Thursday, December 31, 2020

The year in passings

This year I noted the following deaths with particular significance to readers of this blog:

Monday, December 21, 2020 

Edward (Eddie) Lazear (1948-2020)


Saturday, November 7, 2020

Wednesday, December 30, 2020

A hard (theoretical) look at school choice, in the AER by Chris Avery and Parag Pathak

 What are some of the difficulties that might hamper school choice from achieving educational equality (or at least substantially reducing inequality)?  Here's a model by Chris Avery and Parag Pathak.  The theoretical intuitions of top experts in college and school assignments are the sort of thing that can keep you awake at night.  In a sentence, if school choice narrows the quality gap between the best and worst municipal schools, it may also narrow the gap in housing prices, and higher housing prices at the low end may drive poorer families to move to other school districts, just as lower quality at the high end drives richer families to suburbs with excellent schools. ("White flight" has been the subject of many papers, so the issue being raised here is that an improvement at the low end of school quality may also raise prices of less expensive housing and drive out poorer residents.)

The Distributional Consequences of Public School Choice  by Christopher Avery and Parag A. Pathak AMERICAN ECONOMIC REVIEW, VOL. 111, NO. 1, JANUARY 2021, (pp. 129-52)

"Abstract: School choice systems aspire to delink residential location and school assignments by allowing children to apply to schools outside of their neighborhood. However, choice programs also affect incentives to live in certain neighborhoods, and this feedback may undermine the goals of choice. We investigate this possibility by developing a model of public school and residential choice. School choice narrows the range between the highest and lowest quality schools compared to neighborhood assignment rules, and these changes in school quality are capitalized into equilibrium housing prices. This compressed distribution generates an ends-against-the-middle trade-off with school choice compared to neighborhood assignment. Paradoxically, even when choice results in improvement in the lowest-performing schools, the lowest type residents need not benefit."


"Our analysis contributes to a recent literature on school choice mechanisms, which has focused on the best way to assign pupils to schools given their residential location in a centralized assignment scheme. In particular, research has examined the best way to fine-tune socioeconomic or income-based criteria in choice systems. Cities have now experimented with complex school choice tie-breakers in an effort to achieve a stable balance (Kahlenberg 2003). 17 By incorporating feedback between residential and school choices, our model suggests that analysis of school assignment that does not account for possible residential resorting may lead to an incomplete understanding about the distributional consequences of school choice.

"A common rationale for school choice is to improve the quality of school options for disadvantaged students. But, our analysis shows that feedback from residential choice can undercut this approach, for if a school choice plan succeeds in narrowing the range between the lowest and highest quality schools, that change should compress the distribution of house prices in that town, thereby providing incentives for the lowest and highest types to exit from the town’s public schools. This intuition extends to the idealized case of a symmetric model of many towns and partisans, where each town adopts school choice and all schools within a given town have the same quality. Although there is an equilibrium in this idealized model where schools in all towns have the same quality, this equilibrium would likely be unstable, and instead we would expect to observe an equilibrium with differentiation of school qualities and housing prices across towns. That is, the within-town diversity observed in equilibrium under neighborhood assignment could be replicated in cross-town diversity under school choice.

A broader implication of our model is that systemic changes beyond the details of the school assignment system may be necessary to reduce inequalities in educational opportunities."

Tuesday, December 29, 2020

College admissions in Australia, by Guillen, Kesten, Kiefer, and Melatos

 Here's a working paper from the University of Sydney that looks at the New South Wales college admissions clearinghouse in which students receive (accurate but unclear) advice from the clearinghouse operator, together with clear but incorrect advice from individual universities.  In an experiment, they look at the effects of these different kinds of advice when presented separately and together.

A Field Evaluation of a Matching Mechanism: University Applicant Behaviour in Australia by Pablo Guillen Onur Kesten, Alexander Kiefer, and Mark Melatos  December 2020

"Abstract: The majority of undergraduate university applications in the state of New South Wales –Australia’s largest state – are processed by a clearinghouse, the Universities Admissions Centre (UAC). Applicants submit an ordered list of degree preferences to UAC which applies a matching algorithm to allocate university places to eligible applicants. The algorithm incorporates the possibility of a type of “early action” through which applicants receive guaranteed enrolments. Applicants receive advice on how to construct their degree preference list from multiple sources (including individual universities). This advice is often confusing, inconsistent with official UAC advice or simply misleading. To evaluate the policy implications of this design choice, we run a large sample (832 observations) experiment with experienced participants in a choice environment that mimics the UAC application process and in which truth telling is a dominant strategy. We vary the advice received across treatments: no advice, UAC advice only, (inaccurate) university advice only, and both UAC and university advice together. Overall, 75.5% of participants fail to use the dominant strategy. High rates of applicant manipulation persist even when applicants are provided with accurate UAC advice. We find that students who attend non-selective government schools are more prone to use strictly dominated strategies than those who attend academically selective government schools and private schools."

