Market making and law breaking: Ben Edelman considers Uber et al.

Ben Edelman considers the many efficiencies that Transportation Network Companies (TNCs) like Uber provide, but also notes that they may be shifting costs to the public as they disregard laws and regulations regarding commercial drivers:
Whither Uber?: Competitive Dynamics in Transportation Networks
Benjamin Edelman — November 2015, forthcoming, Competition Policy International

"But what about the myriad other requirements the legal system imposes on commercial drivers?
Consider: In most jurisdictions, a “for hire” livery driver needs a commercial driver’s license, a background check and criminal records check, and a vehicle with commercial plates, which often means a more detailed and/or more frequent inspection. Using ordinary drivers in noncommercial vehicles, TNCs skip most of these requirements, and where they take such steps (such as some efforts towards a background check), they do importantly less than what is required for other commercial drivers (as discussed further below). One might reasonably ask whether the standard commercial requirements in fact increase safety or advance other important policy objectives. On one hand, detailed and frequent vehicle inspections seem bound to help, and seem reasonable for vehicles in more frequent use. TNCs typically counter that such requirements are unduly burdensome, especially for casual drivers who may provide just a few hours of commercial activity per month. Nonetheless, applicable legal rules offer no “de minimis” exception and little support for TNCs’ position."
**********

See also
Efficiencies and Regulatory Shortcuts: How Should We Regulate Companies like Airbnb and Uber?
by Benjamin G. Edelman and Damien Geradin
************

I was recently in Toronto, when taxi drivers blocked some intersections to protest what they saw as lack of law enforcement regarding Uber, and earlier I was in Vancouver, where Uber was no longer operating, after a brief foray into that market.

On the other hand, it's clear that Uber is providing services that are being eagerly consumed by a public that hasn't been adequately served by existing taxis and delivery services. (In Toronto, one colleague told me that when he goes to the business school cafeteria and sees a long line, he can order lunch from UberEATS and walk out to the street to pick it up faster than if he waited on the cafeteria line...)

Similarly for Airbnb (see this earlier post): while some hosts may be in violation of local laws, Airbnb is serving (and creating) a big market.

So, things are in flux: we'll see new regulations, that will presumably reach a compromise between serving these new markets while constraining and shaping them.

If you teach in a Business school, how should you advise your entrepreneurial students about market making and law breaking?

When I was recently in Russia, I gave a talk that touched on some of this, about markets as a source of sometimes disorderly growth, called "Markets, businesses, and governments: a complicated triangle."

Rhino horns: flood the market with sustainable horn, instead of prohibiting the market?

The WSJ and the NYT consider the problem of poached Rhino horns.
Here's the WSJ:
Would a Legalized Horn Trade Save Rhinos?
With poaching on the rise, ranchers in South Africa want to flood the market—but conservationists warn of corruption and cruelty

"The global rhino population has dwindled from 500,000 at the beginning of the 20th century to about 29,000 today. The surging trade in illicit horn has cut the population of the three remaining Asian species to just a few thousand, including about 40 Javan and less than 100 Sumatran rhinos. Just about 20,000 Southern White Rhinos and 5,000 black rhinos, which include three subspecies in Africa, survive.
...
"Black-market rhino horn can fetch as much as $100,000 a kilogram in Vietnam and other Asian countries, where it is peddled as a cure for ailments ranging from headaches to cancer. Many conservationists say that a legal marketplace would only raise demand. They argue instead for publicity campaigns to debunk the myths that lead many in Asia to pour rhino-horn powder into useless pills.

Others warn that rhinos can’t wait for those beliefs to wither. “I do not think we have a significant amount of rhinos left to invest in education,” said Louise Joubert, founder of SanWild Wildlife Sanctuary, a rehabilitation center and reserve in South Africa’s Limpopo province. Rhinos “are on a ticking time bomb down to extinction.” Mr. Hume and many ranchers argue that legalizing the trade and flooding the market with sustainably harvested horn could sate demand, lower prices and cut poachers out of the equation.

