Monday, October 19, 2015

Stanford celebrates Itai Ashlagi

Itai Ashlagi has joined the Management Science and Engineering Department at Stanford, and the Engineering School celebrates his arrival here: New Faculty Member: Professor Itai Ashlagi Plays Matchmaker for Patients, Schools, New Doctors


Sunday, October 18, 2015

Christine Exley is an EconomicRockstar: on the Economics of Volunteering, Market Failure in the Homeless Dog Market and Wagaroo

The magic of the market - Nobel Perspectives [Teaser--30 second video]



UBS has commissioned a set of video interviews with Nobel laureates, and this 30 second "teaser" is apparently an indicator that their interview with me will soon appear...
It is part of a long conversation they filmed between me and Paul Milgrom.

Incentives for organ donation: one brick at a time

Right now there is an active discussion of providing incentives for organ donation (see yesterday's post). But providing incentives is hard to do: even recognition is hard. I don't know whether to clap or cry at this effort: Organ donors to get an engraved brick at Lafayette General Medical Center

Saturday, October 17, 2015

A Cost-Benefit Analysis of Government Compensation of Kidney Donors by Held, McCormick, Ojo, and Roberts

Just out in the American Journal of Transplantation: A Cost-Benefit Analysis of Government Compensation of Kidney Donors by Held, McCormick, Ojo, and  Roberts

"From 5000 to 10 000 kidney patients die prematurely in the United States each year, and about 100,000 more suffer the debilitating effects of dialysis, because of a shortage of transplant kidneys. To reduce this shortage,many advocate having the government compensate kidney donors. This paper presents a comprehensive cost-benefit analysis of such a change. It considers not only the substantial savings to society because kidney recipients would no longer need expensive dialysis treatments—$1.45 million per kidney recipient—but also estimates the monetary value of the longer and healthier lives that kidney recipients enjoy—about $1.3 million per recipient. These numbers dwarf the proposed $45 000-per-kidney compensation that might be needed to end the kidney shortage and eliminate the kidney transplant waiting list. From the viewpoint of society, the net benefit from saving thousands of lives each year and reducing the suffering of 100 000 more receiving dialysis would be about $46 billion per year, with the benefits exceeding the costs by a factor of 3. In addition, it would save taxpayers about $12 billion each year."

An html version of the article along with its supplementary materials is here: http://onlinelibrary.wiley.com/doi/10.1111/ajt.13490/suppinfo

Friday, October 16, 2015

Climate negotiation design

Axel Ockenfels writes:

David MacKay, Peter Cramton, Steven Stoft and I published a comment on climate negotiation design today in Nature (my stay in Stanford way extremely useful in this respect ;-). 


And here is a link to an ebook that we compiled, which has lots of background material by us and others, including Tirole, Stiglitz, Weitzman, and Nordhaus: http://carbon-price.com/

There have been a couple of newspaper articles on that (and more are coming), too, such as:
http://www.bbc.com/news/science-environment-34489266
["If you know a carbon price will apply to all other countries as well as you, it now comes in your self interest to advocate a high carbon price" David MacKay, University of Cambridge]



The Nature comment comes with a picture to illustrate the problem of all pulling together...

Price carbon — I will if you will  David J. C. MacKay, Peter Cramton, Axel Ockenfels& Steven Stoft ,12 October 2015

"Negotiations at the United Nations climate summit in Paris this December will adopt a 'pledge and review' approach to cutting global carbon emissions. Countries will promise to reduce their emissions by amounts that will be revised later. The narrative is that this will “enable an upward spiral of ambition over time”1. History and the science of cooperation predict that quite the opposite will happen.
...
"Success requires a common commitment, not a patchwork of individual ones. Negotiations need to be designed to realign self-interests and promote cooperation. A common commitment can assure participants that others will match their efforts and not free-ride. A strategy of “I will if you will” stabilizes higher levels of cooperation. It is the most robust pattern of cooperation seen in laboratory and field studies of situations open to free-riding"
...
"We, and others, propose an alternative: a global carbon-price commitment7. Each country would commit to place charges on carbon emissions from fossil-fuel use (by taxes or cap-and-trade schemes, for example) sufficient to match an agreed global price, which could be set by voting — by a super-majority rule that would produce a coalition of the willing.