The matching algorithm, in which applicants are allowed to list only six choices, is described as follows:

"The algorithm used by UAC sequentially checks each applicant’s eligibility for a degree starting with her first choice. It is therefore reminiscent of the Boston mechanism widely used for school choice in the U.S. (Abdulkadiroglu et al, 2005; Abdulkadiroglu et al, 2006) and college admissions in China (Chen and Kesten, 2017) among other places. However, the absence of formal capacity constraints (on university enrolments) makes this Australian context a unique instance in which the outcome of the algorithm also coincides with that of the celebrated Deferred Acceptance (DA) algorithm of Gale and Shapley (1962). Due to this equivalence, the UAC algorithm does not inherit the strategic vulnerability of the Boston algorithm. Consequently, students are still able to construct their preferred degree list in a manner that is consistent with their true preferences.4

"While the UAC admissions system appears similar to a typical college admissions problem (see, e.g., Roth and Sotomayor, 1991 and Balinski and Sönmez, 1998), universities in NSW can influence student applications through an additional channel. To limit the uncertainty faced by applicants,5 many universities often grant applicants “guaranteed entry” options.6 These schemes represent a university’s commitment to an individualised entry requirement for a particular degree, subject to the candidate’s achievement of a certain score. This innovative feature of the UAC system can be viewed as the centralized or algorithmic embodiment of “early decision” schemes used by over two-thirds of top colleges in the US (see, e.g., Avery, Fairbanks, and Zeckhauser, 2004) that admit students through a decentralized system.7 Indeed, we are not aware of any other centralized college admissions system that has this type of feature. Under the current UAC algorithm, if an applicant includes a guaranteed entry degree in her preference list, this implies that she will not be considered for any degree that she has listed lower on her list provided that she attains the pre-announced entry score."

They conclude in part that

"accurate, albeit somewhat complicated, advice may fail to mitigate the impact of inaccurate (but straightforward) advice."

Monday, December 28, 2020

The cost of a horse's smile (and the supply chain of chess sets)

 Among the pandemic shortages (along with toilet paper) are chess sets, whose sales have soared in response to the Netflix series "The Queen's Gambit." Chess sets, even wooden ones (as opposed to sets made of exotic materials), can be expensive. The NY Times explain why:

What Are You Paying For in a $300 Chess Set? Mostly the Knights.  The horses in higher-end wooden sets must be hand-carved, a long, specialized process to make sure all four are exactly the same.  by Sophia June

"If you bought a wooden chess set after watching “The Queen’s Gambit,” the price you paid was most likely dictated by just four pieces.

"The knights alone can account for as much as 50 percent of the cost of a nice wooden set. While the rest of the pieces can be machine-made, the knights are carved by hand to resemble the head of a horse, a tedious process to make sure all four are exactly the same.

"The knights in the set used in World Chess Championship matches ($310 for the pieces and $220 for the board) were inspired by a horse carving from the Parthenon in Athens, said Ilya Merenzon, the chief executive of World Chess, the company that licenses the rights to the matches. The process of creating the set when it was redesigned in 2013 required extensive back-and-forth communication with carvers in India to discuss minutiae like the horse’s smile.

"About 10 people specialize in carving knights for the World Chess sets, Mr. Merenzon said. It takes about two weeks to produce 100 sets, with a set of knights requiring about six hours to carve, he said.

...

"In the higher-end sets, “you can literally see the teeth carved into the horse’s mouth,” said Noelle Kendrick, the House of Staunton’s business development director. “They are extremely detailed. You can see the mane, the rivets of the mane, if it has a flowing mane.”

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Here's a related article:

‘The Queen’s Gambit’ Sends Chess Set Sales Soaring by Marie Fazio,

and here's a blog post on Knights:

Tuesday, April 1, 2014

Sunday, December 27, 2020

Global chocolate production and consumption

This map  of cocoa production and consumption from the Cocoa Barometer 2020 would make it easy to guess which way is North (were it not for Australia)...

 



Saturday, December 26, 2020

Global markets in antiquity: olive oil and wine

Markets are ancient human artifacts, and a recent paper in the EJ suggests that markets of global scale, based on comparative advantage and international trade, are older than previously recognized.  Global (or at least international) agricultural markets are ancient, according to pollen data on crops and population in ancient Greece:

Landscape Change and Trade in Ancient Greece: Evidence from Pollen Data  by Adam Izdebski, Tymon Słoczyński, Anton Bonnier, Grzegorz Koloch, Katerina Kouli, The Economic Journal, Volume 130, Issue 632, November 2020, Pages 2596–2618, https://doi.org/10.1093/ej/ueaa026

"Abstract: In this article we use pollen data from six sites in southern Greece to study long-term vegetation change in this region from 1000 BCE to 600 CE. Based on insights from environmental history, we interpret our estimated trends in the regional presence of cereal, olive and vine pollen as proxies for structural changes in agricultural production. We present evidence that there was a market economy in ancient Greece and a major trade expansion several centuries before the Roman conquest. Our results are consistent with auxiliary data on settlement dynamics, shipwrecks and ancient oil and wine presses."


" We demonstrate that in a period of apparent population growth southern Greece decreased its relative production of cereals. We also observe a simultaneous increase in the relative importance of olives and vines. Since southern Greece had a comparative advantage in the production of olive oil and wine, we interpret this result as evidence of a trade expansion. The growing demand for wheat could only have been satisfied by massive grain imports, perhaps from the Black Sea region, which were offset by exports of olive oil and wine. These commodities were in high demand in Greek colonies and other neighbouring areas, which needed them for cultural reasons but were not always able to produce them locally."


Friday, December 25, 2020

A chain of 900 strangers...

 When I talk about chains on this blog, I'm almost always talking about kidney exchange.  But there are other kinds of gift giving chains. The Washington Post has this cheerful story:

A chain of 900 strangers bought one another’s meals at a Dairy Queen drive-through  By Cathy Free

"It started with an older gentleman who pulled up to the Dairy Queen Grill & Chill drive-through window in Brainerd, Minn., at the height of the lunch hour on a Thursday.

“I’d also like to pay for the car behind me,” cashier Darla Anderson said the customer told her on Dec. 3. “Whatever they’ve ordered, I’ll cover it.”

...

"two days and hundreds of cars later, she and the rest of the crew were still ringing up “pay it forward” orders as each person who came to the drive-through offered to pay for the car behind them.

