Thursday, February 6, 2014

Perfect Strangers: kidney donation movie

I went to see Perfect Strangers last night at Stanford, by Stanford's documentary filmmaker Jan Krawitz.
It was followed by a panel discussion by Krawitz, Stanford philosopher Debra Satz, and two non-directed kidney donors, one of whom was the main character in the film. Both initiated non-directed donor chains.

The other donor was the subject of this 2011 blog post A kidney donor argues that selling kidneys should be legal.

Wednesday, February 5, 2014

Directed deceased organ donation

Here's a story from Modesto about a relatively rare directed donation of deceased donor organs: Dad selects recipients of Modesto woman’s kidneys after car crash

"The lives of two organ recipients and the father who lost a young daughter are linked by “directed donation,” in which a person chooses recipients for organ donations.

"Nearly 3,000 Californians received organ transplants from 1,279 donors who lost their lives in 2013. Families of about 190 of the donors had at least one specific person in mind to whom they wanted to give an organ. But after considering whether the recipient was on the donor list, was well enough to undergo surgery and was a biological match to the donor, only a quarter of the chosen recipients received the organs they needed.

"In the case of 27-year-old Modestan Stephanie Methvin, both recipients were able to accept a kidney, and both are also from Stanislaus County.

“It is really rare in this case that both folks were able to accept the kidneys,” said Tony Borders, spokesman for the California Transplant Donor Network." 

Tuesday, February 4, 2014

More on the market for kidneys in Iran

Here's an article on the market for kidneys in Iran that I missed when it came out, recently pointed out to me by Mohammad Akbarpour

Kidney International (2012) 82, 627–634; doi:10.1038/ki.2012.219; published online 6 June 2012

The Iranian model of living renal transplantation

Mitra Mahdavi-Mazdeh1
1Iranian Tissue Bank Research & Preparation Center, Tehran University of Medical Sciences, Tehran, Iran
Correspondence: Mitra Mahdavi-Mazdeh, Iranian Tissue Bank Research & Preparation Center, Tehran University of Medical Sciences, Tehran, Iran. E-mail: mmahdavi@sina.tums.ac.ir
Received 6 March 2012; Revised 28 March 2012; Accepted 5 April 2012
Advance online publication 6 June 2012
Top

Abstract

Organ shortage for transplantation remains a worldwide serious problem for kidney patients with end-stage renal failure, and several countries have tried different models to address this issue. Iran has 20 years of experience with one such model that involves the active role of the government and charity foundations. Patients with a desperate demand for a kidney have given rise to a black market of brokers and other forms of organ commercialism only accessible to those with sufficient financial resources. The current Iranian model has enabled most of the Iranian kidney transplant candidates, irrespective of socioeconomic class, to have access to kidney transplantation. The Iranian government has committed a large budget through funding hospital and staff at the Ministry of Health and Medical Education by supporting the brain death donation (BDD) program or redirecting part of the budget of living unrelated renal donation (LURD) to the BDD program. It has been shown that it did not prevent the development and progression of a BDD program. However, the LURD program is characterized by several controversial procedures (e.g., confrontation of donor and recipient at the end of the evaluation procedure along with some financial interactions) that should be ethically reviewed. Operational weaknesses such as the lack of a registration system and long-term follow-up of the donors are identified as the ‘Achilles heel of the model’.

Monday, February 3, 2014

Markets and microbes

Economists are sometimes accused of scientific imperialism, but what is it when biologists find market models useful, as in this paper from PNAS?

Evolution of microbial markets

Abstract: Biological market theory has been used successfully to explain cooperative behavior in many animal species. Microbes also engage in cooperative behaviors, both with hosts and other microbes, that can be described in economic terms. However, a market approach is not traditionally used to analyze these interactions. Here, we extend the biological market framework to ask whether this theory is of use to evolutionary biologists studying microbes. We consider six economic strategies used by microbes to optimize their success in markets. We argue that an economic market framework is a useful tool to generate specific and interesting predictions about microbial interactions, including the evolution of partner discrimination, hoarding strategies, specialized versus diversified mutualistic services, and the role of spatial structures, such as flocks and consortia. There is untapped potential for studying the evolutionary dynamics of microbial systems. Market
theory can help structure this potential by characterizing strategic investment of microbes across a diversity of conditions.

