Washington, DC

Conference Code of Conduct

Thursday, May 14
8:00 am	Continental Breakfast
8:30 am	Spectrum Auctions
	- Opening speaker: Jessica Rosenworcel, FCC Commissioner
	- Overview: Paul Milgrom, Stanford University
	- Viewpoint: Evan Kwerel, FCC
9:55 am	Break
10:10 am	Matching and Broadening the Definition of Markets
	- Overview: Alvin Roth, Stanford University and NBER
	- Viewpoint 1: Edward Glaeser, Harvard University and NBER
	- Viewpoint 2: Susan Athey, Stanford University and NBER
11:20 am	Break
11:35 am	Market Design for the Environment
	- Overview: Michael Greenstone, University of Chicago and NBER
	- Viewpoint 1: Richard Schmalensee, Massachusetts Institute of Technology and NBER
	- Viewpoint 2: Nathan Keohane, Environmental Defense Fund
12:45 pm	Lunch
2:15 pm	Market Design in Healthcare
	- Overview: Amy Finkelstein, Massachusetts Institute of Technology and NBER
	- Viewpoint 1: Marc Miller, LJAF / Former MedPac
	- Viewpoint 2: Kate Ho, Princeton University and NBER
3:25 pm	Market Design in Transportation
	- Overview: Michael Ostrovsky, Stanford University and NBER
	- Viewpoint 1: David Shmoys, Cornell University
	- Viewpoint 2: TBA
4:35 pm	Break
4:50 pm	Market Design in Developing Countries
	- Overview: Kevin Lleyton-Brown, University of British Columbia
	- Viewpoint 1: Tavneet Suri, Massachusetts Institute of Technology and NBER
	- Viewpoint 2: Jishnu Das, Georgetown University
6:00 pm	Adjourn
6:30 pm	Conference Dinner
Friday, May 15
7:45 am	Continental Breakfast
8:15 am	Market Design for Education
	- Overview: Parag Pathak, Massachusetts Institute of Technology and NBER
	- Viewpoint 1: Derek Neal, University of Chicago and NBER
	- Viewpoint 2: Neerav Kingsland, City Fund
9:25 am	Break
9:40 am	Market Design for Organ Transplantation
	- Overview: Tayfun Sonmez, Boston College
	- Viewpoint 1: Nikhil Agarwal, Massachusetts Institute of Technology and NBER
	- Viewpoint 2: Jennifer Erickson, formerly White House OSTP
10:50 am	Break
11:05 am	Market Design for Public Housing
	- Overview: Nathan Hendren, Harvard University and NBER
	- Viewpoint 1: Winnie van Dijk, University of Chicago and NBER
	- Viewpoint 2: Marge Turner, Urban Institute
12:15 pm	Lunch
1:15 pm	Electricity Market Design
	- Overview: Mar Reguant, Northwestern University and NBER
	- Viewpoint 1: Bob Wilson, Stanford University
	- Viewpoint 2: Shmuel Oren, University of California at Berkeley
2:25 pm	Market Design in Online Markets
	- Overview: Preston McAfee, formerly Caltech and Microsoft
	- Viewpoint 1: Hal Varian, Google
	- Viewpoint 2: Irene Lo, Stanford University
3:35 pm	Break
3:50 pm	Market Design in Financial Markets
	- Overview: Darrell Duffie, Stanford University and NBER
	- Viewpoint 1: Eric Budish, University of Chicago and NBER
	- Viewpoint 2: Gary Gensler, Massachusetts Institute of Technology
5:00 pm	Adjourn

Matching and more: Continuing Education at the AEA meetings in Philadelphia

2018 Continuing Education, January 7-9, 2018, Sheraton Philadelphia Downtown

The AEA's 2018 Continuing Education Program will be held at the Sheraton Philadelphia Downtown on January 7-9, 2018, immediately following the close of ASSA. Participants can choose from three concurrent programs. Registration now open. (Alternatively, download PDF Registration form.)