“I’ve seen ‘pay it forward’ chains that went on for about 20 cars, but never anything like this,” said general manager Tina Jensen, 43.

"In the end, it spanned more than 900 cars over 2½ days.

"On the first day, Jensen watched as hour after hour customers paid for the ice cream and hamburgers of the strangers behind them. So she decided to write a quick post on the Dairy Queen Facebook page.

...

"People who saw the post wanted to join in, and a long line of cars was soon snaking along the drive-through lane.

...

"The first two evenings of the pay-it-forward chain, before Dairy Queen closed for the night, Jensen gave the last person at the drive-through the option to leave a few dollars to pay it forward for the first customer the next day.

...

"The chain was finally broken early in the evening Dec. 5, she said, when a customer said he didn’t have enough money to pay for the order behind him, which cost more than his. The restaurant was out of carry-over funds left by other customers."


Thursday, December 24, 2020

Fast Covid vaccine development --science and funding

 Here's a news article from Nature:

The lightning-fast quest for COVID vaccines — and what it means for other diseases.

The speedy approach used to tackle SARS-CoV-2 could change the future of vaccine science. by Philip Ball

"The research that helped to develop vaccines against the new coronavirus didn’t start in January. For years, researchers had been paying attention to related coronaviruses, which cause SARS (severe acute respiratory syndrome) and MERS (Middle East respiratory syndrome), and some had been working on new kinds of vaccine — an effort that has now paid off spectacularly.

"Conventional vaccines contain viral proteins or disabled forms of the virus itself, which stimulate the body’s immune defences against infection by a live virus. But the first two COVID-19 vaccines for which efficacy was announced in large-scale (phase III) clinical trials used just a string of mRNA inside a lipid coat. The mRNA encodes a key protein of SARS-CoV-2; once the mRNA gets inside our cells, our bodies produce this protein. That acts as the antigen — the foreign molecule that triggers an immune response. The vaccines made by Pfizer and BioNTech and by the US pharmaceutical company Moderna both use mRNA that encodes the spike protein, which docks to human cell membranes and allows the coronavirus to invade the cell.

...

"The approach has matured just at the right time; five years ago, the RNA technology would not have been ready.

...

"The slowest part of vaccine development isn’t finding candidate treatments, but testing them. This often takes years (see ‘Vaccine innovation’), with companies running efficacy and safety tests on animals and then in humans. Human testing requires three phases that involve increasing numbers of people and proportionately escalating costs. The COVID-19 vaccines went through the same trials, but the billions poured into the process made it possible for companies to take financial risks by running some tests at the same time."


HT: Muthu Muthukrishnan

Wednesday, December 23, 2020

Celebrating Ramanujan's birthday (with some math quotes)

 Yesterday, 22 December, is celebrated every year as National Mathematics Day in India, in honor of the 1887 birthday of the great Indian mathematician Ramanujan.

Here are some quotes about math in honor of the day, in the Indian periodical RepublicWorld.com

Mathematics Day: Here are some of the most inspirational Happy Mathematics Day quotes on Ramanujan's birthday to honour this special occasion.  By Vageesha Taluja

Not included in that collection of quotes is this one, attributed in Wikipedia to Ramanujan himself: "An equation for me has no meaning unless it expresses a thought of God."

I was pleasantly surprised to see included something much more prosaic that I  was quoted as saying, in a 2010 profile in Forbes magazine called Un-Freakonomics, by Susan Adams: 

"I've always been interested in using mathematics to make the world work better." -Alvin E. Roth

Tuesday, December 22, 2020

The market for music rights--all Bob Dylan's songs

 The NY Times has the story:

Bob Dylan Sells His Songwriting Catalog in Blockbuster Deal--Universal Music purchased his entire songwriting catalog of more than 600 songs in what may be the biggest acquisition ever of a single act’s publishing rights.  By Ben Sisario

"The deal, which covers Dylan’s entire career, from his earliest tunes to his latest album, “Rough and Rowdy Ways,” was struck directly with Dylan, 79, who has long controlled the vast majority of his own songwriting copyrights.

"The price was not disclosed, but is estimated at more than $300 million.

...

"Music publishing is the side of the business that deals in the copyrights for songwriting and composition — the lyrics and melodies of songs, in their most fundamental form — which are distinct from those for a recording. Publishers and writers collect royalties and licensing fees any time their work is sold, streamed, broadcast on the radio or used in a movie or commercial. 

...

"Streaming has helped lift the entire music market — publishers in the United States collected $3.7 billion in 2019, according to the National Music Publishers’ Association — which has drawn new investors attracted to the steady and growing income generated by music rights.

"Dylan’s deal includes 100 percent of his rights for all the songs of his catalog, including both the income he receives as a songwriter and his control of each song’s copyright. In exchange for its payment to Dylan, Universal, a division of the French media conglomerate Vivendi, will collect all future income from the songs."


Monday, December 21, 2020

Edward (Eddie) Lazear (1948-2020)

 My Stanford colleague Eddie Lazear passed away last month, from pancreatic cancer. (When he moved from the University of Chicago to Stanford around 1995 he told me that he moved when he did because he was aware that the academic market for professors became thin after one's 50th birthday.) 

Prominent among his many accomplishments were his studies of labor markets from the inside out, i.e. from the perspectives of workers inside firms.

His papers include

Lazear, Edward P. "Why is there mandatory retirement?." Journal of political economy 87, 6 (1979): 1261-1284.

Lazear, Edward P., and Sherwin Rosen. "Rank-order tournaments as optimum labor contracts." Journal of political Economy 89, 5 (1981): 841-864.

