A heterodox economist looks (disapprovingly) at market design

Ana Santos writes, not-entirely-unsympathetically, about choice architecture and market design, based on her reading of Thaler and Sunstein's book "Nudge...," and my survey article "The Economist as Engineer..." Her remarks include a novel (to me) objection to creating institutions in which individual goals don't conflict with social welfare: in the absence of such conflict, your "ethical muscles" would grow lax from not needing to be used. (Really; see the end of this post...)

Ana C. Santos, "Behavioural and experimental economics: are they really transforming economics?," CAMBRIDGE JOURNAL OF ECONOMICS 35, 4, 705-728, JUL 2011

"The purpose of choice architecture is to prepare contexts of choice to help individuals make better choices, as judged by individuals themselves, or by society as a whole (Thaler and Sunstein, 2003, 2008). Design economics is in turn devoted to the conception of specific allocation mechanisms that aim at coordinating individual actions for the accomplishment of the goals set by the designer (Roth, 2002). Rather than assuming that markets emerge spontaneously and automatically generate efficient allocations of resources, design economics puts at the forefront the complex social engineering processes involved in the building of markets and market-like allocation mechanisms that determine individual outcomes and the aggregate results that are obtained by having people interacting under those mechanisms."
...
"Not only do these proposals retain the fundamental principles of neoclassical economics—rationality and efficiency—they also continue to promote their expansion to various domains of social life. Through the architecture of contexts of choice and the design of market mechanisms, economists are putting their expertise at the service of individual rationality and economic efficiency, within and beyond the traditional domain of economics.


"Choice architecture and design economics promote a particular version of economics imperialism that goes beyond the mere export of its concepts to territories traditionally occupied by disciplines other than economics. They actually aim at inculcating economic calculus in human deliberation and introducing market-like forms of social interaction where they have been absent. In other words, what is at stake here is the deliberate attempt to make society more like its description in neoclassical economic theories, i.e. the performativity of economics (Mackenzie, 2006; Callon, 2007; Mackenzie et al., 2007). Whether or not they have succeeded in this endeavour is an empirical question that cannot be addressed here. For now, it is suffice to note that while taking into account predictable behavioural irrationalities and the opportunistic behaviour of economic agents in their policy proposals, both choice architecture and design economics retain and promote the expansion of the neoclassical concepts of rationality and efficiency in their market-based solutions."

The article includes a novel argument against aligning individual incentives with social welfare:
"In markets people are less compelled to follow non-market norms and values. By aligning self-interest with the interests of others, market mechanisms moreover obviates the need for ethical reasoning; as a result, individuals no longer have the opportunity, as Steve Turnbull puts it, to ‘flex their ethical muscles’ (Frohlich and Oppenheimer, 2003, p. 290). Individuals’ ability to behave in accordance with non-market norms and values, then, will be seriously compromised. On the contrary, living with the tension between the best strategy from a rational, self-interested point of view and the ethically best strategy keeps the ethic imperative active."

Naked hiking is legally repugnant in at least one Swiss canton

Switzerland seems to be a land of contradictions.
The BBC reports, Swiss can ban naked hiking, court rules

"Switzerland's highest court has ruled that local authorities can impose fines on people hiking nude in the Alps.

The federal court threw out an appeal by a man who was fined after hiking past a family picnic area with no clothes on.

"Judges said the eastern canton (region) of Appenzell had been entitled to uphold a law on public decency.

"They said the ban on naked hiking was only a marginal infringement on personal freedom.

...

"The BBC's Imogen Foulkes in Geneva says naked hiking is an increasingly popular pastime in Switzerland.

"However, Appenzell is a deeply devout and conservative canton - it only granted women the right to vote in 1990 - and the influx of naked hikers has offended many local people, she adds."

College admissions, exams, and "clearing" in Britain

The Telegraph reports: Academic condemns 'tortuous' university admissions

"Mary Beard, the Cambridge University classics professor, said the admissions system employed in Britain was “more difficult and stressful than it should be”.

...