"A uniform carbon price is widely accepted as the most cost-effective way to curb emissions. Carbon pricing is flexible, allowing fossil taxes, cap-and-trade, hybrid schemes and other national policies to be used (unlike a global carbon tax). All that is required of a country is that its average carbon price — cost per unit of greenhouse gas emitted — be at least as high as the agreed global carbon price.

"Unlike global cap-and-trade, carbon pricing allows countries to keep all carbon revenues, eliminating the risk of needing to buy expensive credits from a rival country. Taxes need not rise if a nation performs a green tax shift — reducing taxes on good things such as employment by charging for pollution. Shifting taxes from good things to bad things could mean there is no net social cost to pricing carbon, even before counting climate benefits"


Thursday, October 15, 2015

Centennial Lecture at U of I College of Business: Rigor & Relevance

I'm returning to Champaign Urbana, to help celebrate the centennial of the University of Illinois College of Business, where I started my academic career. When I was there (1974-82), it was called the College of Commerce And Business Administration, and I had a joint appointment in its Departments of Business Administration and of Economics (which is now in the College of Liberal Arts and Sciences).   It was a great eight years, which got me going in many ways.

I didn't choose the title of the lecture, nor the announcement, which presents me with a bit of a challenge:

Centennial Lecture: Rigor & Relevance, Friday October 16.

"Alvin Roth is a former member of the College of Business who won the Nobel Memorial Prize in Economic Sciences in 2012. Dr. Roth has successfully bridged economic theory and practice by designing efficient and equitable systems of matching markets. His work has been applied to design school choice procedures for public schools in Boston and New York City, kidney transplant exchange protocols, and clearinghouses for a variety of healthcare professions.

In honor of the College’s centennial anniversary, he is returning to Illinois to present this special lecture that should provide excellent insight into his research. How do engaged scholars such as Roth ensure that the right questions have been asked? How can researchers collaborate with practitioners to successfully co-produce significant knowledge? What specific actions are necessary to ensure effective knowledge transfer from academia to the practitioner world? Join us for this once-in-a-lifetime opportunity to learn from one of the brightest economist of our time. "


I plan to talk about how the theoretical work that I began when I came to Illinois grew into two streams of work that later led to my involvement in the design of labor market clearinghouses for doctors, and to the development of kidney exchange into what is now a standard form of transplantation.

Wednesday, October 14, 2015

Guru Madhavan on economists and engineers

Guru Madhavan has a new book, Applied Minds: How Engineers Think.
I liked it enough to write a blurb for the cover:
“Guru Madhavan not only dispels any hint of darkness concerning how engineers think, his delightful book explains how the designed world of machines and systems interacts with the social world in which we use the tools that engineers give us.” (Alvin Roth, winner of the Nobel Prize in Economics and author of Who Gets What―and Why)"

Now he's published an article in Wired, whose headline conceals how well he thinks engineering and economics go together. I'm guessing he didn't write the headline. Somewhat misleadingly it's called Irrational humans need engineers, not economists.  In fact, he's enthusiastic about market design as the engineering part of economics.

He concludes
"Through an increased reliance on engineers -- or better yet, rethinking economics using the principles of engineering - policymakers can develop more effective solutions to social challenges."

Tuesday, October 13, 2015

The black market for kidneys in South Asia

It sounds like you can buy a kidney in India, and have it transplanted in Sri Lanka. But it isn't clear how large the market is compared to the vast worldwide demand or even to the number of legal kidney  transplants around the world (in the US we have about 17,000) a year). When I say it isn't clear, I mean that the story is based mostly on anecdotal information from market participants...
However I can supply an additional anecdote about social media: almost every morning as I get ready to publish my blog post for the day, I delete spam "comments" on previous posts about kidneys, offering phone numbers to call if you want to sell yours...

Al Jazeera has the story:
Need a kidney? Inside the world’s biggest organ market
The illicit kidney trade in South Asia has exploded as brokers use social media to find donors.

""If you have the money and want it fast, you come here. I will find you a donor and you can go home with a new kidney in a month," Vikas told Al Jazeera, speaking on the condition that his real name not be published.

"According to the World Health Organisation (WHO), South Asia is now the leading transplant tourism hub globally, with India among the top kidney exporters. Each year more than 2,000 Indians sell their kidneys, with many of them going to foreigners.