Lazear, Edward P. "Performance pay and productivity." American Economic Review 90, 5 (2000): 1346-1361.

He founded the Journal of Labor Economics, and its current issue, Volume 39, Number 1, January 2021, published just now, contains his most recent paper:

Why Are Some Immigrant Groups More Successful Than Others?

Abstract: "The composition of immigrants depends not only on immigrant choice but also on immigration policy, because slots are rationed. Policy determines immigrant attainment, as evidenced by immigrants from Algeria having higher educational attainment than those from Israel or Japan. Theory predicts and evidence confirms that immigrant attainment is inversely related to the number admitted from a source country and positively related to population and education levels at home. A parsimonious specification has only two variables yet explains a majority of the variation in educational attainment of US immigrant groups. The theory and predictions are bolstered by Swedish data."


Here is the memorial statement from the JOLE (with a link to a special issue in honor of Eddie's 65th birthday: IN MEMORIAM: EDWARD LAZEAR

He was an an influential policy advisor as well as an institution builder.  Here's his Stanford obituary:

NOVEMBER 24, 2020: Trailblazing economist and presidential adviser Edward Lazear dies at 72


Here's a photo I took of him in December 2011 at a conference in honor of the 20th anniversary of the Rationality Center in Jerusalem.

Eddie Lazear (1948-2020)


Sunday, December 20, 2020

Jefferson University celebrates Dr. Ignazio Marino

Ignazio Marino, transplant surgeon (and former Mayor of Rome) has received the Achievement Award in Medicine from Thomas Jefferson University in Philadelphia.

You can see the award ceremony below (the tribute to Dr. Marino starts at about 43 minutes and goes until 51 minutes, at which point he makes some remarks until about 1:03).

Congratulazioni, Ignazio!



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Previous post:

Tuesday, September 4, 2018


Saturday, December 19, 2020

Should college admissions be organized like the medical residency match?

 The Chronicle of Higher Ed asks why not organize college admissions the way we organize the match for residency positions in medicine. (It considers the benefits and glides over the difficulties):

Can Algorithms Save College Admissions?  We’ve tried a system based on competition long enough. It isn’t working.  By Brian Rosenberg

"competition manifests itself in several ways, including large admissions staffs, growing marketing budgets, costly “yield management” consultants, the proliferation of programs, and what some refer to as an arms race in building construction. By far the most expensive and problematic effect of competition has been increasing reliance on what is euphemistically referred to as “merit aid,” which in fact means the awarding of tuition discounts to low- or no-need students in order to persuade them to attend a particular institution.
...
"What if we replaced the current and longstanding admissions process among private colleges with a match process, similar to what has for years been used to match medical-school graduates with residency and fellowship positions? What if, in other words, we used data and algorithms instead of travel, merit aid, and free food to drive college admissions?
...
"A similar system is used by the QuestBridge program, which asks applicants to rank 12 choices among the 42 colleges in the program and then matches qualifying students with a college. In order to qualify for the QuestBridge scholarship, students must enroll in the college with which they are matched.
...
"is the selection of a college on the basis of the friendliness of the tour guide or the cleverness of the marketing truly less random than being matched on the basis of priorities and interests?"

Friday, December 18, 2020

Allocating vaccines while they're still scarce--I'm interviewed by Stacy Vanek Smith on the Indicator from Planet Money

 Here's a podcast in which I'm interviewed by Stacey Vanek Smith about how vaccines might be allocated while still scarce:

Who Gets A Vaccine? A Conversation With Alvin Roth

The Indicator from Planet Money, December 15, 2020

("9-Minute Listen")



And here's the transcript.

Below is the latter part of the interview, about vaccines (edited by me to take out excess "you know's," you know?):

SMITH: What are - when you're looking at the vaccine situation now, there are a limited number of COVID vaccines available, at least at this moment. What do you see when you look at that market right now? Not that it's a market per se but you know what I mean.

ROTH: Any time we're allocating scarce resources,  I think it's fair to talk about that as the marketplace. It's waiting for a scarce resource to become available. So what we do with [deceased donor] organs is we form waiting lists and each organ has a different kind of waiting list. So that's a little bit like what we're going to see with a vaccine. Different states are going to have different rules of how to get vaccines. They also have different supply and demand. It might be that lots of people in New York will want to have a vaccine. And it's possible - and I'm purely speculating - that a smaller percentage of people in Tennessee will want it, right? We have a lot of vaccine hesitancy in the United States.

SMITH: Yeah.

ROTH: So one thing that reminds me of kidney exchange a little bit is exchange. Supposing it turns out that we allocate to the states proportional to population, which I think we may be doing this morning. And suppose it turns out that in New York, there's a giant shortage, that there are lots of health care workers, and they're eager to get it. And then after that, there are lots of old people and vulnerable people of various sorts. And New York will develop a priority list.

At the same time, they might discover that in Tennessee, they've gotten more vaccines than they can get rid of on the first day because of vaccine hesitancy or maybe people aren't eager to try it out so early. So you could imagine an exchange, that we'll send you 100,000 doses today and call them in two months when we think we'll need them.

SMITH: What would - like, what do you think is sort of an ideal way for states and I guess - and countries to start approaching this? Because it is complicated, and everybody wants this vaccine, right? A lot of people want this vaccine right now. The demand is greater than the supply. Like, what would you I guess like to see happen or like to see start happening for countries and states kind of making this decision?

ROTH: One thing that people have said is, health care workers are important because they help us contain the disease. But they're also vulnerable to it  - especially if we talk about the health care workers who are treating people who are ill with COVID. So it might make sense to prioritize them so that the hospitals don't shut down, things like that.