"The comments were made after the Universities and Colleges Admissions Service proposed a sweeping overhaul of the current system.

"They are planning to allow students to apply for places after receiving their results for the first time in a move that would lead to A-levels being brought forward and candidates choosing courses over the summer.

...

"Currently, students are supposed to apply to Oxbridge by October – around a year before courses start – and to other universities in January. Candidates are then given provisional offers based on the proviso that they gain predicted exam grades the following summer.

"Those who fail to score high enough in A-levels and other qualifications are eligible for “clearing” – the system that matches students to spare places.

"But writing on BBC online, Prof Beard said: “More than anything, it is the bizarre timetable that makes the application process so preoccupying.

“When we say in January or February that someone ‘got in’ to their chosen university, we don't actually mean that. We mean that they will have got in if they achieve the grades demanded by the university in their summer exam, which even if all goes well, drags out the nail biting for a good six months.”

"She added: “If it doesn't go well and they don't get the grades, they enter a whole new round of applications in August.

“This is a frenetic process, with applicants tracking down the remaining unfilled places by email and phone - then being given maybe a few hours to accept a place for a course they haven't really explored at a university they know little about.”

Buying and selling pensions

Does buying future payoffs on someone else's pension become more or less repugnant if that person is in financial distress? (This is an aspect of repugnant transactions and markets that is one of the toughest to focus on, having to do on the one hand with the motivation for the transaction and on the other with ideas about coercion and exploitation...)

The WSJ reports on the mainstreaming of investment opportunities to buy the income stream from pensions:  Investing in a Stranger's Retirement

"The burgeoning business of investing in someone else's pension has never been easier—or more controversial and risky.

"For pensioners who are eager to sell, websites beckon with names such as BuyYourPension.com and pension4cash.com. Financial middlemen then bundle the information from pensioners into spreadsheets that are supplied to financial advisers for their clients.
...
"No one keeps track of how many pensions are turned into instant cash, and the number for now is believed to be small. But in recent months, websites have proliferated, and obscure middlemen far from Wall Street have ramped up efforts to win over financial advisers to the concept. They are finding some acceptance among those who favor alternative investments as part of an overall diversified portfolio.

"It's becoming more of a staple part of our business," said Daniel Cordoba, founder of Asset Exchange Strategies LLC, a Leander, Texas, financial-advisory firm that has sold a handful of pension-payment deals to clients in recent weeks. "There's a starvation for yield" with most bonds paying little interest, and clients are scared of the volatile stock markets, he added.
...
"In general, pension deals thread the needle of federal law that discourages the assignment of pensions for public policy reasons, according to court rulings. In a preliminary ruling in August, a California state-court judge said that military-pension transactions by Structured Investments Co., which has been in business since the 1990s, are "prohibited and unenforceable."

Brett Rubin, a lawyer for Structured, said the firm believes its transactions are proper. Over the years, its agreements have been enforced by other courts, including a U.S. bankruptcy court, according to court filings.
...
"Several buyers of pension payments who were interviewed by The Wall Street Journal declined to be identified because they didn't want to be seen as profiting from anyone's financial desperation.

"I had misgivings at first," said an investor in Philadelphia who this summer bought seven years of pension payments from a retired sailor. She forwarded $50,000, to be repaid in monthly installments that includes 6% annual interest.

"As part of the deal, the woman got some information about the seller, including that he needed the money to escape foreclosure. The retired sailor's "distress" bothered her, she said, but she "concluded this would help him save the house."

Legacies in college admissions

The NY Times writes about the burden of having a parent who went to an Ivy League college: Being a Legacy Has Its Burden

But, for all the angst and pressure, there are some compensations:

"...among legacy applicants for Princeton’s class of 2015, 33 percent of those offered a spot were the children of alumni. Harvard generally admits 30 percent, and Yale says it admits 20 percent to 25 percent. For all three, the overall rate is in the single digits.