Rhino horn is made of keratin, like human fingernails. It grows as much as 5 inches a year. Biologists say that as long as a stump of 2 to 3 inches remains, it can be trimmed, doing a rhino no more harm than a manicure. “There are no nerves in rhinos’ horns,” said Raoul du Toit, director of Zimbabwe’s Lowveld Rhino Trust. He said there is no evidence that the procedure affects rhinos’ breeding practices or leaves them more susceptible to predators. “Why would you hunt a rhino for seven, eight, nine, 10 kilos of horn when, in a lifetime, it can grow 70 kilos of horn?” Mr. Hume asked.

"Animal-rights activists, conservationists and South Africa’s government are skeptical. Critics say that Mr. Hume and other large ranchers stand to profit if they can sell horn harvested from their herds.

“Where we differ is with your attitude towards the exploitation of an endangered species with the intention of making large profits,” Margot Stewart, founder of the nonprofit group Wild and Free South Africa, wrote in an open letter to Mr. Hume. She argues that rhinos are wild animals and should not be kept in paddocks like sheep or cows—and that it is unethical to farm and sell rhino horn since it has zero medicinal value. “Only two parties want this to continue: the rhino farmers and organized crime syndicates,” she added.

"Mr. Hume petitioned South Africa’s High Court in Pretoria to lift the moratorium in September. A judgment is expected in the next few weeks. “I honestly believe the more horn we can sell to people who are using it, the less pressure there will be on my rhinos and Kruger Park’s rhinos,” Mr. Hume said, alluding to South Africa’s premier national park.
...
"Mr. du Toit, the conservationist in Zimbabwe, warns that poverty and graft in the region are too widespread to trust that the rhino-horn market would be restricted to sustainably trimmed horns. Corruption “is our biggest problem,” he said, and it would “pervade the supply chains” of a legalized horn trade.

"The sides argue about precedents. A one-off sale of elephant-ivory stockpiles from four southern African nations in 2008 only whetted appetites for tusks, and elephant poaching has since soared to all-time highs. But a sustained, legal tide of supply—not a brief flood—has worked for other species, like South America’s vicuña, a llama relative. Mr. Hume notes that vicuñas were once slaughtered for their softer-than-cashmere coats but are now farmed sustainably, back from the edge of extinction."
**************
Here's the NYT:
U.S. Pours Millions Into Fighting Poachers in South Africa

JOHANNESBURG — The Obama administration is stepping up efforts here to combat illegal wildlife poaching, an expanding criminal enterprise in South Africa that has driven several animal species toward extinction and fueled the growth of international gangs.

But the effort is coming as South Africa wrestles with its own strategy, which could diverge significantly from Washington’s. Just last month, a South African court lifted a ban on domestic trade in rhinoceros horns, reigniting a debate between those who claim that a legal trade within South Africa’s borders could help stem the poaching crisis and those who say it would only worsen it.

HT: Sangram Kadam (he's on the market, you could hire him...)

Short book review that I liked

One of the fun things about writing Who Gets What and Why was figuring out how to write about economics in a way that might be accessible to non-economists. So I was heartened by this line from a very short recent book review:

"Reading this book will make you proud of yourself because you read something about economics, written by a Nobel-Prize-winning economist, and you understood it."

Videos of the Simons Institute lectures on Algorithmic Game Theory and Practice

The archived videos from Algorithmic Game Theory and Practice Workshop at the Simons Institute for the Theory of Computing can be found by clicking on the titles of individual talks on the schedule (below) or on the Simons Institute YouTube channel.

9:30 am – 10:10 am		Kidney Exchange: Algorithms and Incentives Alvin Roth, Stanford University
10:10 am – 10:40 am		Break
10:40 am – 11:20 am		Designing Online Advertising Markets Susan Athey, Stanford University
11:20 am – 12:00 pm		Outsourcing Tasks Online: Matching Supply and Demand on Peer-to-Peer Internet Chiara Farronato, Harvard University
12:00 pm – 1:30 pm		Lunch
1:30 pm – 2:10 pm		Business Model Analysis Kamal Jain, Faira.com
2:10 pm – 2:50 pm		The Limits of Reputation in Platform Markets Steve Tadelis, UC Berkeley
2:50 pm – 3:20 pm		Break
3:20 pm – 4:00 pm		Dynamic Labor Supply in the Sharing Economy Chris Nosko, University of Chicago
4:00 pm – 5:00 pm		Reception

