Compensation for kidney donors: once again under discussion

The American Journal of Transplantation published the following article, by a large group of authors called the Working Group on Incentives for Living Donation:
"Incentives for Organ Donation: Proposed Standards for an Internationally Acceptable System"
Volume 12, Issue 2, pages 306–312, February 2012

Some idea of the content of their recommendations can be gotten from the following Table:

Table 2.  Guidelines for development of a regulated system of incentives for deceased and living donation

(1) Each country implementing a system of incentives should have a legal and regulatory framework for the process.

(2) The entire process must be transparent and subject to government and international oversight.

(3) The incentive should be provided by the state or state-recognized third party. Under well-defined, transparent and regulated circumstances, prospective recipients may help fund a charity that supports the program. There is no direct payment from the recipient to the donor and supporting the charity will not result in advancement on the waiting list.

(4) Allocation of the organ(s) should be performed according to the single recognized system of that country (similar to UNOS in the United States) using a predefined and transparent algorithm so that everyone on the list has an opportunity to be transplanted. Kidneys would be allocated to the number 1 person on the list (as determined by defined and transparent criteria).

(5) There should be a plan for administration and for rigorous oversight to ensure that criteria for evaluation, acceptance, allocation and provision of the incentive to the donor (or donor family) are being followed.

(6) The donation should be anonymous and nondirected.

(7) No other solid organ donor incentive plan would be legal.

(8) There should be legislation to govern wrongdoing and how centers would be censured, including criminal sanctions and fines, if wrongdoing is identified.

The  article drew the following replies in the Letters to the Editor

“Proposed Standards for Incentivesfor Organs Donation” Are Neither International nor Acceptable

F. Delmonico, G. Danovitch, A. Capron, A. Levin and J. Chapman, Council, Declaration of Istanbul Custodian Group, Montreal, QUE, Canada

The Philippines Is Not the Site forIncentivized Organ Donation

B. Padilla, D. Bayog, N. L. Uy, I. Gueco, L. Nazareno-Rosales, A. Chua, L. Almazan-Gomez, D. Bonzon, B. Balmores and E. Cabral

"The report on the proposed “international standards” for financial incentives for organ donation in the February issue of the AJT (1), stated that “until there are trials, we have no means of knowing under precisely what circumstances such a proposal would best succeed”. Permit us to report that a regulated system of incentives for living organ donors was already implemented in the Philippines from 2002 to 2008. The program offered a sizable “gratuity package” while mandating systems and procedures for transparency, creation of ethical guidelines, monitoring of transplant facilities and a donor registry, much like what this article proposes. The reality was different from the intended outcomes. The black market was not eliminated and organ brokers continued to be involved (Roberto Tanchanco et al., unpublished cohort study, 2011) (2). A regulation that transplants to foreigners should comprise no more than 10% of total transplants proved unenforceable and transplant tourism flourished (3). Donors were not protected, as there was failure of informed consent, lack of economic improvement in the donors’ lives and poor rate of medical follow-up (Roberto Tanchanco et al., unpublished cohort study, 2011) (2). A study limited to the donors within the government-regulated program reported better economic outcomes, but this was hardly convincing as poor follow-up allowed reporting of data in only 81 of 164 participants (Romina Danguilan et al., unpublished cross-sectional study, 2010).

Thus, our experience leads us to believe that the Matas article underestimates the problems related to the approach they recommend. A system of incentives for living unrelated donors which is difficult to differentiate from a disguised organ market is totally inappropriate for a country like the Philippines, where many patients have a potential related donor but cannot afford to pay for a transplant, where the deceased donor program is still very infantile, where the poor have been exploited in organ trafficking before and a large sector of the population remains vulnerable."


A Realistic Proposal—Incentives MayIncrease Donation—We Need Trials Now!

A. Matas, J.A.E. Ambagtsheer, R. Gaston, T. Gutmann, B. Hippen, S. Munn, E. T. Ona, J. Radcliffe-Richards, A. Reed, S. Satel, W. Weimar and R. Danguilan

"To the Editor:

The shortage of organs is a critical problem for patients with organ failure, and has led to a polarizing discussion. Some, including us, have suggested that a regulated system of incentives might increase donation and alleviate the crisis (1,2). Others, championed by Chapman, Danovitch, Padilla and Delmonico, have passionately opposed this option (3–6).