Matching Market Design

Atila Abdulkadiroglu (Duke University)

Atila Abdulkadiroglu joined the Department of Economics at Duke University in the Fall of 2006. He taught at Northwestern University and Columbia University before coming to Duke. He received his PhD in Economics at the University of Rochester. His research has led to the design and implementation of better admissions policies in school choice programs in the US, He has consulted several school districts in redesigning student assignment systems, including Boston (MA), Chicago (Il), Denver (CO), New Orleans (LA), New York City (NY). His current research also focuses on economics of education. He is a recipient of an Alfred P. Sloan Research Fellowship and a National Science Foundation CAREER award. Abdulkadiroglu serves as an Editor-in-Chief of Review of Economic Design. He serves on the board of The Institute for Innovation in Public School Choice.

Nikhil Agarwal (MIT)

Nikhil Agarwal is the Castle Krob Career Development Assistant Professor of Economics at Massachusetts Institute of Technology, where he has been teaching since 2014. He completed his PhD in Economics at Harvard University in 2013, and was a Postdoctoral Associate at the Cowles Foundation for Research in Economics at Yale University. Agarwal specializes in the empirical study of matching markets. He has developed tools that have been applied to labor markets, education markets and organ allocation systems.

Parag Pathak (MIT)

Parag A. Pathak is the Jane Berkowitz Carlton and Dennis William Carlton Professor of Microeconomics at MIT, found­ing co-director of the NBER Working Group on Market Design, and founder of MIT's School Effectiveness and Inequality Initiative (SEII), a laboratory focused on education, human capital, and the income distribution.  Pathak has helped to design the Boston, Chicago, Denver, Newark, New Orleans, New York, and Washington DC school choice systems.   His work on mar­ket design and edu­ca­tion was garnered numerous recognitions including a Presidential Early Career Award for Scientists and Engineers and the 2016 Social Choice and Welfare prize.  He has also authored leading studies on charter schools, high school reform, selective education, and school vouchers.  Pathak is a Fellow of the Econometric Society, and has served on the editorial boards of Econometrica, American Economic Review, and the Journal of Political Economy.

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Machine Learning and Econometrics

Susan Athey (Stanford University)

Susan Athey is the Economics of Technology Professor at Stanford Graduate School of Business.  She received her bachelor’s degree from Duke University and her PhD from Stanford, and she holds an honorary doctorate from Duke University. She previously taught at the economics departments at MIT, Stanford and Harvard. Her current research focuses on the economics of digitization, marketplace design, and the intersection of econometrics and machine learning.  She has worked on several application areas, including timber auctions, internet search, online advertising, the news media, and virtual currency. As one of the first “tech economists,” she served as consulting chief economist for Microsoft Corporation for six years, and now serves on the boards of Expedia, Rover, and Ripple.  She also serves as a long-term advisor to the British Columbia Ministry of Forests, helping architect and implement their auction-based pricing system.

Guido Imbens (Stanford University)

Guido Imbens is Professor of Economics at the Stanford Graduate School of Business. After graduating from Brown University Guido taught at Harvard University, UCLA, and UC Berkeley. He joined the GSB in 2012. Imbens specializes in econometrics, and in particular methods for drawing causal inferences. Guido Imbens is a fellow of the Econometric Society and the American Academy of Arts and Sciences. Guido Imbens has taught in the continuing education program previously in 2009 and 2012.

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DSGE Models and the Role of Finance

Lawrence Christiano (Northwestern University)

Larry Christiano's research has been focused primarily on the problem of determining how the government's monetary and fiscal instruments ought to respond to shocks over the business cycle. This research has two parts: one involves formulating and estimating an empirically plausible model of the macroeconomy, and the second involves developing economic concepts and computational methods for determining optimal policy in an equilibrium model. He is a Fellow of the Econometric Society, and a research associate of the National Bureau of Economic Research.

Thomas Philippon (New York University)

Thomas Philippon is Professor of Finance at New York University - Stern School of Business. Philippon was named one of the “top 25 economists under 45” by the IMF in 2014, he won the 2013 Bernácer Prize for Best European Economist under 40, the 2010 Michael Brennan & BlackRock Award, the 2009 Prize for Best Young French Economist, and the 2008 Brattle Prize for the best paper in Corporate Finance. He was elected Global Economic Fellow in 2009 by the Kiel Institute for the World Economy. He has studied various topics in finance and macroeconomics: financial distress, systemic risk, government interventions during financial crises, asset markets and corporate investment. Recently his work has focused on the evolution of the financial system and on the Eurozone crisis. He currently serves on the Monetary Policy Advisory Panel of the NY Federal Reserve Bank, and as a board member and director of the scientific committee of the French prudential regulator (ACPR). He was the senior economic advisor to the French finance minister in 2012-2013. Philippon graduated from Ecole Polytechnique, received a PhD in Economics from MIT, and joined New York University in 2003.