Tuesday, November 17th, 2015

9:00 am – 9:30 am		Coffee & Check-In
9:30 am – 10:10 am		Adverse Selection and Auction Design for Internet Display Advertising Paul Milgrom, Stanford University
10:10 am – 10:40 am		Break
10:40 am – 11:20 am		Machine Learning in an Exchange Environment R. Preston McAfee, Microsoft
11:20 am – 12:00 pm		From Theory to Practice in Auction Modeling Hal Varian, Google, Inc.
12:00 pm – 1:30 pm		Lunch
1:30 pm – 2:10 pm		Online Advertisements and Online Algorithms Nikhil Devanur, Microsoft Research
2:10 pm – 2:40 pm		Break
2:40 pm – 4:00 pm		On How Machine Learning and Auction Theory Power Facebook Advertising Eric Sodomka, Facebook

Wednesday, November 18th, 2015

9:00 am – 9:30 am		Coffee & Check-In
9:30 am – 10:10 am		On-Line Systems with Long-Range Goals Jon Kleinberg, Cornell University
10:10 am – 10:40 am		Break
10:40 am – 11:20 am		Decision Making at Scale: Platforms and Problems Ashish Goel, Stanford University
11:20 am – 12:00 pm		Strong Truthfulness in Multi-signal Peer Prediction with Overlapping Tasks David Parkes, Harvard University
12:00 pm – 1:30 pm		Lunch
1:30 pm – 2:10 pm		The State of Techniques for Solving Large Imperfect-Information Games Tuomas Sandholm, Carnegie Mellon University
2:10 pm – 2:50 pm		Security Games: Key Algorithmic Principles, Deployed Applications and Research Challenges(*) Milind Tambe, University of Southern California
2:50 pm – 3:20 pm		Break
3:20 pm – 4:00 pm		Robust Inference for Games via Theoretical Guarantees Denis Nekipelov, University of Virginia

Thursday, November 19th, 2015

9:00 am – 9:30 am		Coffee & Check-In
9:30 am – 10:10 am		An Evolutionary Model of Economic Behavior, Bounded Rationality, and Intelligence Andrew Lo, MIT
10:10 am – 10:40 am		Break
10:40 am – 11:20 am		The Design of Financial Exchanges: Some Open Questions at the Intersection of Econ and CS Eric Budish, University of Chicago
11:20 am – 12:00 pm		Algorithmic Trading and Machine Learning Michael Kearns, University of Pennsylvania
12:00 pm – 1:30 pm		Lunch
1:30 pm – 2:10 pm		Incentive Auctions and Spectrum Repacking Kevin Leyton-Brown, University of British Columbia
2:10 pm – 2:50 pm		Informational Substitutes and Complements for Prediction Yiling Chen, Harvard University
2:50 pm – 3:20 pm		Break
3:20 pm – 4:20 pm		Open Directions Session

Friday, November 20th, 2015

9:00 am – 9:30 am		Coffee & Check-In
9:30 am – 10:10 am		AGT and Machine Learning Christos Papadimitriou, UC Berkeley
10:10 am – 10:40 am		Break
10:40 am – 11:20 am		Bitcoin's Incentive Structure Aviv Zohar, Hebrew University of Jerusalem
11:20 am – 12:00 pm		Dynamic Pricing in Ride-Sharing Platforms Ramesh Johari, Stanford University

Recap of the Sonnenschein celebration at Chicago (with a video)

Here's a recap from the Becker Friedman Institute: The Path Ahead for Economic Theory

Here's the video of a panel discussion on the future of economic theory, in which I get to talk about the work of Eric Budish, among other things, as an example of economic engineering. .(I speak for about 10 minutes after the introduction by Nancy Stokey, then Roger Myerson, Ariel Rubinstein and Lars Hansen speak)