"This gaping hole between demand and the legal supply of kidneys is being filled by what may be the world's biggest black market for organs, which criss-crosses India, Nepal, Bangladesh, Pakistan, Sri Lanka and Iran.

"However, in recent years, Sri Lanka's capital Colombo has become the new nerve centre of this network, where most transplant operations are carried out. In recent years, Sri Lanka has attracted kidney buyers from as far afield as Israel and the United States.

"This development came after India tightened its rules on organ exchanges in 2008, following the arrest of a "kidney kingpin" running one of the world's largest kidney trafficking rings. Many donors are also taken to Iran, the only country in the world where selling kidneys is legal, though not to foreigners.

"Anurag, one of the top names in brokering circles, told Al Jazeera that many agents in India and Bangladesh were working at the behest of individual doctors or hospitals based in Colombo who offered "complete packages" to foreign recipients, with prices ranging from $53,000 to $122,000.

"It covers everything - hospital bill, doctor's fee, payment to the donor, his travel and accommodation cost, and, of course, broker's commission. This is the best way because it saves everybody time and hassle," Anurag - who also wanted his real name withheld to avoid trouble - told Al Jazeera from Sri Lanka.

"Although the illicit racket has flourished since the 1990s, social media has catapulted the trade into a new dimension. Brokers like Vikas and Aadarsh are openly lurking on dozens of Facebook pages fashioned as kidney and transplant support groups.

HT: Mohammad Akbarpour

Monday, October 12, 2015

He has new papers on school choice

Yingua He that is, and coauthors Gabrielle Fack and Julien Grenet, and Antonio Miralles, Marek Pycia and Jianye Yan.

You can find them at the links below.

Abstract: We propose novel approaches and tests for estimating student preferences with data from school choice mechanisms, e.g., the Gale-Shapley Deferred Acceptance. Without requiring truth-telling to be the unique equilibrium, we show the matching is (asymptotically) stable, or justified-envy-free, implying that everyone is assigned to her favorite school among those she is qualified for ex post. Having validated the approaches and tests in simulations, we apply them to Parisian data and reject truth-telling but not stability. The estimates are then used to evaluate the sorting and welfare effects of the admission criteria that determine how schools rank students in centralized mechanisms.

Abstract: We propose a pseudo-market mechanism for no-transfer allocation of indivisible objects that honors priorities such as those in school choice. Agents are given token money, face priority-specific prices, and buy utility-maximizing assignments. The mechanism is asymptotically incentive compatible, and the resulting assignments are fair and constrained Pareto efficient. Hylland and Zeckhauser's (1979) position-allocation problem is a special case of our framework, and our results on incentives and fairness are also new in their classical setting.

Sunday, October 11, 2015

From Syria to Norway through Russia (by bicycle at the very end)

It is hard to stymie refugees: the NY Times has the story of a Northern route from the middle east to the EU: Bypassing the Risky Sea, Refugees Reach Europe Through the Arctic

Bicycles used by migrants to cross into Norway from Russia are piled behind a police station on the Norwegian side of the border at Storskog. Norwegian police confiscate the bicycles, which are mostly Russian-made, because they usually do not meet local safety standards.CreditMauricio Lima for The New York Times

"Some of them, including Mr. Arslanuk, are Russian-speaking Syrians who were already living in Russia and see the border with Norway as a path to a better life at a time when Syrian citizenship generally confers refugee status in Europe. Others, having heard of the new route into Europe, are traveling through Russia to the border rather than taking the more established but riskier paths.
...
"For those who make it, the oddity of the route continues to the very end. A Russian ban on pedestrian traffic across the border at Storskog, and Norwegian threats to prosecute motorists who give rides to people without visas, mean that migrants, even young children and the infirm, have to use bicycles to complete the last few dozen yards of an exodus that in some cases began thousands of miles away.

"Once in Russia, it costs migrants only a few hundred dollars to secure transportation to the border and a bicycle, far less than the more than $1,500 that Turkish smugglers often charge to ferry migrants across the Aegean Sea to Greece.

"The bicycle-borne flow into Norway underscores not only the dogged determination of migrants but also Russia’s curious role in helping to drain the population from Syria, a country that President Vladimir V. Putin views as a vital ally and whose leader, Bashar al-Assad, he is now helping with bombing raids against the opposition.

