Friday, April 17, 2009

Plug-in hybrid cars, and the retail market for electricity

The news is full of plug-in hybrid cars, i.e. cars with both an electric and a gasoline powered motor, which can be recharged overnight from your household electric outlet. See e.g.MIT's Technology Review on First Plug-in Hybrid to Be Sold in the United States or the AP onAuto industry on plug-in hybrids and electric cars, which begins

"Several automakers are developing plug-in hybrid vehicles and electric cars that could help meet President Barack Obama's goal of putting 1 million plug-in hybrids on the road by 2015. Many industry officials say the goal is a worthy one but will be difficult to meet. "

One difficulty not discussed in these articles is how retail electricity is sold. If your electricity bill is like mine, it consists of charges for power consumed, and charges for delivery and maintainence of the network. That is, you are charged both for the variable cost of the electricity you use, and a share of the fixed cost of the infrastructure. However, and strangely, you are charged for both by the kilowatt hour of electricity you use. That is, for each kilowatt hour, you pay an electricity part and an infrastructure part (and you can see this because your electricity utility is now required to offer its delivery service to multiple providers...)

This has some strange consequences, not least of which is that it makes additional electricity usage much more expensive than it would be if you instead were charged an access fee to cover your share of the infrastructure (including the peak load generating capacity), and a separate energy usage fee. Then the marginal additional kilowatt would be cheaper. In that case it might be economical for you to buy an electric car that would charge itself by being plugged in overnight, or even heat your home with electricity.

Thursday, April 16, 2009

Match Day for New Doctors, the book

When I blogged last month about Match Day for new doctors, I mentioned Brian Eule's new book, Match Day: One Day and One Dramatic Year in the Lives of Three New Doctors. A copy of the book arrived in my mailbox last week, with a note from the author, who had interviewed me while writing it.

I've noticed before that good science writers tend to write about scientists at least as much as they write about science. But I guess I am not in the habit of anthropomorphizing markets, since I was nevertheless surprised to read the following characterization of the market for new medical residents.

"If you wanted to put a face on this faceless machine, it would have a thick black beard, beginning to go gray. It would have a receding hairline. It would wear glasses, squint when smiling, and present a big forehead adding to its contemplative appearance. It would look, in this case, much like an economist at Harvard University named Alvin Roth."

Fortunately, most of the story is about the three couples he follows through the resident match and their first year of residency. I didn't reach a point at which I could put the book down for the first time until after the first hundred pages, since the story carried me along, and I wanted to find out where they matched. Way to go, Brian.

Wednesday, April 15, 2009

Real money trading in Massively Multiplayer Online Games

Want to know the current price of gold? Check out http://www.mysupersales.com/. You won't find the traditional store of value there, but rather the virtual gold used in massively multiplayer online games like World of Warcraft. You could earn gold by playing the game, and use the gold you earned in the game to buy equipment "in-game". But you can also buy gold from "gold farmers," in China and elsewhere, using real money, and having the gold delivered to you inside the game. Here's a paper by Richard Heeks of Manchester that says it's a surprisingly big business: "It employs hundreds of thousands of people and earns hundreds of millions of dollars annually. "

Real money trading for online gold also involves a set of transactions that some gamers and game operators find repugnant: operators go to great lengths to stop it. Here's a statement against the practice by the proprietors of World of Warcraft. And an article at a gamer site begins
"Is gold selling like pornography: something more of us do than admit? A shameful secret, something indulged alone and at night, in front of the screen; or during a lunchbreak, safely away from a partner, when a quick credit card or PayPal transaction will go unnoticed by others in-game?"

A further article recounts how some game operators have tried changing the rules on in-game transactions to make real money purchases less practical, while other games have decided to allow players to enter for free, and finance the game by officially selling equipment for real money:

"The most probable trend is that the games become 'free-to-play', and the operators sell gold or other in-game items by themselves. There are a lot of so-called F2P MMOs, and they mainly get revenue from selling in-game items.
"One of the most famous examples is a Chinese online game developer and operator - Giant Interactive Group, they got listed in the NASDAQ by selling in-game items in ZhengTu, a game they developed and published in China. So I don't think the game publishers will be willing to share the cake with the gold sellers.
...
"According to Vili Lehdonvirta of the Helsinki Institute for Information Technology, an expert on virtual consumerism, real money trading is now well-established outside of the MMO sphere.
"Several Korean online games successfully sell performance-based items to users," he says in his recent report Virtual item sales as a revenue model: identifying attributes that drive purchase decisions. "

HT: Rich Dougherty (who describes himself as an avid reader of Market Design).