************
Update: my joke about imperialism was a bit opaque it turns out. To be clear, I'm a big admirer of cross fertilization between fields. Here's an earlier post about Noe's work...

Tuesday, April 13, 2010

Sunday, February 2, 2014

Saturday, February 1, 2014

Counterproductive incentives in transplantation

Which would be better, to have a transplant center transplant 200 patients and have 150 do well, or to have the center transplant 100 patients and have all of them do well? How about if the 100 patients who didn't receive a transplant in the second scenario would all have died?

In Oregon, The Bend Bulletin has a three part series (pointed out to me by Ben Hippen) on the difficulties of regulating transplant centers, and the sometimes counterproductive incentives that are introduced (in an effort to counteract other bad incentives that hospitals may have).

UPMC, the University of Pittsburgh Medical Center, comes out looking very good, incidentally.


Patients denied transplants as donor organs are discarded
PART 1: Centers forced to focus on benchmarks rather than patients
By Markian Hawryluk

"Patients who need organ transplants are dying even while viable organs are being thrown out, as government regulations have forced transplant centers to focus on overall survival rates instead of the well-being of individual patients.

"The rules implemented by the Medicare program, which pays for the vast majority of organ transplants in the U.S., evaluate transplant centers based on the one-year patient and organ survival rates after transplant. Centers that fall below benchmarks could be shut down or forced into a lengthy and expensive remedial process.

That has prompted many centers to choose healthier patients and higher quality organs to transplant. High-risk patients that could pull down a center’s overall survival rate are often unable to get on the transplant list, or end up dying on the waiting list as centers pass on marginal but still usable kidneys, livers and lungs. And the decades-long growth in the number of transplants performed in the U.S. has plateaued since the regulations were implemented.

“The side effect has been to turn people risk averse,” said Dr. Dorry Segev, a transplant surgeon at Johns Hopkins Medical Center, “to the point where patients who would benefit from transplant are being denied transplants, and to the point where organs that are beneficial to patients are discarded.”

The regulations have caused centers to take a hard look at their quality-improvement mechanisms and how they evaluate patients and organs for transplant.

Programs became acutely aware of their survival rates, which began to climb after the rules went in effect in 2007.

The percentage of hearts still beating one year after transplant hit an all-time high of 91 percent in 2010, up from 88 percent in 2003; 85 percent of transplant lungs were still breathing, up from 80 percent in 2003. Deceased donor kidney transplants have achieved an astonishing 93 percent success rate.

"Transplant surgeons routinely credit the regulations with strengthening the transplant system and for the most part, improving the quality of care for transplant patients.

“There is no question we have a healthier system and a more monitored system than we did before these regs came out,” said Dr. Michael Abecassis, director of the transplant center at Northwestern University in Chicago.

The unintended consequence, he said, is that centers are “cherry-picking” their patients.

Patients might die and not get transplanted even though they may have an 80 percent chance of survival,” Abecassis said. “If the target is 90 percent, or you’re going to get flagged, you may look at 80 and say, ‘I’m not going to do that.’ Well, if you’re the patient, it’s 80 versus zero. Then 80 is pretty good.”

 ...
"Before the regulations went into effect, the number of transplants in the U.S. had grown each year. But in 2007, the first year centers were being held to the survival benchmarks, the number of transplants dropped and has remained flat ever since."
****************

Transplant centers pull back to avoid sanctions
PART 2: High-risk patients can put programs in jeopardy

"The new regulations, known as the Medicare Conditions of Participation, or COPs, were finalized in 2005 after a series of highly public transplant scandals. Reports of wait-list irregularities, diversions of organs and major medical errors spurred CMS officials to step in and establish regulations for what primarily had been a self-regulated field.

"CMS, the largest purchaser of transplants in the world (with the possible exception of China), adopted metrics originally developed by the transplant industry itself. Years earlier, the United Network for Organ Sharing’s Organ Procurement and Transplant Network had set up a flagging system to help identify and improve programs with subpar results.

But while that flagging system relied on peer review and public disclosure, the CMS regulations threaten to shut down centers that don’t improve.

Centers whose number of patient deaths or organ failures exceed 150 percent of what would be expected for their mix of patients are flagged. Multiple flags within a 21⁄2-year period trigger CMS action.