But then you might also say, people who are at risk in various ways should get a high priority because getting a vaccine might save their life. But then we might want to go in a different direction. We might want to say - who is likely to be a superspreader? Who  is exposed by the nature of their work? Maybe the essential workers who drive the trucks and deliver the goods and coming to your door and maybe getting your signature.

SMITH: Right, right 'cause this is a little different than a kidney because we're talking about a virus that can spread. So that's in there, too. Like, people who are more likely to - 'cause if we can vaccinate, let's say, like, people who do deliveries, then that could pay sort of exponential dividends.

ROTH: Right. And then we could also think about what's costly to us about the precautions we're taking. One of those things, of course, is child care. If you have school-age children and they're now at home and especially if they're quite young, so they can't even really do Zoom classes without your help, well, then someone in your household is not working very hard 'cause they're providing a service that teachers used to provide. So we might think about what set of vaccinations would be required to open up schools again 'cause that would be a big weight lifted off the economy.

SMITH: Oh, right. That would be - that would help in, like, other ways because then it could help people go back to work, yeah.

ROTH: You'd like there to be the biggest multiplier effect you can get for each vaccine that not only does good for the person getting the jab, you know, the needle in his upper arm but that jab should also do the most good for the most other people.

SMITH: Dr. Alvin Roth is a professor of economics at Stanford University and winner of the 2012 Nobel Prize in Economics.

This episode of THE INDICATOR was produced by Nick Fountain, fact-checked by Sean Saldana. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.

Copyright © 2020 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
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A quick note on interviews.  These 9 minutes came from a one hour interview, so lots of decisions about what to include were made by NPR. (That’s why I come off as a solitary hero in the initial discussion of kidney exchange.)  But, aside from that, the editors did a pretty good job on this one, imho...)

Thursday, December 17, 2020

Eduardo Laguna Müggenburg explores the repugnance of price gouging, and defends his dissertation

 Eduardo Laguna successfully defended his Ph.D. dissertation last month. One of the papers he presented  (with Justin Holz and Rafael Jiménez-Duran) was an online experiment in which Amazon sellers of face masks and sanitizer at high prices were sampled, and subjects in the experiment were offered the opportunity to pay to have items be purchased from those sellers and donated to hospitals, and also to pay to have those sellers reported as price gougers to the  Department of Justice National Center for Disaster Fraud.  Some subjects were willing to buy, some were willing to pay to report, and some were willing to pay to avoid having sellers reported.

Here's the paper 

Quantifying repugnance to price gouging with an incentivized reporting experiment 

by Justin Holz, Rafael Jiménez-Duran and Eduardo Laguna-Müggenburg

Abstract: "Anti-price gouging laws are ubiquitous and people take costly actions to report violators to law-enforcement agencies, which suggests that they value punishing price increases during emergencies. We argue with a model that consumer reports contain information about repugnance to price gouging, or willingness to prevent third-party transactions (Roth, 2007). We conduct a field experiment during the first wave of COVID-19 to measure individuals’ willingness to pay to report sellers who increase prices of personal protective equipment. The willingness to pay to report is non-negligible, polarized, and responsive to the seller's price. We also find that repugnance is partly due to distaste for seller profits, depending on the product."

Remarkably, "Half of subjects who are willing to pay to report sellers are also willing to forgo the $5 gift card to have us donate PPE from a price-gouging seller."

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

That is, there are substantial numbers of participants who are willing to pay to report the seller, but are also willing to pay for the experimenters to purchase from the seller and donate the PPE to a hospital.  

We often think of repugnance as partitioning the population—there are people who want to transact, and others who think the transaction shouldn’t happen.  The fact that some individuals can simultaneously have both these feelings is, I think,  one of the most striking results of this experiment—it shows just how complex repugnance can be. These are people who recognize that buying goods at inflated prices (and donating them to hospitals) may be efficient, and worth doing given the shortage,  but would still like to see the sellers fined or jailed.  

I'm reminded of this (third hand) story about a N. Carolina hurricane, in which people waiting in line to buy ice at high prices nevertheless applauded when police arrived to arrest the sellers for price gouging... They Clapped: Can Price-Gouging Laws Prohibit Scarcity?

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    Here's a picture from Eduardo's dissertation defense, conducted over Zoom:

Top: Matt Jackson, Eduardo Laguna, Al Roth
   Bottom: Larry Goulder, Chenzi Xu, Melanie Morten

Welcome to the club, Eduardo.

Wednesday, December 16, 2020

Some more Nobel links for Wilson and Milgrom

 This was a Nobel year unlike any in recent memory, since the Covid pandemic prevented the festivities from being held in Stockholm as they usually are.  The Nobel lectures by Milgrom and Wilson were recorded at Stanford, and they received their medals from the Swedish consul in a private ceremony.

Here's the text of the Award Ceremony Speech by Tommy Andersson

Here's Bob Wilson's Nobel lecture:





Here's Paul Milgrom's Nobel lecture: 



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Paul Milgrom posted some reflections on his website:
  1. "It was the first to be awarded outdoors and the first outside of Stockholm.
  2. It was the first economics prize awarded to a student (Paul) with his disseration adviser (Bob).
  3. It was the first awarded jointly to two people living across the street from one another.
  4. Paul became the first to give TWO Nobel prize lectures, having already lectured on behalf of Vickrey in 1996.
  5. The backyard ceremony was held behind a residence that had housed two economics laureates (Paul Milgrom & Joe Stiglitz), plus 3-time SuperBowl winning coach Bill Walsh!
"Also unusual is that, by focusing on Paul's auction contributions, the Nobel Committee had left unmentioned ten of Paul's twelve most highly cited publications."
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Here's an essay by Jacob Goeree:
"there are many cases where the “invisible hand” does not work. Prof. Wilson’s analysis of the winner’s curse in common-value auctions is a prominent example. “Sometimes the invisible hand needs a bit of help, and that’s where market design comes in – for instance, making sure bidders can update their value estimates during the bidding process itself” 
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Here (live streamed today on Dec. 16) is an event originating in Vienna, including a video interview in which I talk to Ben Greiner. (It starts at 6pm CET, i.e. 9am PST):