Tuesday, April 14, 2009

Forward contracts on sporting events

How should tickets for big sporting events be sold, in advance of information about which teams will play in them? American baseball's World Series, the NCAA's basketball Final Four, and other such events are elimination tournaments. So it is known well in advance that there will be some important games, but which teams will play (and hence which fans will most want to attend) is known only quite near the event.

This makes the market less thick than it might be far in advance, and requires fast market clearing once the relevant information becomes known. In turn, this opens the market to third party brokers, and scalping.

Contingent contracts might be a solution (e.g. a market in which I can buy a ticket to the World Series contingent on the Boston Red Sox being in the game).

Felix Salmon blogs about a paper exploring a related idea (because of a fear that contingent contracts might be regarded as repugnant): Selling forwards for sporting events.

"Preethika Sainam of Indiana University, along with two colleagues from Chapel Hill, has an interesting paper suggesting that sports organizations shouldn’t sell tickets to big sporting events, like the finals of the Final Four, where the teams who will be playing are unknown. Instead, they say, they should sell options to buy tickets at a certain price once it’s known who’s going to be playing. This system, they say, will raise more money in ticket sales, will make fans happier, and will reduce scalping.
The interesting thing is that reading between the lines of the paper, it seems that selling options is actually the second-best solution to these problems. The best solution would be to replace some (but not all) of the tickets with team-specific forwards, which expire worthless if that team doesn’t make the finals. That would allow the “team-oriented” fans to buy forwards rather than tickets which they might not want if their team fails to make it to the finals; it would allow “game-oriented” fans to buy tickets to the finals just like they can right now; it would mean that many more tickets could be sold in total (for the final match-up, you can sell 32 times as many forwards as there are seats), which would reduce the supply/demand imbalance which often drives scalping.
Professor Sainam, however, reckons that the forwards idea is a non-starter, for reasons of optics: she worries, she tells me, “that fans could perceive the league as profiting unduly from the situation”. And so the options option is the next best thing. "

HT: Steve Leider (on his way to Michigan).

Monday, April 13, 2009

Update on the Economics Job Market "Scramble"

The Economics Job Market “Scramble” for New Ph.D.s opened for registration on March 24, became visible to participants the next week, and was scheduled to go dark on April 11. Its purpose was to give applicants and employers a low cost way to see who was still on the market.

It's too early to know how many interviews were conducted with the help of the scramble, or how many of those will eventually result in hires. (In fact, the market is so decentralized that there is no reliable way to gather data on that, beyond surveys that the AEA sends out to participants). But there is information on how many applicants and employers registered for the scramble.

There were 395 applicants registered, of whom 362 made further information about themselves available at a URL.
223 of these show up when sorted as 2009 PhD candidates, 47 as 2008 Ph.D.s, and 125 before 2008. (These numbers aren't quite right, since they account for all the candidates, and I noticed at least one without a Ph.D.)

There were 78 employers, advertising 87 positions. 17 of the 87 positions were not made visible (even) to registered applicants; these employers preferred to be able to contact applicants but not to be contacted by them.

The visible employers consisted of
20 universities with graduate programs
18 four year colleges
10 consulting or research
7 Federal government
4 Banking or finance
2 other

The registered employers who chose to remain invisible consisted of:
8 Universities with grad programs
3 four year collegs
3 Federal government
2 consulting or research
1 banking or finance

Good luck to all those still seeking a match.

Sunday, April 12, 2009

Market for sugar daddies

Not all dating sites have marriage as their goal.