Centers then have 210 days in which to explain the mitigating factors that led to their low survival rates. If programs can improve by the end of that period, they are allowed to continue operating as usual. In other cases, CMS will acknowledge the mitigating circumstances and grant exceptions.

The centers that can’t improve quickly or convince CMS to grant an exception are given three options: shut down voluntarily, shut down involuntarily, or enter into a systems improvement agreement, or SIA. Through August 2012, 127 of the nation’s 330 transplant centers were flagged twice and investigated by CMS, including the programs at Hopkins.

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

Transplantable organs go to waste
PART 3: Centers feel regulatory pressure to avoid non-ideal organs

"Transplant programs may have to make do with more marginal organs going forward. Ideal organs generally come from young, healthy individuals who incur a traumatic death. Those types of donors are becoming less common, due to gains in highway safety and medical advances that can save accident victims from brain death. A Canadian study released in October found that the percentage of patients with brain injuries who eventually were declared brain dead fell from a high of 9.6 percent in 2004, to 2.2 percent in 2010.

"Donations after brain death accounts for half of kidney transplants, three-quarters of liver transplants, 90 percent of lungs, and all hearts. But that is changing.

"An increasing proportion of organs are coming from patients whose hearts stopped beating before the other organs could be recovered, or from older, sicker donors. Both categories of organs have a lower chance of surviving one year after transplant.

“We are seeing more and more organs sitting in that category of marginal organs,” Alexander said.

"Expanded-criteria donor kidneys (ECD), for example, have an 82 percent one-year survival rate, compared with 90 percent for a standard-criteria kidney. A kidney procured from a brain-dead donor has a 91 percent one-year survival rate, while those recovered from donors after cardiac death (DCD) have an 89 percent rate.

"When patients are listed for transplant, they are usually presented with a menu of organ types, each with different risk profiles, and asked to choose what types of organs they would accept. When organs become available, doctors and transplant coordinators decide whether they are willing to transplant that organ into that patient and whether to pass on that offer to the patient.

"Studies show that in aggregate, transplant candidates who accept ECD kidneys do better over the long run than patients who wait on dialysis for a more ideal kidney. While standard kidneys last an average of 10 years post-transplant, ECD kidneys average five.
...
"Yet marginal and high-risk organs are routinely turned down. An analysis of organ sharing data by surgeons at the University of California, San Francisco, found that 84 percent of patients who died waiting for a liver had received at least one organ offer and an average of six offers. Most were declined by the surgeons due to donor age or quality of organ.

“Wait-list deaths are not simply due to lack of donor organs as many of us assume,” lead author Dr. John Roberts said, citing the stigma of non-ideal livers.

"When surgeons become more selective about marginal organs, it can quickly result in a snowball effect. When an organ becomes available it is offered electronically to centers in the region and across the country. The more centers decline an organ, the more surgeons with patients lower down the list begin to wonder why the organ has been passed on so many times. And with each refusal, the time the organ sits on ice and degrades in quality increases. Kidneys can still be transplanted up to 48 hours after being put on ice, livers less than a day. If no center is willing to take a chance, eventually the organ is simply thrown out.

“Our system is pretty slow,” Roberts said. “It works well for good organs. It doesn’t work that well to get not-so-good organs broadly distributed.”

Friday, January 31, 2014

Stanford Connects in Pasadena, Feb 1

Expand your mind—and your network

Ready to meet President Hennessy, world-class faculty and hundreds of Stanford alums from Los Angeles and beyond? 
I'll be giving one of the seminars:

Who Gets What? The New Economics of Matching and Market Design

Alvin E. Roth, MS ’73, PhD ’74, is the Craig and Susan McCaw Professor of Economics and a senior fellow at the Stanford Institute for Economic Policy Research.

Professor Roth addresses recent developments in market design, for which he shared the 2012 Nobel Memorial Prize in Economics. He suggests ways to think about why some transactions may be regarded as repugnant, and how we might think about what are free markets.