Delmonico et al., representing the Declaration of Istanbul [DoI] Custodial Group (DICG) now write that our proposed guidelines for a regulated system are not acceptable (4). Our proposal, as stated in the manuscript, was presented as a basis for discussion (7). Rather than suggesting modifications or improvements, the DICG simply condemns it.

Their condemnation rests on two arguments. First, that others have suggested that “sales,”“brokering” and “organ markets” are wrong, and that we have “departed from the consensus.” Yet we clearly state our opposition to exploitation and unregulated markets, and instead suggest a government-regulated system with explicit limits to prevent the abuses all parties decry. But even the supposition that we have no right to challenge “the consensus” is suspect. When, in moral debate, is majority opinion the final argument? If it were, homosexuals would still be criminals and women still subordinate to their husbands and excluded from public life–both once widely held majority views enshrined by law.

And where does this so-called consensus come from? The DICG refers to the World Health Organization (WHO) and the DoI. Yet, the WHO has updated its Guiding Principles (most recently supporting reimbursement of costs and of emotionally or legally related donors vs. previous stance banning all but genetically related donors and any payment). The draft of the DoI was written by a Steering Committee including Chapman and Delmonico, but no proponent of incentives (8). The summit was by invitation only, and invitees were invited based on their stance on this issue (Danovitch, personal communication). The few proponents of incentives were vastly, and vociferously, outnumbered. Why are these “consensus” documents immune from challenge?

Second, the DICG is incorrect that our proposal is “belied by the reality of markets.” Again, they conflate “unregulated markets” with the government sponsored regulated systems we propose. As we state: (a) each system would be limited (donors and recipients) to citizens of that country, and (b) the organ would be allocated to the #1 person on the list (i.e. not the rich buying from the poor). Each government-regulated system would be based on donor and recipient protection, regulation, transparency and oversight.

Finally, we resent the innuendo in the suggestions that our manuscript was prompted and “funded in part by Filipino organizations that have favored organ sales to foreigners” and that the authors would accept “permitting the poor and vulnerable in any community to part with a kidney for the wealthy sick.” These are cheap shots unworthy of a discussion so important to our patients. It may be that there is no place for a regulated system of incentives. But that decision should be made after dispassionate, reasoned discussion and ideally after being informed by hard data.

In a second letter, Padilla (another member of DICG) et al., suggest that our proposed system would not work in the Philippines (6). We recognize that there have been mixed evaluations of the programs implemented in both the Philippines and Iran (9). However, neither system of incentives meets the guidelines we have proposed. Moreover, the very fact that successes have been reported suggests that the systems could indeed work and should be improved upon rather than abandoned. We did not state that our system would work in every country, but presented guidelines detailing how systems should be designed in order to be acceptable. Each country would need to have appropriate regulation and oversight and to be able to address wrongdoing."

(Not so) New discussion of monetary incentives for organ donation

Update: a comment correctly points out that I somehow linked to an old story below:(
I'll follow with some more up to date material tomorrow...
a.r.

NBC news has the story, on the latest, cautious support for amendments to the 1984 National Organ Transplant Act that prohibit even experiments designed to understand the effect of monetary incentives on organ donation:
Docs push for tests of cash rewards for organs: Medical group wants to go beyond altruism to motivate cadaver donors

Most people who donate organs after death need no reward beyond altruism, but others could use a little nudge, according to the nation’s doctors.

That’s why the AMA has waded into the controversial waters of offering financial incentives for cadaver organ donations, a proposition that can’t even be examined without modifying the National Organ Transplantation Act.What’s not so clear to the American Medical Association is what kind of incentives — and in what amounts — might encourage potential organ donors and their family members to follow through.

That’s the 1984 federal law that prohibits payment or any kind of “valuable consideration” for organ donation.

This month, the AMA voted to move forward with plans to amend the law to allow pilot studies to settle the incentive issue.

“We can speculate, but unless you actually study it, you don’t know,” said Dr. Joseph Annis, an AMA board member. “What’s standing in the way right now is NOTA.”

The federal law is aimed at preventing human organs from becoming a commodity, of course, said Dr. Gerald Wilson, a South Carolina surgeon and member of the AMA delegation that introduced the issue.