"According to “The Impact of Legacy Status on Undergraduate Admissions at Elite Colleges and Universities,” a study of 30 colleges published in June in Economics of Education Review, the closer the relation, the greater the benefit: children of parents who attended a school as an undergraduate saw a 45 percentage point increase in the probability of admission; for children of graduate students — or those who had a relative other than a parent attend — the increase in probability was about 14 percentage points.

"Over the long haul, though, legacy enrollment has declined. In 1980, 24 percent of Yale’s freshman class had a parent who had attended, but in the class of 2014, 13 percent were legacy students. At most Ivy League schools, 10 percent to 15 percent of those who end up enrolling are the children of former students.

"And with college enrollment at an all-time high, admittance has become tougher for everyone; acceptance rates are far lower than a generation ago. An applicant from the Harvard class of 1985 would have faced an admission rate of 16 percent, compared with 6 percent for the class of 2015."

A kidney donor argues that selling kidneys should be legal

An op-ed in today's NY Times, by Alexander Berger, scheduled to donate a kidney on Thursday: Why Selling Kidneys Should Be Legal

He'll start a non-directed donor chain, but donors are still in desperately short supply.

Here's his market design argument:


"It has been illegal to compensate kidney donors in any way since 1984. The fear behind the law — that a rich tycoon could take advantage of someone desperately poor and persuade that person to sell an organ for a pittance — is understandable. But the truth is that the victims of the current ban are disproportionately African-American and poor. When wealthy white people find their way onto the kidney waiting list, they are much more likely to get off it early by finding a donor among their friends and family (or, as Steve Jobs did for a liver transplant in 2009, by traveling to a region with a shorter list). Worst of all, the ban encourages an international black market, where desperate people do end up selling their organs, without protection, fair compensation or proper medical care.

"A well-regulated legal market for kidneys would not have any of these problems. It could ensure that donors were compensated fairly — most experts say somewhere in the ballpark of $50,000 would make sense. Only the government or a chosen nonprofit would be allowed to purchase the kidneys, and they would allocate them on the basis of need rather than wealth, the same way that posthumously donated organs are currently distributed. The kidneys would be paid for by whoever covers the patient, whether that is their insurance company or Medicare. Ideally, so many donors would come forward that no patient would be left on the waiting list.

In the end, paying for kidneys could actually save the government money; taxpayers already foot the bill for dialysis for many patients through Medicare, and research has shown that transplants save more than $100,000 per patient, relative to dialysis."

The role of recruiting in hiring and career choice

Matching is the part of economics that studies who gets what, for things that are not allocated entirely by price. So, if there's an application or admission or recruitment or selection process, we're probably in the domain of matching.

A recent article by Marina Keegan, a Yale undergraduate, points out that the high percentage of Ivy undergrads who go into consulting and finance may have to do with how well those places recruit: Another View: The Science and Strategy of College Recruiting.

She writes:
"Sometime between freshman fall and senior spring, an insane number of students decide – one way or another – that entering the banking industry makes a whole lot of sense. A few weeks ago I interviewed over 20 Yalies to try to figure out why.

"What I found was somewhat surprising: the clichéd pull of high salaries is only part of the problem. Few college seniors have any idea how to “get a job,” let alone what that job would be. Representatives from the consulting and finance industries come to schools early and often – providing us with application timelines and inviting us to information sessions in individualized e-mails. We’re made to feel special and desired and important."
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Vikram Rao, who brought the article to my attention, writes
"... I thought one of the interesting points of the article is that these companies do a very good job of getting to the best students quickly (seems like an unraveling market) by recruiting in the fall, spending lots of money on recruiting, and presenting students with a well-defined process. I know from personal experience having gone to Princeton that they also do a very good job of outlining the parameters of the job market (i.e. if you intern with us/apply for full time with us at this time, then you will receive an offer at time X for Y dollars with roughly Z probability). Their interview process is also extremely efficient. The article makes the point that most college students don't really know how to find a job. These companies eliminate a lot of this uncertainty by having such well-established recruiting timetables and processes.