"This event is being organized by the WU Department of Economics

"Nobel Prizes are awarded every year in December, on the anniversary of Alfred Nobel’s death. Nobel laureates are celebrated in the media, but hardly anyone knows anything about the research that goes on behind the scenes. We plan to change that. In cooperation with experts, we will be introducing the work of the winners of this year’s Nobel Prize in Economic Sciences in terms that even laypeople can understand. We will analyze the innovative power of the work and discuss its significance and potential applications in practice.

Welcoming words: Tatjana Oppitz, Vice-​Rector for Infrastructure and Digitalization

Discussion: Maarten Janssen, Professor of Economics, University of Vienna

Maarten Janssen is Professor of Microeconomics at the University of Vienna. Among many others, his research interests are in the fields of game theory, industrial organization and competition policy, and in particular auctions. He is particularly interested in the implications of information asymmetries in markets and market design.

Stefan Felder, Rundfunk und Telekom Regulierungs-​GmbH: RTR

Stefan Felder studied at Technical University and University of Economics and Business in Vienna. He worked in the telecommunications industry and at the University of Vienna. As of 1998, he has been a member of the Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR). He is an expert on spectrum auctions, competition analysis, and mobile communications. He is Head of Spectrum and Mobile Market at RTR.

Moderation: Maria Marchenko, WU

Maria Marchenko is an Assistant Professor at the WU Department of Economics. Her research lies in the fields of applied and theoretical econometrics using state-​of the art techniques and theoretical concepts with applications to networks and labor market.

Video interview: Alvin E. Roth, Winner of the Nobel Prize 2012; Professor of Economics, Stanford University

Alvin E. Roth is Professor of Economics at Stanford University. In 2012, he won the Nobel Prize in Economic jointly with Lloyd Shapley “for the theory of stable allocations and the practice of market design.’’


 

Tuesday, December 15, 2020

Another mail order catalog throws in the towel (Sic transit gloria mundi .)

 The mail order catalogs of Sears Roebuck and Montgomery Ward were as innovative in the late 1800's as Amazon is today, bringing retail shopping to customers who otherwise had relatively little access to the wide variety of goods available in major cities.  Those catalogs lasted more than a century before giving way to other business models.

Now, IKEA is discontinuing its catalog.  The WSJ has the story:

The IKEA Catalog Defined Home for Millions. Now It’s Gone.  Flat-pack giant says it will discontinue publication of the book as readership declines  By Saabira Chaudhuri

"IKEA’s decision to stop publishing its annual catalog marks the end of a tome that served as much as an aspirational lifestyle guide for millions as it did a marketing tool for the flat-pack furniture giant.

"After 70 years, the catalog had become a relic in the digital age, the company said, calling the decision “emotional but rational.” The 2020 edition, which was sent out earlier this year, will be the last. The catalog will also no longer be published online.

"Like an international version of the Sears catalog, which ceased publication in 1993, the IKEA book sold not only housewares, but a lifestyle."

Monday, December 14, 2020

Designing centralized marketplaces that work gracefully with pre-existing decentralized ones, in Management Science, by Benjamin Roth and Ran Shorrer

 In Management Science (online ahead of print):

Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design

 Benjamin N. Roth , Ran I. Shorrer 

Published Online:8 Dec 2020 https://doi.org/10.1287/mnsc.2020.3643

Abstract: Often market designers cannot force agents to join a marketplace rather than using pre-existing institutions. We propose a new desideratum for marketplace design that guarantees the safety of participation: dominant individual rationality (DIR). A marketplace is DIR if every pre-existing strategy is weakly dominated by some strategy within the marketplace. We study applications to the design of labor markets and the sharing economy. We also provide a general construction to achieve approximate DIR across a wide range of marketplace designs.


Introduction: "Many marketplaces operate in a broader economic environment, and often participants cannot be forced to use a marketplace rather than the pre-existing institutions it was meant to displace. For instance, although most hospitals and residents use the clearinghouse known as the National Residency Matching Program (NRMP) to coordinate job offers, there is no legal barrier that prevents members of either side of the market from finding matches outside of the clearinghouse.1 In school choice, charter schools sometimes opt not to participate in clearinghouses, instead recruiting students in a decentralized manner. In the private sector, marketplaces that comprise the gig and sharing economies demonstrate the primacy of attracting participants who have many outside alternatives. In each of these settings marketplaces are actively engaging with the challenge of recruitment. In other words, these are marketplaces in which participation is not always safe.

...

"A designer may introduce a mediator (alternatively referred to as a marketplace), to which players may delegate their decision rights (i.e., participate in the marketplace). The mediator comprises a message space and a mapping from messages to outcomes (strategy profiles for the delegators). Players who delegate their decision rights select a message to send to the mediator, who then acts on their behalf according to the outcome mapping, as a function of the whole set of messages it receives. The mediator is voluntary in the sense that players may choose one of their original (outside) actions instead of sending it a message. And the mediator is restricted to condition the actions of participants only on the messages of other participants and not on the outside actions of nonparticipants.