The NY Times Sunday magazine has an article called Keeping Up With Being Kept, about the website SeekingArrangement.com, which advertises itself as "the elite sugar daddy dating site, for mutually beneficial relationships." As the site makes clear, money is part of the benefit in one direction, but as the story also makes clear, the line between dating and sex work is fuzzy, and some of the relationships that develop are potentially rewarding.

Apparently the law is on the side of the site: "...since the 1970s, courts have ruled that as long as the woman is paid for some service besides sex — housecleaning, companionship — the arrangement is not the equivalent of prostitution."

The complication is summed up by one young woman who apparently has some experience with this marketplace:

"“When these sugar-daddy relationships go the way I think they should go, the lines are pretty blurry between that and a typical boyfriend-girlfriend relationship,” she said. “And when they go the way I don’t think they should go, the lines are blurry between that and sex work.” "

The website also suggests that you "Visit our other dating sites: SeekingMillionaire.com (Millionaire Dating) & SeekingFantasy.com (Adult Dating)"

The Times story puts the matter in (market) context by considering some of the history of courtship :
"MOST PEOPLE WOULD LIKELY BE appalled to learn that a daughter — or father — was using SeekingArrangement.com. Beth Bailey, a Temple University historian of courtship, said that her first reaction to the site was “revulsion.” But when she reconsidered it within the historical context of dating, she had a somewhat different response.
Heterosexual relationships, including marriage, have long involved economic transactions, but Bailey points out that when men provided financial security, they traditionally did so in exchange for a woman’s sexual virtue (and potential to bear and rear children), not for sexual thrills. For that, they often turned to prostitutes and mistresses, involving a more frank money-for-sex exchange. It’s only in the last century that money has been traded — albeit indirectly — for sexual attention from “respectable” unmarried women. In the early 1900s, courtship shifted from girls’ porches or parlors to a commercial venture: a date. Etiquette manuals of the time were explicit — boys were to pay for meals, entertainment and transportation, and in return, girls were to provide well-groomed company, rapt attention and at least a certain amount of physical affection."

Market design and experimental economics

Noam Nisan asks "should “algorithmic game theory” (in the broad sense) also put significant energy into experimentation? " Or should experiments remain in the province of economists, and market designers who deal with human (as opposed to computer) agents? He sees some possibilities that computer scientists should also entertain experiments, about the connection between computerized systems and their human users.

This of course raises the possibility that the interaction of computer science theorists with economists will expand to include psychologists doing cognitive engineering, the part of human factors engineering most concerned with cognition, and human-computer interaction. (Here's my favorite cognitive engineering website, soon to be updated.)

Nisan also has some interesting asides, and one particularly caught my eye:
"I never quite understood the difference between experimental economics and behavioral economics. My impression is that it is simply a question of your attitude towards game theory: experimental-pro, behavioral-con. The anti-game-theory bias is probably not that of its founders Kahneman and Tversky. Shortly after winning the Nobel prize in economics in 2002, I heard Kahneman talk at a dinner held by the Hebrew University’s rationality center. His point was that while most psychologists would immediately dismiss the economic assmptions of rationality as absurd regarding human beings, the greatness of his co-author Tversky was to realize that there was an important underlying truth to this point of view, and hence that it was interesting to carefully study its limitations. "

I think that this view was more accurate in the early days. Today, I think that "behavioral economics" means the broad effort to include (a little or a lot) psychology in economics, and in that sense (to paraphrase),we are all behavioral economists now, whether or not we do experiments. Experimental economists, however, do experiments.

Saturday, April 11, 2009

Why can't you eat horse meat in the U.S.?

The first sentence of Repugnance as a Constraint on Markets asks "Why can't you eat horse meat" in California? The answer is that it's against the law. But while similar bills to outlaw the sale of horse meat for human consumption have passed by big majorities in the U.S. House of Representatives, they have never managed to pass into law. Nationally such bills are opposed (as they were in California) by many horse breeders, cattle ranchers, and veterinarians. Nevertheless, the department of Agriculture removed funds for inspection of slaughterhouses.

Now the NY Times reports: Surge in Abandoned Horses Renews Debate Over Slaughterhouses .