Thursday, January 30, 2014

Dental residency match results

Elliott Peranson, who runs National Matching Services in Toronto, apparently has fond memories of our trip to Stockholm: here is the news release about the results of the recent Postdoctoral Dental Matching Program

Assignment of Dental Residency Positions Made with Nobel Prize Algorithm

The results released today by National Matching Services for the Postdoctoral Dental Matching Program placed 1721 applicants into postdoctoral dental residency positions. The Matching Program uses a mathematical algorithm to create a fair, transparent and efficient recruitment process.

"The results of the 29th annual Postdoctoral Dental Matching Program (the “Match”) were released today by National Matching Services Inc. (NMS). The Match places applicants into positions for the first year of accredited postdoctoral training in Oral and Maxillofacial Surgery, Orthodontics, Pediatric Dentistry, General Practice Residency, Advanced Education in General Dentistry and Dental Anesthesiology.
According to the data from NMS, 1721 of 1974 positions offered were filled in the Match, which is the highest fill rate in any of the last 15 years. The number of applicants participating in the Match increased by 3.3% to its highest level in Match history. According to Elliott Peranson, President of NMS, “the high level of applicant participation is being driven by the interest of current graduates of U.S. Dental schools to pursue advanced education.”
The Match uses the Roth-Peranson algorithm, which aligns the preferences of applicants and residency programs to generate an optimal result. The algorithm was designed by NMS and Stanford professor Alvin Roth, and was recognized in the awarding of Roth’s 2012 Nobel Prize in Economic Studies.
The algorithm acts as a central clearinghouse for all offers, acceptances and rejections. By centralizing the offer-acceptance process, both applicants and recruiters can be confident that they will receive the most preferred placement available to them. It creates a fair and efficient recruitment process that eliminates many of the common adverse situations found in competitive recruitment environments, like applicants hoarding offers and recruiters overfilling positions.
“We are very proud to be the trusted provider of matching services to the dental profession,” said Elliott Peranson. “By working closely with the sponsoring organizations of the Match, we have developed a Matching Program that leverages the power of the Roth-Peranson algorithm while fitting the unique needs of the postdoctoral dental residency recruitment environment.”
The Match to fill postdoctoral positions in dentistry has operated successfully since 1985 and has expanded to include six dental specialties. The Match is sponsored jointly by the American Association of Oral and Maxillofacial Surgeons, the Special Care Dentistry Association Council of Hospital Dentistry, the American Academy of Pediatric Dentistry, the American Association of Orthodontists, the American Society of Dentist Anesthesiologists and the American Student Dental Association. In addition, the Match has been endorsed by the American Dental Association Council on Dental Education and Licensure, the American Dental Education Association, and the Veterans Administration
About National Matching Services:
National Matching Services is the leading outsourced provider of matching services to professional organizations and industry associations. Since 1985, NMS has designed and implemented Matching Programs for competitive recruitment in a variety of industries, including health, education and law. NMS Matching Programs take the stress out of recruitment by providing tools for sponsoring organizations to oversee the recruitment process and giving applicants and recruiters confidence that they will obtain the best possible placement. National Matching Services is headquartered in Toronto, Ontario."

Wednesday, January 29, 2014

Cash for kidneys: letters to the editor of the WSJ

The recent Becker-Elias article, about which I blogged about my thoughts here, has drawn some letters to the editor, which the WSJ published under the headline Is a Market in Kidneys the Right Answer to Shortage? It is a tragedy when people die while waiting for a lifesaving transplant, but paying for organs isn't the answer.

One of them, by Sigrid Fry-Revere, doesn't fit the sub-headline. She advocates adopting something like the market approach in Iran. Her unedited letter, which she shared by email, is below:


Letter to the Editor of WSJ
Edited version ran Sat. Jan 2014

The Rest of the Story

I read with great interest Gary S. Becker and Julio Elias article “Cash for Kidneys: The Case for a Market for Organs” in Saturday’s WSJ.  Like so many others who have written on this subject, their article misrepresents the Iranian system of compensated donation.

Usually not much is said about Iran, because not much is known, but I went to Iran and spent nearly two months interviewing paid kidney donors for a documentary film I was planning. I visited six different regions and returned with over 200 transplant stories.  There are too many misconceptions about what is going on in Iran to explain in one letter, but the most important thing I would like to point out is that paid kidney donors are people, not commodities, and no matter what the economics of the situation, there is a human element that can’t be ignored.