“People are concerned about the possibility that we’re buying organs,” Wilson said.

But even some of the harshest critics of payment for living organ donations — a separate hot-bed issue — say that studying incentives for donation after death should be acceptable in a nation where nearly 100,000 people remain on a waiting list for organs and nearly 10 percent die before a transplant becomes available.

Living donations raise most concern “Those of us who worry about financial incentives corrupting organ donations worry most about living donations,” said David Rothman, director of the Center on Medicine as a Profession at Columbia University.

“A tightly controlled study that looks strictly at cadaveric donations — you’re getting a qualified, ‘It’s OK.’”

Rothman acknowledged that critics who oppose financial incentives for deceased donation fear that it's the first step on a slippery slope to payment for living organs.

Critics also worry that the prospect of even modest payments could lead patients' families to withhold vital medical information that could lead to rejection of an organ, or to prematurely withdraw care from a patient.

Ideally, the AMA hopes to determine whether cash contributions, payment for funeral expenses or even donations to a charity of the deceased’s choice might motivate family members to allow donation after death.

More than a decade ago, Pennsylvania approved a law to pay $300 toward funeral expenses for families of organ donors, but the rule was never enacted because of the NOTA restrictions.

The number and design of studies and where they might be conducted is not clear, Annis and Wilson said. Wilson, however, noted that the an organ procurement agency in his state, Life Point Inc. of South Carolina, may be interested in conducting a pilot study.

It’s not the first time this issue has been raised. The AMA first argued for studying motivations for cadaveric organ donation in 2002. The issue has been the subject of heated debates since then, both inside and outside the organ donation community.

The United Network for Organ Sharing, or UNOS, the nation’s organ allocation agency, is divided on the issue, said Dr. Benjamin Hippen, a North Carolina kidney transplant specialist.

‘It definitely doesn't go far enough’ Hippen, a member of UNOS ethics committee, believes in incentives for living and deceased donors alike and said the AMA’s intent to study the issue is only a necessary first step.

“It definitely doesn’t go far enough, in my view,” Hippen said.

Efforts to increase cadaver donations actually have succeeded, he said. In the past five years, the percentage of deceased people eligible to donate organs who actually do so has risen from about 50 percent to nearly 70 percent, according to UNOS. In some places, the percentage may be even higher.

“It begs the question: If you’ve only got 20 percent more you get organs from, is it 20 percent who could be swayed? “ Hippen said.

Only well-conducted studies can answer that question. AMA officials said they’re not sure when they’ll begin serious lobbying to change NOTA, certainly not before a new president takes office.

"The politicians have their hands full," Annis said.

Meanwhile, critics like Rothman welcome a cautious approach.

"Would I line up to oppose this bill? No," he said. "Would it worry me? Yes."

Unraveling in Israel: CPAs and law grads

Ran Shorrer sends me an email about the hiring of CPA's in Israel, in an article (in Hebrew) that also touches on law firm hiring.  He writes:

"google translate with modifications (just to make it readable):

 The race to specialize will only start in CPA third year

The Board of Auditors shall recommend to the Ministry of Justice about a revolution in the management of specialization: accounting firms will not recruit interns until the end of their studies, students can choose to specialize in a greater number of enterprises and public institutions

Hadar Buy

the Board of Auditors decided to make a recommendation to the Minister of Justice correction accounting regulations regarding the regulation of the interviews and the acceptance of accounting students in their apprenticeship and the places who are entitled to receive specialized profession.

the Council auditors explains that the move is designed to create a uniform date for interns, similar to the one recently set by the Bar Association.

Choose to specialize without academic data

In August 2010, the Minister of Justice Yaakov Neeman signed on an amendment according to which law firms will not be allowed to interview candidates before March  in their third year of study.

Today, the accounting industry is not regulated, and specialized ministries begin recruiting the first year of their studies, making it difficult for firms to learn the capabilities of each student, and students themselves should decide on a specialty before managed to find out what interests them in their studies.

Dr. Hadas Glndr, head of the Department of Accounting at the College of Management, initiated the initial appeal to the Minister of Justice, said to Calcalist that the appeal to students in the first year due to the wish of firms to receive the best students at an early stage because of the competition between them.