"Emaciated horses eating bark off trees. Abandoned horses tied to telephone poles. Horses subsisting on feces, walking among carcasses.
As the economy continues to falter, law enforcement officers in Kentucky and throughout the country are seeing major increases in the number of unwanted and neglected horses, some abandoned on public land, others left to starve by their owners.
The situation has renewed the debate over whether reopening slaughterhouses in the United States — the last ones closed in 2007 — would help address the problem. Some states, Missouri, Montana and North and South Dakota, for example, are looking at ways to bring slaughterhouses back. "

Friday, April 10, 2009

Malls

Shops provide positive externalities to each other. Both stores and restaurants like to be where there is good foot traffic from other restaurants and stores, and some stores like to cluster together (jewelers, and automobile dealers) to draw comparison shoppers who might not make the journey to a destination that had only a single shop. Part of the problem that towns face in nurturing thriving Main Street/downtown shopping districts is that it is hard to get the right mix when each commercial tenant negotiates separately with each landlord.

Malls--privately owned shopping centers--attempt to internalize this externality, and provide that right mix. (So, not all tenants of a mall have to pay the same rent per square foot; some tenants may provide traffic that raises the profitability of other tenants.) The marketplace designer is the mall owner, sometimes in negotiation with the tenants. (This is what led in Massachusetts to the Solomonaic judicial ruling that a burrito is not a sandwich, when Panera bread sued a mall claiming that the clause in its lease guaranteeing that it would be the mall's only sandwich shop was violated when the mall leased space to a burrito chain.

In the current recession, in which commercial real estate is hard to fill, malls are struggling to keep a mix of tenants who will draw traffic for each other: Malls Test Experimental Waters to Fill Vacancies . While some malls will fail, others may manage to bring new kinds of tenants (the article suggests wave machines and community colleges).

The stakes are high, since many malls are designed as easy-to-park-at destinations that must draw shoppers to them. If some shops go dark, malls will face the same kind of struggle as do less planned retail commercial neighborhoods.

Thursday, April 9, 2009

Market for eggs and sperm

The Boston Globe reports Recession spurs egg and sperm donations
Giving provides extra income
.

"Couples, and some single women, pay $20,000 to $30,000 for an egg donation, in vitro fertilization, and transfer to the recipient. Donors generally must be healthy nonsmokers between ages 21 and 32 with a good family health history, "reasonably educated and reasonably attractive," Benardo said. Screening involves physical, psychological, and genetic testing. If accepted, the woman undergoes hormone injections, then a surgical procedure to remove her eggs. Fees paid to the donor generally range from $5,000 to $10,000. Recipients choose prescreened donors."
...
"In Charlestown, NEEDS (National Exchange for Egg Donation and Surrogacy) also reports a 25 percent increase. "Very few of them will say just straight out it's for the money," said NEEDS manager Jan Lee. "They don't want to sound like a money-grabber. We ask them if they're applying because they need the money or out of the goodness of their heart, and they say both." "
...
"[Dr. Vito Cardone, founder of Cardone Reproductive Medicine & Infertility] cautions against women seeing this as a gold mine.
"The money that's given is limited; it's not going to be something to create a yearly revenue to get them through life," he said.
He believes in compensating women for their time and trouble but said there needs to be "some ethics to it" - both an altruistic motive and a monetary limit.
"When I see people who want to 'sell' their eggs for $20,000 or more it makes no sense, because then it becomes commercial, like selling any other thing," he said. "There has to be a little bit of kindness, because these couples have had a lot of hardship and desire a child very strongly." "
...
" Sperm donations are also on the increase, although they pay much less - an average of $85 to $100 per donation. Such "banks" generally require that the donor be at least 5-foot-8, a college student or graduate between the ages of 18 and 38, and in good health.
California Cryobank, which has offices in Cambridge, recruits largely on college campuses and asks each donor for a year's commitment, with the average donor contributing 2-3 times a week.
In the past six months, applications are up 20 percent, said Scott Brown, communications manager. "I think the recession has certainly opened up interest," he said. But less than 1 percent of applicants are chosen, based on family history, a physical exam, and analyses of blood, urine, and semen. "It's tougher to get into the Cryobank than into Harvard," Brown said."