You might think I’m going to say we should not pay kidney donors, or that I’m going to rage about how exploitive kidney selling is. Not so. I learned many things on my trip to Iran, but the most important was sometimes money is what makes helping others possible.

The issue isn’t how much a kidney is worth, but how to make helping economically feasible and how best to show appreciation. I disagree with economists who say you can put value on someone giving up part of their body to save another person’s life. A conscious, informed decision, to risk oneself for another is an invaluable gift both to the person and to society.

Iran is the only country in the world that has solved its kidney shortage, and it has done so by legalizing and regulating compensated donation.  In the rest of the world there are two options:  Altruistic donation and the black market. The third option only exists in Iran where the rule of law protects donors and recipients alike. Paid donors are not treated like criminals, as is the case when the underprivileged are exploited for their kidneys on the black market. 

The Iranian system has developed over 30 years and continues to improve.  Today, paid donors are secure in their knowledge that the system works to protect their rights as much as the rights of recipients. Their money is put in escrow, the middlemen who arrange kidney matches are NGO volunteers, not black market profiteers, and they are treated on the same medical wards and in the same post-operative clinics as kidney recipients.  

How much are Iranian kidney donors paid for their service to humanity? Much more than the thank you, travel expenses, and occasional lost wages, paid altruistic donors in the United States. Iranian kidney donors receive the equivalent to six month’s salary for a registered nurse in Iran, or approximately $32,000 in the United States. But in addition to monetary compensation, they receive many goods and services that are hard to quantify in dollars.  All receive at least one year of health insurance, not just care related to their nephrectomy, as is the case in the United States. They also receive automatic exemption from Iran’s two-year mandatory military service.

Furthermore, Kidney donors often receive extra health insurance, sometimes for their whole family and often under terms where it can be renewed annually. They receive dental care at the NGO dental clinics that serve diabetes patients and kidney recipients. They receive job services, small business loans, and household goods.  I estimate the total average package paid donors receive in Iran is close to $45,000 in value. 

Most importantly, these paid donors know the government supports them for having done something honorable, like a paid firefighter or a paid emergency medical professional. They have saved a life -- and their contribution to society is invaluable.  Mohaghegh Damad, the ethicist for the Iranian Academy of Medical Sciences told me no payment could ever be enough. But, the payment Iranian kidney donors get, makes doing the right thing easier. 

In the United States 20-30 people die every day because they can’t get a kidney. Iran is the only country in the world where almost everyone who medically qualifies to get a kidney gets one, and in many regions of the country there is a waiting list for people who want to donate.  Maybe its time we learn something from their experience.


Sigrid Fry-Revere, J.D., PhD, is a bioethicist and founder and president of the non-profit organization Stop Organ Trafficking Now and author of The Kidney Sellers (Carolina Academic Press, 2014).

Tuesday, January 28, 2014

More on unpaid internships and repugnance

Over at the Chronicle, the issue seems clear to journalism student Peter D'Amato: The Unpaid Internship Is Indefensible

And he's not alone, he reproduces this image:
Full_01142014-internpetition

My previous post on Should unpaid internships be repugnant drew some interesting comments...

Monday, January 27, 2014

New transplant statistics from Israel

The Jerusalem Post has the story: Israel Transplant Center reaches all-time high in number of transplants, potential donors

"Last year brought good news to the Israel Transplant Center and to 392 people whose lives were saved by deceased and live donors.

There was an increase by 24 percent of live kidney donors; 56% of family members of deceased agreed to donate organs; 90,000 more people signed donor cards; and almost half of those who received organs from deceased donors were advanced in the queue because they had signed a donor card.

In addition, the first transplant of a small intestine was successfully performed and 637 corneas were also transplanted in 769 patients (some were split into parts), giving recipients the gift of sight, the center announced on Sunday.

Of the 143 requests to families whose loved ones suffered lower-brain death, 80 of them consented to give one or more organs. The families said it was important to save the lives of others, while the most common reason for refusal were “religious” – even though modern Orthodox clergymen say donating fulfills a very important positive commandment – and the concern that the body to be buried would “not be whole.”

The figure of 392 donated organs was the highest ever.

Of these, 104 of the donors were from live relatives (who gave a kidney or liver lobe), and the rest were from altruistic families who gave their loves ones’ organs.