"Having just gone through the post-collegiate job market, I can say that this alone is worth a lot. In addition to lower salaries, the majority of other professions do not present such a clean-cut "do this, then this, then this" approach to recruiting and instead require that you go through contacts or wait long periods of time without much certainty to get a job. The banks and consulting firms also do a good job of convincing applicants that "if you work here, you can do a, b, or c afterwards", whereas many other industries do not make such claims. This is an interesting market design perspective on I-banking and consulting recruiting - I don't think America's youth is suddenly much greedier than it once was and is drawn by large salaries. Certainly some people are, but not all. I think what the I-banking and consulting firms really offer is 1) they recruit early, 2) they offer a very well-understood process towards getting a job, and 3) a clear vision of your future (I make no claim as to whether or not this vision is accurate or not). Graduates of top schools are used to getting results when they put their minds to something and tend not to like uncertainty. "
******

A similar view, from the point of view of what career counseling offices do, is expressed by Peter Bozzo, writing in the Harvard Crimson: Profits and Bridges

"The more intriguing question is why students—many of whom, like me, were inspired to create during their years at Harvard—eschew careers in the more “creative” professions and pursue work in the financial world. Why are we creating profits instead of bridges?

I think that much of the answer has to do with the resources devoted to career counseling for students whose interests point them toward occupations outside the world of finance and consulting. Certainly some students enter this world because of the financial benefits, but for others it’s simply the most visible and defined career path after graduation. Students can meet with recruiters and interview on campus; the Office of Career Services provides extensive counseling for undergraduates pursuing finance or consulting careers. Many students work in internships during the summer after their junior year; by the end of the summer some have job offers in hand and can go through senior year with defined post-graduation plans while their friends frantically search for job listings and interview opportunities.

"Searching for a career outside finance or consulting often comes with more uncertainty than searching for a career within this profession. As a result, students often need to be counseled extensively when searching for opportunities in non-finance fields. Opportunities for such counseling currently exist at Harvard, but they often aren’t advertised extensively and can be overshadowed by the highly visible recruiters who descend on campus each year. The OCS could more effectively highlight its counseling opportunities for students interested in engineering, politics, or academia and could more aggressively reach out to students interested in these fields. Currently, OCS’s extensive finance career counseling services are not an example of a response to students’ demand for careers in these fields; instead, the supply of these services inflates demand for careers that might not otherwise be as attractive to students.

"As seniors near their thesis deadlines and eventually their graduation dates, thoughts of post-college plans inevitably hang over their heads. Right now, the ease of enter the consulting and finance fields means that students with diverse interests and creative impulses are streamlined into these professions, even if they’re more willing—and more suited—to entering other occupations. So why are we creating profits instead of bridges? It’s not because we’re uncreative; it’s because profits—and the careers associated with them—simply come easier."
***********
The Occupy Harvard movement seems to agree: Occupy Harvard Rally for Free Speech Targets Goldman Sachs Recruiting Event

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Of course, recruiting isn't something that can only be done by some kinds of employers.Teach for America is also known for the good job it does: see my recent post on that...

Teach for America's recruiting at Harvard

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And here's a report by Bryan Caplan on a paper about what hiring looks like (in contrast) at firms whose recruiters look at applications while commuting on the train and in other stolen moments :
How Elite Firms Hire: The Inside Story

The blackest of kidney black markets

Can some black markets be blacker than others? Two longtime observers of black markets for kidney transplants nominate some.

Ethan Gutmann writes chillingly of The Xinjiang Procedure: Beijing’s ‘New Frontier’ is ground zero for the organ harvesting of political prisoners.

"Thirty-six scheduled executions would translate into 72 kidneys and corneas divided among the regional hospitals. Every van contained surgeons who could work fast: 15-30 minutes to extract. Drive back to the hospital. Transplant within six hours. Nothing fancy or experimental; execution would probably ruin the heart. 

"With the acceleration of Chinese medical expertise over the last decade, organs once considered scraps no longer went to waste. It wasn’t public knowledge exactly, but Chinese medical schools taught that many otherwise wicked criminals volunteered their organs as a final penance. 