From Bolivia, where the legal working age is now 10 years old

Nico Lacetera points me to this NY Times video on the differing views about child labor in Bolivia, where the legal working age has been lowered to 10, and there is some sentiment for lowering it further (and, of course, opposition as well):
http://www.nytimes.com/video/world/americas/100000003982850/in-bolivia-legitimizing-child-labor.html

Voluntary deceased organ donation in China

It's always hard to parse the Chinese organ data, and know what is going on in the military hospitals, but here's an encouraging story

Chinese Organ Donation on the Rise
   2015-12-06 21:11:39    Xinhua      Web Editor: Guan Chao

"Chinese organ donation has been on the rise after the country banned the use of prisoners' organs for transplant starting Jan. 1 this year, a top medical expert said Sunday.

As of Nov. 9, China has recorded 5,384 voluntary organ donors, who donated 14,721 various organs, said Huang Jiefu, head of a national human organ donation and transplant committee and former vice health minister.

China is expected to top the world in terms of organ donation in several years, said Huang at a forum in the central city of Changsha.

"As long as the donation system is transparent, most of citizens will be willing to join the program," he said.

The shortage of qualified transplant doctors is a major bottleneck. There are only 169 hospitals across the country eligible for organ transplant, with some 100 doctors able to do the operation, said Huang.

Huang called for speedy training of medical talent and expanding the number of hospitals eligible for organ transplant to 300 and the number of doctors to 400 to meet the public demand.

China began a voluntary organ donation trial in 2010 and promoted the practice across the country in 2013. Now, it tops Asia in the number of organ donations."

A skeptical look at "nudges" in the Atlantic (which reminds me of Loewenstein's 2010 op-ed in the NY Times)

In the Atlantic, a recent complaint about the tendency to over-promote the efficacy of"nudges" as inexpensive solutions to big problems:

Why 'Nudges' Hardly Help by Frank Pasquale

"...the nudge is really a fudge—a way of avoiding the thornier issues at stake..."
**********

I think the promises and perils of relying on nudges as primary tools of policy were set forth elegantly in a 2010 NY Times op-ed by George Loewenstein and Peter Ubel, who spoke of the relative magnitudes of the effects of nudges compared to e.g. changes in price:

Economics Behaving Badly

 "Behavioral economics should complement, not substitute for, more substantive economic interventions. If traditional economics suggests that we should have a larger price difference between sugar-free and sugared drinks, behavioral economics could suggest whether consumers would respond better to a subsidy on unsweetened drinks or a tax on sugary drinks."

Loewenstein, of course, is one of the founding giants of behavioral economics.

American Medical Association adopts resolution calling for increased incentives for organ donation

I'm not completely clear on the parliamentary procedures of the American Medical Association's House of Delegates, but Frank McCormick draws my attention to a recently passed resolution:
RESOLUTION 007 - REMOVING DISINCENTIVES AND  STUDYING THE USE OF INCENTIVES TO INCREASE  THE NATIONAL ORGAN DONOR POOL

The AMA site itself requires a login, but here's an ungated site with an account of the resolution:

Report from the Section Council on Emergency Medicine: Highlights of the AMA Interim Meeting, Nov 2015, Atlanta, GA

"Unanimous testimony was offered in support of the medical student resolution* to remove disincentives and study the use of incentives to increase the national organ donor pool. Misery and disability due to lack of organs is evidenced every day in our practices. The HOD voted first to support a study on use of incentives, including valuable consideration, second to eliminate disincentives and third to remove legal barriers to research investigating the use of incentives."

*Here's the draft of the resolution as initially submitted: 

***********

But don't get too excited,  the working group on The Delivery System reporting in The Surgeon General's Workshop on Increasing Organ Donation held in. July 1991  also recommended removing disincentives and studying the possible use of incentives to increase organ donation.

p59: "RECOMMENDATIONS

II-A.1 Maintain the current approach of organ and tissue donation based on

voluntary, altruistic choice and family participation, but continue to explore the

potential impact of possible alternative approaches, such as financial incentives and presumed consent.