Of 248 organs from deceased donors, 109 of the recipients had to wait less because they had previously signed up as potential donors. The number of patients waiting to receive a lifesaving organ dropped from 1,114 in 2012 to 1,075 in 2013.

Of the 109 recipients who were advanced in the queue, four received hearts, 25 received lungs, 13 received livers and 67 received kidneys.

Of the deceased donors, 112 were donors of kidneys, 10 of kidney-pancreases, 5 double kidneys (usually from elderly donors), 57 of livers, one liver and kidney, 13 hearts, 24 double lungs, 25 single lungs and one “domino” donation of a liver (when an organ or part of one is removed for the primary purpose of a person’s medical treatment and may prove suitable for transplant into another person)."

HT: Jay Lavee

Sunday, January 26, 2014

The Financial Times on looking into the future "In 100 Years"

Simon Kuper at the FT reviews the recent book of essays ‘In 100 Years: Leading Economists Predict the Future’, by Ignacio Palacios-Huerta (ed), MIT Press

The economist’s guide to the future

Prediction is hard, but so is summary. About my essay, he writes

Roth foresees parents manipulating their children’s genes. Some such methods, he writes, “may come to be seen as part of careful child rearing”. He also thinks people will become more efficient thanks to performance-enhancing drugs that improve “concentration, memory, or intelligence”.
Once humans have more years in good health, they will probably reorder their lives. Roth says that if child rearing takes up less of the lifespan, people may want different spouses for different phases of life. “New forms of polygamy-over-lifetime relationships” could arise, he writes.

You can see a longer summary and a link to the full essay here.


Saturday, January 25, 2014

Brookings Education Choice and Competition Index 2013


The Education Choice and Competition Index Background and Results 2013

RankSchool DistrictGradeCountyStudent Population No. of Schools
1Recovery DistrictAOrleans Parish, LA47,493126
2New York CityA-New York County, NY1,150,7952,431
3Orleans ParishA-Orleans Parish, LA51,042119
4HoustonBHarris County, TX220,754471
5DenverBDenver County, CO87,147229
6MinneapolisBHennepin County, MN46,165122
7Washington DCB-District Of Columbia, DC72,875295
8San DiegoB-San Diego County, CA146,207309
9TucsonB-Pima County, AZ66,505215
9ChicagoB-Cook County, IL427,945961
...


Executive summary:

"The United States is in the middle of a K-12 education revolution that is characterized by many dramatic transformations — among them, a shift toward more choice by parents in where their children are educated with public funds. This shift is signified by, among other things, the growth of public charter schools, the adoption of open enrollment systems for public schools, the expansion of statewide voucher programs, and continued increases in the availability of technology-based distance/virtual education.

"Although the expansion of choice in education is driven by a widely-recognized market model, which posits that allowing students and their families to choose schools and backpack their public funds will force education service providers to innovate and compete on the quality of their product, there is little available information about the current state of school choice in American education. For that reason, the Brown Center on Education Policy at Brookings compiles an annual Education Choice and Competition Index (ECCI) of 100+ U.S. school districts. The ECCI is based on scoring rubrics within thirteen categories of policy and practice that are important to the availability and quality of choice and to the competition created by choice among providers of education services.

"Based on these scoring principles, the Recovery School District in New Orleans and New York City Public Schools occupy the highest rankings on the 2013 ECCI, with scores of 83 and 73 points out of 100, respectively. Both districts occupied those same rankings in 2012, illustrating a larger trend uncovered by the ECCI: districts demonstrate little year-to-year change in their commitment to or design of school choice. The correlation between this year’s and last year’s aggregate district scores is 0.95. There are, however, exceptions. Denver dramatically improved its ranking, moving from 24th to fifth place, based on its implementation of a unified application process for all its public schools, including charters.

"Despite their high rankings, the Recovery School District and New York City, along with all other top-scoring districts, need improvements. And, as demonstrated by the 34 districts that received an “F” grade, zip code assignment and other policies antithetical to choice still represent standard operating procedure for many school districts across the country."