Wednesday, April 8, 2009

Repugnant transactions: cartoon edition

Prophet Muhammad Cartoon Goes on Sale in Denmark

"A Danish press freedom group said Wednesday it is selling copies of a cartoon of the Prophet Muhammad that caused outrage across the Muslim World.
Some 1,000 printed reproductions of a drawing depicting Islam's prophet wearing a bomb-shaped turban are being sold for 1,400 kroner ($250) each, said Lars Hedegaard, chairman of the Danish Free Press Society.
...
Hedegaard said Danish artist Kurt Westergaard, who drew the cartoon in 2005, had given the society permission to produce the copies and sell them. Each numbered copy has been signed by Westergaard, Hedegaard said.
...
Westergaard has been living under police protection since an alleged plot to murder him was discovered last year.
Twelve cartoons depicting the prophet, including the one by Westergaard, were published in the Jyllands-Posten newspaper in 2005.
The following year, they triggered massive protests from Morocco to Indonesia, with rioters torching Danish and other Western diplomatic missions. Some Muslim countries boycotted Danish products."

Same sex marriage in Iowa, and New England

Another legally banned transaction between two willing adults that some third parties find repugnant has fallen, this time in Iowa: Gay Marriages Expected to Begin in Iowa April 24.

The different roles of judges, politicians, and voters in this matter are interesting to consider.

"The Iowa Supreme Court on Friday unanimously upheld a lower-court ruling that rejected a state law restricting marriage to a union between a man and woman.
...
"Only Massachusetts and Connecticut currently permit same-sex marriage. For six months last year, California's high court allowed gay marriage before voters banned it in November."

In MA and CT also, the ban on same-sex marriage was ended by judges, not legislators or voters.

Now in Vermont, a legislature has moved: Vermont Legislature Makes Same-Sex Marriage Legal .

"The Vermont Legislature on Tuesday overrode Gov. Jim Douglas’s veto of a bill allowing gay couples to marry, mustering one more vote than needed to preserve the measure.
The step makes Vermont the first state to allow same-sex marriage through legislative action instead of a court ruling. The law goes into effect Sept. 1."

Tuesday, April 7, 2009

The NYC high school match, continued

When I recently blogged about The NYC High School Match, I focused on the many students who received one of their choices. As I mentioned, "The NYCDOE reports that of 86,000 students looking to enter the 9th grade, 44,012 students received their first choice school, and 7,455 could not be assigned to any of their (up to 12) choices."

Those unmatched students will now go through a supplementary match process. Many of them likely ranked many fewer than 12 choices, and will now have to select among schools that still have vacancies. Needless to say, this is a serious setback for some of them. (Here's a story from the Daily News: Parents fume as kids miss cut for top city high schools).

Michael Hickins, a reporter from Information Week (who writes that his daughter just went through the process) was referred to me by the NYCDOE, because of the work I did to help design the process, along with my colleagues Atila Abdulkadiroglu and Parag Pathak. Here is how our conversation (and others he had) is reflected in his report: NYC Board Of Ed's Algorithm Not Academic.

Helping kids get into good schools is one of the most important things we can do for them, and this is why it's important for schools to use modern matching technology, as NYC does, to try to get as many kids well matched as possible. It's agonizing that we can't provide enough great school places for everyone. There's only so much that can be done with matching technology, which can allocate existing places, but doesn't create good new schools. School systems need our support in other ways as well.

Monday, April 6, 2009

Markets for organs

In Reward Organ Donors , Sally Satel writes in the Asian WSJ about the recent changes in Singapore law regarding compensation for donors (see my previous posts here and here). She goes on to outline the design of the kind of market she would like to see, and ways in which perceived repugnance might be addressed.

"My colleagues and I suggest a system in which a donor can accept a reward for saving the life of a stranger. A third party (the government, a charity or insurer) would provide the benefit and newly available organs would be distributed to the next in line -- not just to the wealthy. Donors would be carefully screened for physical and emotional impediments to safe donation, as is currently done for all volunteer living kidney donors. Moreover, they would be guaranteed follow-up medical care for any complications.
Many people are uneasy about offering lump-sum cash payments. A solution is to provide in-kind rewards, such as a down payment on a house, a contribution to a retirement fund or lifetime health insurance, so the program would not be attractive to people who might otherwise rush to donate on the promise of a large sum of instant cash.
Not only will more lives be saved through legal means of donor rewards, but fewer people will haunt the black-market organ bazaars of places like China, Pakistan, Egypt, Colombia and Eastern Europe. The World Health Organization estimates that 5% to 10% of all transplants performed annually -- perhaps 63,000 in all -- take place in these clinical netherworlds."