"Right after the first shots the van door was thrust open and two men with white surgical coats thrown over their uniforms carried a body in, the head and feet still twitching slightly. The young doctor noted that the wound was on the right side of the chest as he had expected. When body #3 was laid down, he went to work. "

*****

And Nancy Scheper-Hughes writes of The Rosenbaum Kidney Trafficking Gang, and of kidney black markets more broadly (as well as of her difficulties in getting others to see these things as she sees them).

"Some of the victims of US organs trafficking are bonded servants from Syria and Jordan brought into the US to provide kidneys to their patron royal families from the Gulf States. The Cleveland Clinic has a transplant wing that for many years has catered to these so-called “transplant tourists.” UCLA had its heyday with wealthy Japanese Yakuza crime “family members” who were given priority for liver transplants from the UNOS waiting list, livers that technically belonged to US citizens.

"So, Rosenbaum’s network, though extensive, represents only one of many forms of transplant trafficking into and out of the United States. Transplant trafficking is a public secret within the transplant profession, something that everyone knows about but which within the corporatist culture of the transplant profession — as secretive as the Vatican — is never discussed.
...
"Caught in the dragnet Rosenbaum admitted that he charged a lot to set up these illegal transplants in some of the best hospitals on the east coast, including Mount Sinai in NYC , Albert Einstein in Philadelphia, and Johns Hopkins in Baltimore.
...
"Nobody cared about, or even believed in, human trafficking for organs. I went to the media, to CBS, to 60 Minutes and then to 48 Hours which did send an investigative reporter, Avi Cohan, to meet me in Israel where we spoke to patients who had had “undercover” transplants at hospitals in NYC Philadelphia, the Bay Area, and Los Angeles. CBS decided not to do the exposé. I was stumped. No one wanted to accuse surgeons, or prevent a suffering patient from getting a transplant, even with an illegally procured kidney from a displaced person from abroad. The Israeli origins of the trafficking network did not help either. It smacked of bias, blood libel, or worse. “Don’t Indians and Pakistanis broker more kidneys than Israelis”, I was asked? Why pick on Israel?
...
"What I imagine is that the complicit surgeons loved the Rosenbaum option because they didn’t have to go through UNOS, the United Network for Organ Sharing, which until 2007, had nothing to do with living donors, related or unrelated. Hospital administrators loved it because foreign patients paid cash so there was no waiting for Medicare or insurance premiums. And there was minimal responsibility for the aftercare of the recipients or their kidney providers. Both were speedily returned to their respective communities and countries. Should they ever get caught red-handed, surgeons can cite patient confidentiality (their privacy oath), the hospitals could pretend they had been duped, the transplant coordinators could say that they followed the transplant protocols for living donors, but they are not, after all, detectives. Everybody wins. Lives were ‘saved’, transplant surgeons got to do what they do best, poor people got a ‘bonus’ for being charitable with their ‘spare’ kidneys, and everybody was happy.
...
"Meanwhile, complicit transplant doctors collude and protect each other, while the best ones tried to fix the problem from inside the profession without the help of the DOJ or the courts getting involved. Bioethicists argue endlessly about the “ethics” of what is in fact a crime and a medical human rights abuse. Economists and moral philosophers launch arguments based on rational choice theory for regulation rather than prosecution, as if prosecutions were going on every day. In fact, as the Rosenbaum history shows so well, human trafficking for organs is a protected crime. It is protected by the charisma and awe-inspiring ‘ miracle’ of transplant. The Rosenbaum guilty plea is the first prosecution in the United States for organs trafficking. On February 2nd Rosenbaum could be sentenced to five to 12 years in prison and a fine for illegally brokering organs in New Jersey. But the larger and deeper story of his international kidney dealings, his hired traffickers, kidney hunters, ‘enforcers’, money laundering operations, false charity organizations, Medicare fraud is yet to be told. And in the meantime, “life saving” for some at the cost of diminishing the lives of others ,the invisible kidney sellers of Chernobyl, Kiev, Nazareth, or the Negev desert, will continue undeterred.