Friday, January 24, 2014

Scholarships for donors and donor family members

The Isabelle Christenson Memorial Scholarship honors the life of a brave transplant recipient who died when she was only 10 years old. It is a scholarship available to anyone connected to a donor or transplant recipient:

"Scholarship Requirements: Be an organ transplant candidate, recipient, donor family member, living donor or immediate family member of a transplant candidate or recipient  "


HT: Sangram Kadam

Thursday, January 23, 2014

Venture capital looks at the design of marketplaces

Not long ago I had a chance to listen to some interesting presentations at a conference sponsored by Greylock Partners, about businesses that aim to make marketplaces: As Marketplaces Evolve, Greylock Places Its Bets

  writes:
"The idea of marketplaces as a business model for technology startups isn’t new. We saw some marketplaces go belly up in the bubble, and saw a few, like eBay, grow into massive businesses. However, the marketplace model has experienced a renaissance of sorts lately, with companies like Airbnb, Uber and others gaining serious traction and becoming billion-dollar-plus businesses.
Greylock Partners held a conference in mid-November devoted to talking about design, product development, the economics and more around marketplaces, spearheaded in part by the firm’s newest partner and former eBay Motors creator, Simon Rothman.
As part of its new $100 million commitment to investing in marketplaces, Greylock assembled Reid Hoffman, Airbnb co-founder and CEO Brian Chesky, eBay CEOJohn Donahoe, Nobel Prize Laureate and marketplace expert Alvin Roth, and many others to discuss the rise of marketplaces and much more. I was able to sit down with some of the speakers to talk about their thoughts on why marketplaces are hot right now.
Hoffman, who founded LinkedIn and was an early investor in Facebook, sees many parallels between networks and marketplaces. On the similarities in both models, he says: “There’s a question of how do you identify people? What reputational systems underlie it? What kinds of information and signaling? What kind of transactions go public? There’s some differences, too, but it’s essentially a similar brain activity.”
As for why marketplaces are getting more attention now, Hoffman believes that it’s in part due to mobile and the progression in human behavior. “Now everyone is comfortable with the notion of, ‘Oh, I could actually find someone I don’t know and transact with them, either as travelers, hosts, sellers, buyer.’ Those that can actually work mean that I have some trust in these mechanisms,” he explains further.
Rothman agrees with Hoffman, and told me that trust is a huge element of why marketplaces have evolved, as well as the biggest challenge for these marketplaces. “They’re really selling trust. And until the web adds social identity, I think creating trust at scale is really hard. As we’ve heard, marketplace is about influence, and if you can’t control the experience, if you can’t control the product, you can’t control the fulfillment. All you can control is trust and you need to have that. And then mobile is an accelerant to that. If you are a local market, or a local business, you have to have mobile. There’s just no way Uber works without mobile,” he says.
...
So how do marketplaces add trust? Hoffman advises to look at mechanisms by which you can essentially borrow some trust and add it to the product, such as using social networks or identities. He recalled a product development from his PayPal days, where an engineer developed a better way to authenticate bank accounts.
For years, in order to authenticate a bank account you had to send in a voided check, and a copy of your drivers license. PayPal realized that if they wanted to get to scale, the company would have to make it easier to create accounts. “If we can’t solve this problem, we basically don’t have an interesting business model,” he said. One of the early engineers developed a way to send two sub-dollar transactions to the account, to create a PIN of sorts for instant verification.

While friction is something most marketplaces want to remove, Rothman argues that some should consider “the concept of strategic friction” when it comes to trust and safety. He thinks it’s one of the only places where friction is not only tolerable but kind of desirable.
...
"Hoffman says that Airbnb was creating liquidity out of space. Even if the hosts didn’t own their real estate, the liquidity involved is “hugely valuable and motivating to them.” So, they’ll adopt mobile products, and go through hoops to make that happen. “There was no question that this is going to work,” he says. 
...
Now that Greylock is allocating some of its new $1 billion in funding toward the marketplace model, we’ll be looking to see where the firm will be placing its bets. Rothman thinks that in the next five years there will be more $1 billion dollar marketplaces than there were in the past 20 years, and we already have quite a few that are rising fast. Stay tuned."