Sunday, April 5, 2009

Kidney donors (and advertising)

Several recent stories about kidney transplants are worth noting, not least for their focus on donors: how to find one, how their gifts are effectively used, and how they are and might be compensated. (This leads to some thoughts on the various roles that advertising, through personal communication, news stories, and commercially, might play at various points).

At Salon, Whaddaya have to do to get a kidney around here? Frances Kissling writes about the gratifying responses she received when she carefully let her friends know that she was in need of a kidney transplant. She writes:
"I think I instinctively knew what I had to do. I'd spent a lot of my time raising money, and I had that Bible verse "ask and you shall receive" burned into my consciousness. I decided to compose an e-mail about my need. In it, I shared my sense of the adventure before me and asked if anyone would like to give me one of their kidneys. I noted: "To be dependent on the generosity of others is a new experience for me and I am thinking a lot about what it means to share one's body with another person. Also trying to figure out how I ask for a gift that I really want without expectation or making friends and colleagues uncomfortable." "

About the ongoing discussion of providing compensation for donors, whe writes
"Even without incentives, no group of do-gooders is treated with more suspicion by the medical community than living organ donors. Even a free glass of orange juice or an unnecessary lollipop given to a donor is interpreted by some leaders in the field as a "bribe" or a crime. Appropriate concern for the international organ trafficking problem (WHO estimates that the annual total of internationally trafficked kidneys is about 6,000) has so distorted the concept of altruism and eroded the principle of mutual respect that potential kidney donors are denied the basic safety net that a just and giving society should provide people who offer to risk their own lives to save the lives of others. And let's be clear. The best way to stop first-world people with money from exploiting poor people by bargain basement organ trafficking is to procure more organs from well-informed, healthy and autonomous people in the first world."

Among her bottom lines: if you need a kidney, let your friends know.

From Australia, Kidney Exchange is making continued progress: the news story Chain of goodwill saves lives reports that Western Australia's Paired Kidney Exchange Program has performed an altruistic donor chain, involving three transplants. As the technology progresses for effectively using altruistic kidney donations to enable multiple transplants, the benefits of such donations increase. And as the news of this spreads, it is likely more altruists will be moved to donate.

This brings me to the subject of advertising.

Apart from letting their friends and acquaintances know (and sometimes in preference to doing that) people in need of transplants sometimes advertise (see e.g. the story Ads, Billboard Plead for Organ Donations, or the site MatchingDonors.com).

In a column in the Los Angeles Times about how all sorts of transactions (particularly on the web) are funded these days by advertising, Joshua Gans is interviewed on the subject of repugnant transactions
"According to Joshua Gans, an economist at Melbourne Business School in Australia..., there's a social norm against repugnant transactions, such as paying for a kidney. In the last few years, too many transactions have become repugnant. "And if you need to make money to pay for the content ... and you can't get the consumers to pay, what do you do? Sell a related product, advertising," Gans told me. The good news is that at this point, I'm pretty sure The Times' sales staff will sell space on their kidneys."

Could someone actually finance a kidney donation by advertising? Jeff Ely at Cheap Talk offers this suggestion under the heading Organs for Money:
" I wonder if the following transaction would be considered taboo. I need a kidney, you have a spare. By law, I cannot pay you for the kidney and you would not give it to me without compensation. So instead I buy five minutes of primetime network TV air, say in the middle of American Idol, to broadcast my documentary about you telling the world what a heroic human being you are, how you saved my life and where to send you donations."

(In the nothing is too bizarre to contemplate category, Tyler Cowen at Marginal Revolution points to a laptop company that offers to help defray the cost of well attended funerals in return for being allowed to advertise at them: Advertising markets in everything)

HT to Lauren Merrill for the Salon story.