“Putin loves Assad and Assad loves Putin, but neither of them like Syrians,” ..."

Saturday, October 10, 2015

Interview in Spanish on refugee resettlement as a matching problem

Here's an interview on matching and refugee resettlment, in Spanish, in Estrategia newspaper in Chile
Cuando Se Piensa en Refugiados Deberíamos Pensar en Comunidades y No en Individuos

We talked about the matching problem associated with relocating refugees in communities, rather than as individuals.

(Previous posts on refugees here.)

Friday, October 9, 2015

A matching market for used textbooks at Stanford

Here's an attempt to disintermediate bookstores:

Matchbook--The easiest way to buy and sell textbooks and course readers at Stanford

Nick  Arnosti forwarded me this email about it:

"As many of you probably know by now, MS&E (and other departments) course materials like textbooks and course readers can be super expensive to buy from the bookstore and hard to sell outside of Stanford.

Easily find other Stanford students on campus who are buying and selling Stanford course materials by using MatchBook.

www.StanfordMatchBook.com
@stanford.edu email required

Search and add textbooks or course readers by class (e.g. MS&E 240) then easily contact buyers or sellers to meet up on campus

-No spamming email lists/Facebook
-No hassle of shipping through Amazon
-No searching unreliable SUPost listings
-No buying at markup/selling for nothing at bookstore

There are currently 500 Stanford students on MatchBook, 255 books for sale and 304 books on buy lists. There are sellers/buyers for most MS&E and CS classes along with most other departments."

Thursday, October 8, 2015

Market Design as a Resource for Social Justice Research

Sebastian Lotz has a book review essay about Who Gets What - and Why in the September issue of the journal Social Justice Research, Engineering Fairness? Market Design as a Resource for Social Justice Research, September 2015, Volume 28, Issue 3, pp 391-399. (The link gives you access only to the first few pages--to read the whole thing I had to access it through Stanford library.)

He motivates the connection between design and justice this way:

"Social justice research has an inherent interest in how people, groups, or societies deal with competition over scarce resources. Many theories of social conflict suggest that at instances when people try to allocate scarce resources, individual (or group-based) egoistic inclinations lead to competitive action that ultimately result in social harm (Lind, 1995). A key challenge for social justice research is to overcome these harms. Market design and the related field of behavioral economic engineering (e.g., Bolton & Ockenfels, 2012) designs real-world institutions and mechanisms that align individual incentives with the underlying goals set by societies, companies or other social groups. Market design is a hybrid between theory and application as it has a strong focus on (economic and related) theory but a strong interest in applying insights in the real world, leading to the connotation of the economist as an “engineer” (Bolton & Ockenfels, 2012; Roth, 2002)"

and concludes
"To sum up, I think that Roth’s (2015) book “Who gets what and Why?” provides a viable opportunity for social justice scholars to familiarize themselves with the main ideas and selected achievements of market design. Wrapped up in personal anecdotes from an exciting research life, Roth manages to introduce a topic to a broader audience that has been traditionally dominated by complex game-theoretical jargon. The mere fact that market design has been influential in many fields, among them law, medicine, education, but also government auctions, makes the field interesting to our community. In his final conclusions, Roth states that markets are not a natural phenomenon, but human artifacts that can be maintained, improved, and sometimes even newly created. With justice being a core concern of humans, market design as a method to increase procedural and distributional justice can be a valuable add-on to the justice researcher’s toolbox, especially when we adopt Roth’s relatively broad conception of a market."

Wednesday, October 7, 2015

Death with dignity law in California

The NY Times has the story: California Governor Signs Assisted Suicide Bill Into Law