Wednesday, January 22, 2014

Webcast of the luncheon talks on market design from the 2014 AEA Annual Meeting

The AEA has posted a collection of webcasts from the 2014 annual meeting in Philadelphia, including from the
Nobel Laureate Luncheon
William Nordhaus; Paul Milgrom; Roger Myerson 
View Webcast

The video is a little less than an hour: and consists of brief introductions by Nordhaus, and talks on market design and its history by Milgrom and Myerson, and a short talk by me with some thoughts on the future of market design as economic engineering and the science that supports it.  (spoiler: I think it will be important to study congestion...)
**************

Eleven 2014 Annual Meeting sessions are available online. (I enjoyed Claudia Goldin's magisterial address on gender and jobs, which reminded me of the work following up on this and the matching aspects of pursuing both careers and marriages, of our joint student Stephanie Hurder.):
  •    AEA Presidential Address "A Grand Gender Convergence: Its Last Chapter" (Claudia Goldin)
  •    AEA Awards Ceremony (William Nordhaus)
  •    Richard T. Ely Lecture "Retirement Security in an Aging Population" (James Poterba)
  •    Nobel Laureate Luncheon (Paul Milgrom, Roger Myerson, and Alvin Roth)
  •    AEA/AFA Joint Luncheon (Jeremy Stein)
  •    Chairman Bernanke Presentation (Ben Bernanke, Kenneth Rogoff, and Anil Kashyap)
  •    What's Natural? Key Macroeconomic Parameters after the Great Recession
  •    Discounting for the Long Run
  •    Financial Globalization
  •    Climate Change Policy after Kyoto
  •    Macroeconomics of Austerity

Tuesday, January 21, 2014

Scalper resistant Super Bowl tickets

Assaf Romm points me to the story: Take that, Super Bowl scalpers! Ticket-lottery winners to get non-transferable tickets

"Every year, the NFL holds a lottery for football fans for the next year’s Championship. Some 30,000 people entered this year, McCarthy said. The number of winners will double to 1,000, McCarthy said, and the price of the ticket will drop to $500, from last year’s $600.
But there’s a catch. Winners won’t get their tickets until game day, and they won’t be able to leave the stadium after receiving them, McCarthy said.

“The point is we want these people going to the game,” McCarthy said. “So you can’t turn around and sell them to a scalper.”

Monday, January 20, 2014

Ricky Vohra's class in market design at Penn

Ricky Vohra is teaching market design at Penn, and describes it on his blog: Graduate Market Design Class (2nd Try)

Here's the reading list

Topics & Papers
1. IPOs
Jaganathan and Sherman: Why do IPO Auctions Fail
Ritter: Equilibrium in the IPO market
Background Reading (to be read by all)
Ljungqvist: IPO Underpricing: A Survey
Ritter and Welch: A review of IPO activity, pricing and allocations

2. Health Care & Insurance Markets
Cochran, J: Time Consistent Health Insurance, JPE 1995.
Cochran, J. : After the ACA: Freeing the market for health care
Fang & Gazzara: Dynamic Inefficiencies in an Employment-Based Health Insurance System: Theory and Evidence
Handel, Hendel and Whinston: Equilibria in Health Exchanges: Adverse Selection vs. Reclassification Risk
Levine, Kremer and Albright: Making Markets for Vaccines
Kremer: Creating Markets for New Vaccines Part 1: rationale
Kremer: Creating Markets for New Vaccines Part 2: design issues 
Background Reading (to be read by all)
Rothschild, M. & J. Stiglitz: Equilibrium in Competitive Insurance Markets, QJE 1976.
Fang, H: Insurance Markets in China
3. Market for Cybersecurity Insurance
Kesan, Majuca & Yurcik: Cyberinsurance as a market based solution to the problem of cybersecurity

4. Affirmative Action
Hickman: Effort, Race Gaps and Affirmative Action: A Game Theoretic Analsyis of College Admissions
Chung: Affirmative Action as an Implementation Problem
Fryer and Loury: Valuing Identity: The simple economics of Affirmative action policies
Background Reading (to be read by all)
Fang and Moro: Theories of Statistical Discrimination and Affirmative Action: a survey

5. Assigning Counsel
Friedman & Schulhofer: Rethinking Indigent Defense: Promoting Effective Representation Through Consumer Sovereignty and Freedom of Choice for All Criminal Defendants

6. The Role of Politics
Acemoglu: Why not a political Coase theorem?
Acemoglu: Modeling Inefficient Institutions