Saturday, April 4, 2009

More on recommender systems for escorts

Scott Cunningham of Baylor writes:

"I saw today your post on the screening sites that prostitutes use ["Problem customer" registries for prostitutes]. I just wanted to pass along to you a paper I'm currently working on with Todd Kendall called "Prostitution 2.0: Estimating the Effect of the Internet on the Market for Commercial Sex in the US."
http://business.baylor.edu/scott_cunningham/Research_files/pro20-4.pdf
"We have been surveying online prostitutes for the last 10 months using data collected from The Erotic Review, which is a large "mall" that clients use to record detailed information about prostitutes in various cities. In the course of the surveys, we have been studying the way in which the Internet has facilitated improved screening, and even in some cases, signaling between clients and prostitutes. One of the more ingenious things that we have found is a case of signaling from clients to prostitutes wherein they send letters of recommendation to prostitutes, usually in the form of sending along information [from] another prostitute with whom they've already visited. This, we argue, has enabled prostitutes to update their beliefs that a new client is not a cop (or a violent client) because these letters are relatively more expensive for cops to send. A case in point - see this story about two police officers who were sleeping with prostitutes in Beaumont, Texas allegedly in order to make a case on a drug trafficker. When the public learned, the men were fired, and the officers are now suing the Beaumont, Texas police department for wrongful termination. (It's suggestive that indeed the private costs of using these kinds of methods are prohibitively high for cops, which we argue is evidence that the costs of signaling type to prostitutes is such that the separating equilibria and not the pooling equilibria is more likely to be happening). "

Here is The Erotic Review, and here is what they say about customers getting recommendations from escorts:

"TER White List
If you have a good reputation with the ladies, encourage them to visit the TER White List and submit a referral for you. The TER White List is an easy way for providers to give positive references about members they have seen. "

Friday, April 3, 2009

The NYC High School Match

The New York City Department of Education reports that the new high school match process continues to work well: More Than 80 Percent of Students Admitted to a Top Choice High School for Fourth Consecutive Year.


"The Department of Education conducts extensive outreach to families about the high school admissions process, beginning during the sixth grade. High school applicants receive the annual, 500-page High School Directory, which provides them with information about every high school. They also receive several other publications that guide them through the admissions process. In addition, the Department of Education hosts Citywide high school fairs, workshops, and information sessions for several months before students’ applications are due. Middle and high school administrators, guidance counselors, parent coordinators, and community partners help students and families evaluate their options and make informed choices.

"Students can list up to twelve high school programs on their applications in order of preference. Schools also rank students. Then, students are matched to the school they ranked highest that also ranked them. The admission process consists of three rounds: the first round for students applying to the City’s Specialized High Schools, the main round (this round), and the supplementary round for students not matched during the main round. "


The NYCDOE reports that of 86,000 students looking to enter the 9th grade, 44,012 students received their first choice school, and 7,455 could not be assigned to any of their (up to 12) choices.(The figures they give are for what we called rounds 1 and 2 of the new system, described in our paper discussed in a previous post, Matching students to high schools in NYC . The unmatched students will next be informed of the schools that still have vacancies, and be asked for a new preference list of up to 12 choices. Here's a link to the paper again: Abdulkadiroglu, Atila , Parag A. Pathak, and Alvin E. Roth, "Strategy-proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match,'' revised, November, 2008, American Economic Review, forthcoming. )

Thursday, April 2, 2009

Repugnance, and regulation of new markets: surrogate wombs

One of the reasons that people are reluctant to consider legalizing markets for new and possibly repugnant transactions is that it is easy to imagine that bad things can happen in new markets. (Credit default swaps, anyone?). The question of whether it should be legal to buy and sell kidneys for transplantation is the example I've most frequently written about.

But now comes a story about the market for surrogate wombs. A company that did the matchmaking between infertile couples and surrogate moms, and had the couples set up escrow accounts to make guaranteed payments to the surrogate mom over the course of the pregnancy, has collapsed, and the funds with which it was entrusted have disappeared. Here's the story in Slate: If you stop paying a surrogate mother, what happens to the fetus?