"This framework highlights the endogeneity of the individual rationality constraint with respect to both the set of players who sign away their decision rights and the actions they take. We show by example that mediators that satisfy attractive criteria such as incentive compatibility and efficiency assuming that everyone participates may no longer do so in equilibria with partial participation. This motivates the search for mediators that can guarantee the safety of participation. In Section 3 we present our key desideratum: dominant individual rationality (DIR)."

Sunday, December 13, 2020

Milgrom's "Discovering Prices" reviewed in the JEL by Kominers and Teytelboym

 In the December Journal of Economic Literature:

The Parable of the Auctioneer: Complexity in Paul R. Milgrom's Discovering Prices

by Scott Duke Kominers and Alexander Teytelboym, JOURNAL OF ECONOMIC LITERATURE, VOL. 58, NO. 4, DECEMBER 2020, (pp. 1180-96)

Abstract: Designing marketplaces in complex settings requires both novel economic theory and real-world engineering, often drawing upon ideas from fields such as computer science and operations research. In Discovering Prices: Auction Design in Markets with Complex Constraints, Milgrom (2017) explains the theory and design of the United States' "incentive auction" that reallocated wireless spectrum licenses from television broadcasters to telecoms. Milgrom's account teaches us how economic designers can grapple with complexity both in theory and in practice. Along the way, we come to understand several different types of complexity that can arise in marketplace design."

And from the conclusion:

"So what have we discovered from Prices? Modern marketplace design increasingly wrestles with complexity; as it does so, we need novel, tailor-made theory as well as supporting infrastructure. Complexity has real economic meaning—and can take multiple forms."

Saturday, December 12, 2020

The Einstein Foundation Award for Promoting Quality in Research (apply or nominate now...)

 Here's the announcement of a new award, for promoting research integrity, reproducibility, and or other elements of research quality.

The Einstein Foundation Award for Promoting Quality in Research

"Objective

The Einstein Foundation Award for Promoting Quality in Research aims to provide recognition and publicity for outstanding efforts that enhance the rigor, reliability, robustness, and transparency of research, and stimulate awareness and activities fostering research quality among scientists, institutions, funders, and politicians. To acknowledge the outstanding role early career researchers (ECRs) have in promoting research quality, ECRs will be invited to propose projects that foster research quality and value. Projects will be competitively selected for funding and internationally showcased.

Award Categories

Individual Award: Individual scientist or small teams of collaborating scientists can be nominated. The laureate will be awarded €200,000.

 

Institutional Award: Governmental and non-governmental organizations, institutions, or other entities can apply or be nominated. The award-winning organization or institution will receive €200,000. If governmental organizations or institutions are the recipients of the award, they will not receive any funds in addition to the award itself.

 

Early Career Award: Early career researcher can submit a project proposal for an award of €100,000.

Friday, December 11, 2020

Concerns about remote interviewing for the surgery match

 I don't doubt that every year people are nervous about the residency Match, and worries this year are related to the special situation of the Covid pandemic, in which interviews will be remote.

Irene Wapnir forwards the following:

From the AM College of Surgeons Bulletin: Interview crisis:

It May Be Too Late toAvoid a Crisis in the Surgery Match This Year

Ronald J. Weigel, MD, PhD, FACS; Steven C. Stain, MD, FACS; and L. Scott Levin, MD, FACS, FAOA

Are you hearing that outstanding medical students applying for surgical residencies are being wait-listed for an interview at top training programs? The problem may be yet another unfortunate consequence of the COVID-19 pandemic.

In normal years, programs have cancellations because there is a physical limitation for how many interviews a student can do. This year, the pandemic forced programs to go to virtual interviews, and a small group of top students nationally appear to be filling all the interview slots for the top programs. If this is true, then many of those programs may go unfilled in the match.

For example, if the average number of interviews offered by a program is 100, and these programs are all competing for the same pool of 100 intern applicants, the pool of top students interviewed may be too small to fill all the slots in these programs. Additionally, the current interview process may create disadvantages for minority applicants and students from schools that are not considered "top tier."

With virtual interviews allowing students to interview at a larger number of programs, we may need a different system nationally for the allocation of interview slots, such as rolling acceptances for interviews with students being required to commit only to a set number of programs, which would allow additional students the opportunity to be interviewed. The solution will require program directors and surgical leaders nationally to discuss this issue. It may be too late to avoid a crisis in the match this year.

Surgery Match: Considerations and Possible Solutions

In their article, "It May Be Too Late to Avoid a Crisis in the Surgery Match," Drs. Weigel, Stain and Levin highlight challenges with this year's surgery match. Regarding this, the ACS proposes that program directors, deans and chairs, as well as candidates, consider the following to ensure as fair and equitable a process as possible during this extraordinary time:

Program Directors, Deans, Chairs

  • Review the consequences that oversubscribing to slots has to programs and other candidates with students
  • Don't offer slots to more candidates until those offered have a reasonable time to respond
  • Make lists of candidates of interest who are not interviewed to ensure slots are offered when available

Candidates

  • Consider limiting the number of interviews scheduled to a reasonable amount. Consider the impact on your colleagues of taking up too many interview slots—be fair to other applicants
  • Release interview slots if you know you will not use them
  • Release slots when you have completed enough interviews and experienced reciprocal interest that you are confident you have a well-prepared rank list

 


Thursday, December 10, 2020

Susan Athey wins the CME Group-MSRI Prize in Innovative Quantitative Applications

 The seminar is tomorrow, it appears that registration is required.

CME Group-MSRI Prize in Innovative Quantitative Applications: Virtual Seminar Honoring Stanford Professor Susan Athey

Please join CME Group and the Mathematical Sciences Research Institute (MSRI) for a virtual seminar event recognizing Professor Susan Athey, the Economics of Technology Professor, Stanford Graduate School of Business. 