NBER Market Design conference at Stanford, June 8-9, 2014

Here's the program:

NATIONAL BUREAU OF ECONOMIC RESEARCH, INC. Market Design Working Group Meeting Susan Athey and Parag Pathak, Organizers June 8-9, 2014 Sheraton Palo Alto Sequoia/Oak Room 625 El Camino Real Palo Alto, CA PROGRAM Participant List Sunday, June 8: 8:30 am Continental Breakfast 9:00 am Haluk Ergin, Duke University Tayfun Sonmez, Boston College Utku Unver, Boston College Living-Donor Lobar Liver/Lung Exchange 9:45 am Yeon-Koo Che, Columbia University Jinwoo Kim, Seoul National University Fuhito Kojima, Stanford University Stable Matching in Large Economies 10:30 am Break 11:00 am Nicolas Lambert, Stanford University Michael Ostrovsky, Stanford University, Google, and NBER Mikhail Panov, Stanford University Strategic Trading in Informationally Complex Environments  11:45 am Nima Haghpanah, Northwestern University Jason Hartline, Northwestern University Reverse Mechanism Design 12:30 pm Lunch 2:00 pm Umut Dur, North Carolina State University Scott Duke Kominers, Harvard University Parag Pathak, Massachusetts Institute of Technology and NBER Tayfun Sonmez, Boston College The Demise of Walk Zones in Boston: Priorities vs. Precedence in School Choice 2:45 pm Nikhil Agarwal, Yale University and NBER Paulo Somaini, Massachusetts Institute of Technology and NBER Identification and Estimation in Manipulable Assignment Mechanisms 3:30 pm Break 4:00 pm Paul Milgrom, Stanford University Ilya Segal, Stanford University Deferred-Acceptance Auctions and Radio Spectrum Reallocation  4:45 pm Susan Athey, Stanford University and NBER Denis Nekipelov, University of Virginia Designing Large Advertising Markets When Agents Have Heterogeneous Objectives 5:30 pm Adjourn 7:00 pm Dinner at Il Fornaio 520 Cowper Street, Palo Alto Monday, June 9: 8:30 am Continental Breakfast 9:00 am Liran Einav, Stanford University and NBER Chiara Farronato, Stanford University Jonathan Levin, Stanford University and NBER Neel Sundaresan, eBay Research Labs Sales Mechanisms in Online Markets: What Happened to Internet Auctions? 9:45 am Lawrence Ausubel, University of Maryland Oleg Baranov, University of Colorado Boulder Revealed Preference in Bidding: Empirical Evidence from Recent Spectrum Auctions 10:30 am Break 11:00 am Bradley Larsen, Stanford University and NBER The Efficiency of Dynamic, Post-Auction Bargaining: Evidence from Wholesale Used-Auto Auctions  11:45 am Eric Budish, University of Chicago Judd Kessler, University of Pennsylvania Changing the Course Allocation Mechanism at Wharton 12:30 pm Joint ACM EC and NBER Lunch 2:00 pm A Joint Session for EC, NBER and Decentralization on CS and Economics Organized by the Events Chairs:  Susan Athey, Stanford University and NBER Moshe Babaioff, Microsoft Vincent Conitzer, Duke University David Easley, Cornell University Fuhito Kojima, Stanford University Scott Page, University of Michigan Parag Pathak, Massachusetts Institute of Technology and NBER Invited Speakers, Titles and Links to Abstracts: Susan Athey, Stanford University and NBER The Economics of Crypto-Currencies  Joaquin Candela, Facebook Machine Learning and the Facebook Ads Auction Jon Kleinberg, Cornell University Computational Problems for Designed Social Systems Tim Roughgarden, Stanford University Approximately Optimal Mechanisms Motivation, Examples, and Lessons Learned 5:30 pm Adjourn The joint conference, with activities by EC and Decentralization, will continue from Tuesday to Thursday.  On Tuesday morning, EC will have a keynote talk by Matt Jackson, followed by a poster session and EC technical session.  Additional details on the EC Conference, including registration information are available at http://www.sigecom.org/ec14/index.html