"That's the scenario unfolding in California. The victims are couples and surrogates who met through SurroGenesis, a company "dedicated to assisting infertile couples to have a baby through third-party assisted reproduction." Hiring a surrogate through the company is expensive, as you'll see from its long list of fees. But don't worry: The company offers to "arrange for opening of [a] trust account" that will cover your expenses. Specifically, according to the Los Angeles Times, its clients say "SurroGenesis recommended that prospective parents set up trust funds administered by the Michael Charles group," its partner company.
The parents handed over the money. From this, the companies were supposed to pay the surrogates. Now, the Times reports, payments have stopped. In fact, the New York Times adds, "SurroGenesis told clients on March 13 via e-mail that their money was gone. Lawyers say that as much as $2 million may be missing, with some couples losing as much as $90,000."
...
"Surrogates aren't mercenaries. But they do need to be paid for their sacrifices. With every week that passes, they endure more of pregnancy's burdens. They submit to exams, tests, and other procedures. They take on serious medical risks. They forgo activities that might harm the fetus. They lose the ability to commute to and work at other jobs. They have bills to pay. At least one abandoned surrogate says she has received an eviction notice.
"If you stop paying your surrogate, she needs to quit and find another job, just like any other worker. But surrogacy isn't like any other job. The only way to quit a pregnancy is to abort it."

So, we've got a very bad market failure here. Either surrogacy needs to be better regulated, or private institutions have to emerge that will provide more security for these difficult transactions.

Is this kind of failure a reason to make surrogacy illegal? I think that would be way premature; I'm guessing there are happy children being brought up in loving families, borne by surrogates who feel well compensated. But it does mean that, when we debate whether to legalize selling kidneys, for example, the "market design" questions of how any such market might be regulated, and whether the worst failures could reliably be avoided, should be at the center of the discussion.

HT (and congratulations) to Steve Leider (who just took a job at Michigan)

Wednesday, April 1, 2009

In MA, proposed law makes 60 _obscenely_ old

Eugene Volokh reports Proposed Ban on Making and Distributing Pornography Involving >60-Year-Olds and the Disabled (Including Spouses or Lovers Consensually Photographing Each Other):
"Yup, the law (in Massachusetts) would make it a very serious crime — tantamount to child pornography — to make, and distribute "with lascivious intent," "any visual material that contains a representation or reproduction of any posture or exhibition in a state of nudity" involving anyone age 60 or over, or anyone who has "a permanent or long-term physical or mental impairment that prevents or restricts the individual’s ability to provide for his or her own care or protection."
..."The bill text is here; the provisions that would be amended are here and here; and the definitions of "elder" (anyone age 60 or older) and "person with a disability" ("a person with ) are here. "

HT: Steve Leider

A no-longer repugnant marriage transaction?

The Telegraph reports: Gordon Brown has opened talks with Buckingham Palace on removing the 308-year-old law which bars members of the Royal Family from marrying Roman Catholics.

"Monarchs and members of their family in the order of succession have been banned from marrying Roman Catholics since the Glorious Revolution of 1688, when the Catholic James II was overthrown in favour of the Protestant William of Orange. The prohibition is enshrined in the Bill of Rights passed that year, and the 1701 Act of Settlement.
Rewriting the Act of Settlement requires the consent of all 53 Commonwealth countries, and Mr Brown hopes to discuss the proposal at the Commonwealth summit in November. He has already held private talks about his plans with some Commonwealth leaders.
Sources close to the Prime Minister stressed that the plans would not undermine the Establishment of the Church of England, and that the monarch would retain the role of head of the Church."
...
"During the current Queen's reign, two members of the Royal Family - Prince Michael of Kent and the Earl of St Andrews - renounced their rights of succession after marrying Roman Catholics. Last year, it was announced that Autumn Kelly had renounced her Catholic faith before she was able to marry Mr Phillips."

"Dr Harris said of his Bill: "The Bill will remove the uniquely discriminatory stipulation which currently exists - that an individual in the line of succession to the throne can have a civil partnership with a Catholic, can marry a Muslim or atheist, but can not marry a Catholic."