The program will feature a discussion between Professor Athey and the 2020 Nobel Laureate in Economic Sciences and recipient of the 2017 CME Group-MSRI Prize, Paul Milgrom, as well as presentations from leading economists on the intersection of markets and the response to the COVID-19 pandemic.

For more information on the event and to register, please follow the link below. Please contact events@cmegroup.com with any questions.

 

Register Today

DATE:
December 11, 2020

TIME:
10:15 a.m. CT
8:15 a.m. PT


 





The virtual event honoring Athey will feature presentations focused on topics related to market design, including how food banks use markets and the intersection of markets with the COVID-19 pandemic response. Several distinguished economists and academics will be participating in the program, including:

  • Scott Kominers – MBA Class of 1960 Associate Professor, Entrepreneurial Management Unit, Harvard Business School
  • Paul Milgrom – Shirley and Leonard Ely professor of Humanities and Sciences in the Department of Economics at Stanford University; 2017 CME Group-MSRI Prizewinner; 2020 Nobel Laureate in Economic Sciences   
  • Canice Prendergast – W. Allen Wallis Distinguished Service Professor of Economics, University of Chicago Booth School of Business
  • Christopher Snyder – Joel Z. and Susan Hyatt Professor in the Economics Department, Dartmouth College 

Advance Market Commitments for Vaccines

 David Warsh, in his weekly Economic Principals (not a mis-spelling, it's often about economists, and newspapers) writes about Advance Market Commitments for vaccines, as we await the rollout of the various vaccines for Covid-19: A Victory for Vaccine Market Design (and a scoop for a well-designed newspaper as well)

"the mechanism known as advanced market commitment is of comparatively recent origin. It is the discovery, if that is the word, of University of Chicago economist Michael Kremer, in a series of papers he wrote while teaching at the Massachusetts Institute of Technology and Harvard University some twenty years ago, culminating in the publication, in 2004,  of Strong Medicine: Creating Incentives for Pharmaceutical Research on Neglected Diseases, with his wife, Rachel Glennerster, in 2004.

"The new mechanisms they advocated were similar to those that in the eighteenth century gave rise to the development of the naval chronometer, necessary to determining longitude at sea. Governmental “pull” methods could complement the inherently risky “push” of private research and development.  AMCs – legally binding commitments to buy specified quantities of as yet unavailable vaccines at specified prices – were the most promising of the lot for bringing into existence medicines that otherwise might not pay. 

...

"I asked Kremer last week if he had been involved in the Warp Speed journey, The answer was no.  He and co-authors had spoken to staff at the Council of Economic Advisors in the run-up to the creation of Operation Warp Speed. They had co-authored an op-ed article in the NYTimes in May. But they had not met with Slaoui. He seems to have imbibed the basic idea as long ago as 2013, when he organized a session on the industry’s stock of common knowledge for the Aspen Ideas festival

"Kremer was recognized with a Nobel Prize in economics, with two others, in 2018, for work on policy evaluation, including the work on vaccines. But I was struck when Wall Street Journal editorial-page columnist Daniel Henninger suggested last week that the scientists at the pharmaceutical companies who developed vaccines against Covid-19 were “the obvious recipient for 2021’s Nobel Peace Prize.”

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

It would be exciting to see an economist win two Nobels, one of them in Peace. Michael Kremer would be a great choice...

In the meantime, here's the latest in Kremer's string of papers on AMC, this one a theoretical treatment:

Designing Advance Market Commitments for New Vaccines

Michael Kremer, Jonathan D. Levin & Christopher M. Snyder

NBER WORKING PAPER 28168 DOI 10.3386/w28168    December 2020

Abstract: Advance market commitments (AMCs) provide a mechanism to stimulate investment by suppliers of products to low-income countries. In an AMC, donors commit to a fund from which a specified subsidy is paid per unit purchased by low-income countries until the fund is exhausted, strengthening suppliers' incentives to invest in research, development, and capacity. Last decade saw the launch of a $1.5 billion pilot AMC to distribute pneumococcal vaccine to the developing world; in the current pandemic, variations on AMCs are being used to fund Covid-19 vaccines. 

"This paper undertakes the first formal analysis of AMCs. We construct a model in which an altruistic donor negotiates on behalf of a low-income country with a vaccine supplier after the supplier has sunk investments. We use this model to explain the logic of an AMC—as a solution to a hold-up problem—and to analyze alternative design features under various economic conditions (cost uncertainty, supplier competition). A key finding is that optimal AMC design differs markedly depending on where the product is in its development cycle."


From the introduction:

"Mechanisms such as patents and prizes that stimulate research and development (R&D) for products sold in high-income markets may fall short in low-income markets. Patents generate deadweight loss along with the monopoly rents intended to incentivize investment; furthermore, the monopoly rents may be limited in countries with mostly poor consumers, particularly if the country or aid agency acting on its behalf ignores these patents or uses bargaining power or public pressure to push down prices. Prizes may lead to the development of products that, while meeting the letter of the competition’s technical specifications, fail to meet consumers’ true needs.

"The difficulty in meeting the needs of poor countries is particularly apparent in the marketfor vaccines. Vaccines are a highly cost-effective tool to improve global public health.1 Yet the provision of vaccines in poor countries lags widespread use in rich countries and the development of vaccines targeting diseases of poor countries has been disappointingly slow.2 This situation has sparked a host of initiatives to catalyze vaccine markets in developing countries. Among the most prominent has been an Advance Market Commitment (AMC) piloted last decade for a pneumococcal vaccine."