"California will become the fifth state to allow doctors to prescribe life-ending drugs to terminally ill patients, after Gov. Jerry Brown signed the measure into law on Monday, ending his months of silence on one of the most emotional issues in the state this year.
In an unusually personal signing message, the governor, a former Jesuit seminarian, signaled how torn he was by the issue.
“I do not know what I would do if I were dying in prolonged and excruciating pain,” he wrote. “I am certain, however, that it would be a comfort to be able to consider the options afforded by this bill. And I wouldn’t deny that right to others.”
...
"Oregon has allowed what opponents call “assisted suicide” and supporters term “aid in dying” since 1997, and, after a Supreme Court ruling in 2006 that affirmed the law, Washington, Montana and Vermont have also approved the practice.
"Opponents have long raised concerns that ill and disabled people could be coerced into choosing death over more care, which can be expensive and burdensome. The Catholic Church, which considers suicide a sin, also helped lead opposition.
...
"In 2014, four states considered bills to allow physicians to help terminally ill patients end their lives; this year, that number increased to 24 states plus the District of Columbia, according to Compassion and Choices, a group that supported the law.
...
"The California law includes protections designed to assuage concerns about potential abuse. Patients must be terminally ill and mentally sound; they must be capable of administering the medication themselves; and two different doctors must approve it.
"Hospitals and doctors will also have the option of not offering end-of-life drugs..

Tuesday, October 6, 2015

American Economic Association election results, and a request for suggestions...

The American Economic Association has announced the results of the recent election of new officers, who join the existing officers:

2016 Election Results--American Economic Association


President-Elect
Alvin RothStanford University
Vice-Presidents
Daron AcemogluMassachusetts Institute of TechnologyMarianne BertrandThe University of Chicago Booth School of Business
Executive Committee
John CampbellHarvard UniversityHilary Hoynes
***********************


As one of the new officers, I will be interested in hearing suggestions about projects that a soon-to-be president with a one year term might usefully undertake.

Monday, October 5, 2015

how can David sue Goliath? A new marketplace for litigation funding

Justice and the courts are in principle available to all, but litigation is expensive. So it may be hard for a plaintiff of limited means (call him David) to receive justice by suing a defendant with deep pockets, such as an insurance company. That will be particularly true if the plaintiff's need is urgent, if the defendant can afford to delay the proceedings (and add to their expense) through legal maneuvering.

But firms that offer to finance lawsuits often have bad reputations, in part because lawsuits themselves often have bad reputations. So litigation financing has suffered from some repugnance, including legislation limiting it.

A new marketplace for litigation financing, called Mighty, has just been launched. It is intended to allow potential investors to bid to support meritorious cases, and thus bring some market discipline to the process.

I earlier had a chance to chat with one of its founders, Joshua Schwadron, who accompanied the launch with this essay: Power to the Plaintiff, from which these quotes are taken:

"Well aware of plaintiffs’ precarious situations, insurance companies often prolong the legal process, waging a war of attrition to get plaintiffs to accept quick, less-than-fair settlements. This happens even in the most clear-cut cases. It’s called “frivolous defense,” a phrase you will have heard much less frequently than “frivolous lawsuits,” even though many scholars believe it is the former that causes our courts to clog, not the latter. And frivolous defense works — it almost always does. It’s a systemic scandal.
The fundamental problem is that defendants enjoy what economists call“monopsony power.” Monopsony power is just like monopoly power, except that one buyer has all the market power instead of one seller. Essentially, the defendant is the only legally authorized “buyer” of the plaintiff’s liability claim. As Stephen Gillers, one of the most prominent legal ethicists in the United States, explains:
“[The defendant] is under no time pressure. It is, furthermore, the only authorized purchaser of [the plaintiff’s] claim, the only one allowed to bid on it. Now it requires no MBA to recognize that if one person is under duress and needs to sell something and another person is the only one legally allowed to buy it, the buyer has an enormous advantage.”
...
Plaintiff financing provides plaintiffs with funds that enable them to live their lives while they wait for fair settlement offers. It’s not a loan; it’s an investment, which yields a return to the investor only if a plaintiff’s case settles or is won.
...
"The insurance industry has consistently fought the adoption of plaintiff financing. Just last year, The National Association of Mutual Insurance Companies awarded State Legislature of the Year Awards to three legislators who helped regulate plaintiff financing out of existence in Tennessee.
...
"If plaintiff financing is such a commonsense solution, why is it not more widespread? First, the market is nascent. A handful of early participants have been bad actors and stifled the practice’s growth by engaging in opaque tactics. Second, skeptics claim that plaintiff financing could lead to an increase in frivolous litigation. But in reality, empirical studies have shown that plaintiff financing does not increase non-meritorious litigation because investors are rational actors who invest only in the cases most likely to win. Finally, plaintiff financing can be rhetorically reduced to the “financing of lawsuits,” a description that is plagued by the ick factor and offends the sensibilities of many."
***************


Here is a WSJ blog post: Personal Injury Plaintiffs May Benefit from New Litigation Funding Marketplace

Here are some older links to litigation financing, and it's repugnance...