 "There is no  academic data at this stage, so accounting firms hire testing services that will help them find qualified interns. Proposed regulation will determine to choose only the third year students not only designed to help firms but also for students in their third year and more unified in terms of their aspirations for the profession."

If the Minister of Justice approves the proposal of the Board of Auditors, the regulation will apply to candidates who began their studies in the school year following approval of the regulations."

Can prison inmates consent to register as deceased organ donors?

The State of Utah recently made it easier for prisoners to become organ donors: the Salt Lake Tribune has the story. House passes Utah inmate organ-donor legislation

"A bill that would streamline the process for prisoners to sign up as organ donors passed unanimously Wednesday in the Utah House of Representatives.

"Rep. Steve Eliason, R-Sandy, pitched HB26 in response to prisoners who wanted to be donors upon their deaths, but were being rejected. The proposal would allow them to sign up as donors while in the correctional facility.

"It [would be] completely voluntary," Eliason said."

Economics in British Airways' magazine

I recently flew to and from Europe on a United/Lufthansa set of flights. Had I flown British Airways (which I haven't done since this incident), I could have seen myself in Tim Harford's article about me and market design and the recent Nobel in their Business Life magazine...

Rudolf Diesel, Niels Bohr and me ("great minds don’t go out of print; they go online.”)

So says Springer, which published my first book: Springer Book Archives Makes Its Debut:

"Chiarcos points to the value of keeping such titles in this archive alive. Among some of the treasures in the collection are Rudolph Diesel’s work on the diesel engine, Niels Bohr’s Über den Bau der Atome, and the first book by Alvin E. Roth, the 2012 Nobel Prize winner in Economic Sciences. After Roth won the Nobel Prize, Chiarcos says Springer received many requests to have his 1979 book translated into multiple languages. However, the book had since been out of print. SBA made it possible to gain access to the book and bring the title back into circulation.

In fact, the accomplished works of more than 200 Nobel Prize winners are now part of SBA to ensure that such seminal works are not lost over time, says Chiarcos. For the Springer product development team, the victories come in all sizes: “During our work on the project, we came to realize that great minds don’t go out of print; they go online.”
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In the meantime, I long ago made the book available online myself...(although I guess the URL will change as I complete my electronic move to Stanford...):

Roth, Alvin E. Axiomatic Models of Bargaining, , Springer-Verlag, 1979. 
http://kuznets.fas.harvard.edu/~aroth/Axiomatic_Models_of_Bargaining.pdf

Virtual greyhound racing: technology meets repugnance

I've written before about how greyhound racing is a transaction that many find repugnant. The Economist reports that technology may be coming to the rescue: it's possible to gamble on computer generated virtual greyhound racing, conducted entirely on a computer screen (much as you could play virtual roulette, but apparently more exciting...)

They note that "the move from real dogs to virtual ones threatens to kill off a working-class pastime." (But note that in the picture there is a virtual crowd in the virtual stadium watching the virtual dogs...)

The Harvard Crimson on Michael Sandel on economists

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

Zhou writes, in part:

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

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

Performativity as a critique of economics and market design

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

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

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

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

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

He writes:

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

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

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

Paul Milgrom wins the BBVA Foundation Frontiers of Knowledge Award

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

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

Here is the prize announcement:

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

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

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

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

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

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

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

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

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

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

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



Industrial organization

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

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

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

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

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

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

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

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



Bio notes

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

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



International jury

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

Using chimpanzees for medical research is becoming repugnant

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

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

Prisoner's dilemma, exam grading, and social media

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

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


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

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

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

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

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

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

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

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

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

News story on sorority matching, quoting two Roths

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

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

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

School choice in New Orleans, evolving

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

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

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

"But we can do more.

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

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

Wagaroo: A matching market for pet dogs from responsible sources

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

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

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

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

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

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

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

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

Horse meat (unlabelled) in Britain and elsewhere in Europe

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

Here are some of the stories:

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


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

Waiter, There's a Horse in My Lasagna

Horse meat and the economics of disgust

Real estate ads in Britain: "no upward chain"

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

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

HT: Brit Grosskopf

Art project on matching in Berkeley today

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

SONYA RAPOPORT

"ImPOSSIBLE CONVERSATIONS?" Data Gathering Event 

One Day Only!

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

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

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

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

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

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

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

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

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

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

Caroline M. Hoxby 

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

Christopher Avery 

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

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