II-A.l.Str.1: DHHS should support the collection and further analysis of

existing data on the attitudes of the public as well as those involved in the

donation process regarding the issues of financial incentives and presumed

consent. "

Amsterdam school choice: next year will be single tie-breaking deferred acceptance (instead of multiple tie-breaking)

In Amsterdam, the school choice debates have been resolved for now. Next year, there will be a deferred acceptance algorithm with single tie-breaking, which replaces deferred acceptance with multiple tie breaking. The reason is to avoid inefficiencies that could leave students wanting to trade places.
 Hessel Oosterbeek forwards the following press release:

Nu toch matching voor toewijzing van scholen aan nieuwe brugklassers
Osvo herziet besluit plaatsingsprocedure en volgt Amsterdamse gemeenteraad in wens tot matching
Datum: 27 november 2015


Google translate renders it into English like this:

Now surely matching for allocation of new schools graders
Osvo revises decision placement procedure and following Amsterdam city council in desire to matching
Date: November 27, 2015

The Amsterdam secondary schools united in Osvo match yet again to bring out high school students in a school of choice. In matching children fill a preferred list of several schools, and the computer most favorable and fairest possible distribution calculates. Last year was also matched, but according to a different algorithm. With the currently chosen variant will be more students in the school of their first choice, but there will be more children who are considerably lower on their preferred list. In any case, there is not the problem afterwards between students can be exchanged for a better result.

Osvo still goes first consult with the alderman of education Simone Kukenheim the practical assistance that will get the schools of the municipality for the implementation of the matching. Concrete will be requested from the municipality together with Osvo a central project, the information to parents and children and to take complaints to themselves.

A broad majority in the city council gave to know the alderman of education for this variant of matching. The alderman asked Osvo thereafter published the decision on October 29 to return to draw, to reconsider. With the amended decision in favor of the matching variant Osvo hopes for this year to be able to count on political and social support in the implementation, but also for the results of the placement.

The selected system is also preferred by a large group of parents who made ​​their wish to keep matching known through a petition, in a variant they call matching 2.0. This variant is referred to as DA STB or RSD. DA STB earlier this year in a scientific analysis for the evaluation Osvo compared with DA MTB, which was used in the 2015 matching. DA STB recently came second in the bus in the quest of Osvo to a procurement procedure for 2016. For the pros and cons refer to 
http://www.verenigingosvo.nl/wp-content/uploads/2013/09/Evaluatie_Matching_simulaties.pdf

Osvo has always its decision to match last year defended by pointing to the starting point of an optimal and fair distribution of the few places in schools where more children enroll than there are places. After a storm of protest about the system, its implementation and information about Osvo selected after extensive review and in consultation with the municipality for a combination of items and match. It would be students in a first-round no preferred list can draw for their school of choice, followed by a relatively small group of about 500 children would be placed on matching the schools still places available. The second round would be conducted according to the system which now is put the whole group of students.


See previous posts:

Friday, June 26, 2015

School choice in Amsterdam goes to court over tie-breaking

Thursday, July 2, 2015

The Amsterdam court rules on school choice

Curious Minds interviews me about matching, market design, and a phone call that set me on my path (podcast)

CM 014: Alvin Roth on the Secrets of Market Design

By Gayle | December 14, 2015 | 0 

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Nobel-prize-winning economist Alvin Roth explores the markets that shape our lives, particularly our work, our health care and our schools. He also explains how key technologies enable companies like Uber, Airbnb, and Google to thrive. His insights extend beyond products, services, and features to include how successful companies attract and hire the most talented employees.

Alvin Roth is a Stanford University Professor, and bestselling author of Who Gets What – and Why: The New Economics of Matchmaking and Market Design. In this episode you will learn:

• how one phone call and a pivotal decision ultimately led to a Nobel Prize
• the important differences between markets
• the role of markets when it comes to marriage, loans, and more
• the role of social support in markets
• the ways the Internet and mobile technology shape market possibilities
• the three key factors that influence the success of companies like Airbnb and Uber
• the ways Smartphones are influencing markets
• how labor market findings influenced the market designs of today
• what game theory can teach us about getting into college and getting a job
• how market designers are applying their skills to the growing global refugee crisis

Alvin also shares what got him interested in the economics of market design and the potential this new field holds for helping us rethink what markets are and can do.