February 10, 2015  Updated 02/11/2015
Litigation-finance firms bet on the little guy
Hedge funds, private-equity players fund small businesses' lawsuits.

Litigation Finance Firm Raises $260 Million for New Fund

Litigation Financing Firm Exits Tennessee As New Law Goes Into Effect
By Andrew G. Simpson | July 3, 2014
By WILLIAM ALDEN

LITIGATION OR LAWSUIT FUNDING TRANSACTIONS 2014 LEGISLATION  summary of state laws

Sunday, October 4, 2015

Janos Kornai on recent developments in Hungary and its political and economic institutions

Janos Kornai, the eminent Hungarian economist, is not optimistic about recent developments there.


Janos Kornai 


Harvard University; Corvinus University of Budapest

July 11, 2015

Capitalism and Society, Volume 10, Issue 1, Article 2, 2015 

Abstract:      

For two decades Hungary, like the other Eastern European countries, followed a general policy of establishing and strengthening the institutions of democracy, rule of law, and a market economy based on private property. However, since the elections of 2010, when Viktor Orbán’s Fidesz party came to power, Hungary has made a dramatic U-turn. This article investigates the different spheres of society: political institutions, the rule of law, and the influence of state and market on one another, as well as the world of ideology (education, science and art), and describes the U-turn’s implications for these fields and the effect it has on the life of people. It argues against the frequent misunderstandings in the interpretation and evaluation of the Hungarian situation, pointing out some typical intellectual fallacies. It draws attention to the dangers of strengthening nationalism, and to the ambivalence evident in Hungarian foreign policy, and looks into the relationship between Hungary and the Western world, particularly the European Union. Finally, it outlines the possible scenarios resulting from future developments in the Hungarian situation.


His first paragraph:
"Hungary is a small country, poor in raw materials, with a population of only 10 million. No civil wars are being waged on its territory, nor are there any popular uprisings or terrorism. It has not become involved in any local wars, and it is not threatened by immediate bankruptcy. So why is it still worth paying attention to what is going on here? Because Hungary, a country that belongs to NATO and the European Union, is turning away from the great achievements of the 1989–1990 change of regime—democracy, rule of law, freely functioning civil society, pluralism in intellectual life—and attacking private property and the mechanisms of the free market before the eyes of the whole world; and it is doing all this in the shadow of increasing geopolitical tensions"

Saturday, October 3, 2015

Repugnance watch: sports gambling is largely illegal, while fantasy sports leagues are thriving

Itai Fainmesser points me to this story in the NY Times, about how some things are illegal while similar things are legal--the legal distinction being between games of chance and games of skill:

Daily Fantasy Sports and the Hidden Cost of America’s Weird Gambling Laws

"An entire industry has emerged out of a legal loophole for something that looks a whole lot like sports gambling, which is illegal outside of Nevada and a few other states.
...
"The fantasy sports industry argues that its service is not gambling at all, but rather a game of skill. It’s the sort of game specifically allowed by most state laws and by a 2006 federal law restricting online gambling that carved out protections for fantasy sports leagues. The industry is right about that much. It is a skill, and it unquestionably rewards those who apply dogged analytics to assembling their fantasy lineups.

Although daily fantasy sports advertisements target casual fans, a disproportionate share of the contest entries — and even more disproportionate share of the winnings — go to people who play the game on a scale most armchair sports fans couldn’t imagine. An analysis of Major League Baseball contests by Ed Miller and Daniel Singer published in the Sports Business Journal found that 1.3 percent of fantasy players paid $9,100 in entry fees on average, accounting for 23 percent of all entry fees and 77 percent of all profits."

Who Gets What and Why: podcast at Ideas Books

Craig Barfoot at IdeasBooks interviews me about Who Gets What and Why: our conversation ranges over repugnant transactions, kidney exchange, and my treadmill desk.  You can find the podcast (about 20 minutes) here: http://www.ideasbooks.org/news/2015/10/1/episode-9-alvin-roth-who-gets-what-and-why
***********

It looks like you can find it here too:
http://podacademy.org/bookpods/matching-markets-who-gets-what-and-why/