Kidney sales and trafficking

There have been a number of recent stories about criminal organ-trafficking rings around the world.  Here's a long quote from the one that seems most credible, from Bloomberg (in which Frank Delmonico is among those quoted), followed by links to two related stories.

Organ Gangs Force Poor to Sell Kidneys for Desperate Israelis
"Aliaksei Yafimau shudders at the memory of the burly thug who threatened to kill his relatives. Yafimau, who installs satellite television systems in Babrujsk, Belarus, answered an advertisement in 2010 offering easy money to anyone willing to sell a kidney.

He saw it as a step toward getting out of poverty. Instead, Yafimau, 30, was thrust into a dark journey around the globe that had him, at one point, locked in a hotel room for a month in Quito, Ecuador, waiting for surgeons to cut out an organ, Bloomberg Markets magazine reports in its December issue.

...

"Organ trafficking is on the rise, as desperate people seek transplants in a world that doesn’t have enough donors. About 5,000 people sell organs on the black market each year, according to Francis Delmonico, an adviser on transplants to the World Health Organization.

It’s against the law to buy or sell an organ in every country except Iran, says Delmonico, who is president-elect of the Montreal-basedTransplantation Society, which lobbies governments to crack down on illicit procedures.

‘Exploit Shortages’

“There have been successes fighting organ trafficking around the world,” Delmonico says. “But organ trafficking continues to flourish because criminals exploit shortages of organ donors.”

Bloomberg Markets reported in June that U.S. citizens and others from the Americas suffering from kidney failure were going to Nicaragua and Peru to buy organs in a shadowy trade that injured and killed donors and recipients.

That U.S.-Latin American connection is dwarfed by a network of organ-trafficking organizations whose reach extends from former Soviet Republics such as Azerbaijan, Belarus and Moldova to Brazil, the Philippines, South Africa and beyond, a Bloomberg Markets investigation shows.

Many of the black-market kidneys harvested by these gangs are destined for people who live in Israel.

...

"Delmonico, a professor of surgery at Harvard Medical School, has spent the past six years lobbying governments and doctors around the world to combat organ trafficking. He says Israel’s government is cracking down.

The Knesset, Israel’s legislative body, passed the Organ Transplant Law in 2008, setting penalties, including imprisonment of up to three years, for buying and selling organs and requiring hospitals to scrutinize transplants by nonrelatives and foreigners.

Breaking up Gangs

In an effort to draw more legal organ donors, the law also offers volunteers compensation for lost wages and travel expense and provides them with additional health insurance. Israeli police have been among the most aggressive in the world against organ traffickers, breaking up three international gangs since 2008.

The government has also banned insurers from funding most transplants outside Israel.

The dearth of available organs in Israel has spawned a new class of criminals, mainly immigrants from the former Soviet Union, says Jerusalem Police Superintendent Gilad Bahat.

Investigators on five continents say they have uncovered intertwining criminal rings run by Israelis and eastern Europeans that move people across borders -- sometimes against their will -- to sell a kidney.

“The criminal here is the middleman who profits from the sick and the poor,” says Bahat, who investigated an organ- trafficking ring in Jerusalem. “It touches my heart that people will sell part of their body because they need money to live.”

...

"The Brazilian case is still wending its way through international courts. In November 2010 in Durban, Netcare Ltd. (NTC) -- South Africa’s largest hospital company -- pleaded guilty to violating the Human Tissue Act, which prohibits buying and selling organs.

Netcare paid 7.8 million rand ($848,464) in fines and penalties. It admitted to allowing 92 transplants in which donors from Brazil, Israel and Romania sold kidneys to Israeli patients. Four doctors are awaiting trial on trafficking charges.

In Brazil, 12 people connected to the Netcare case were convicted and jailed, with sentences from 15 months to 11 years.

In Kosovo, Ratel, who has dual citizenship in Canada and Great Britain and was appointed by the European Union to help restore the country’s criminal justice system, is overseeing a pivotal organ-trafficking case. It includes participants and victims from Belarus, Moldova, Turkey and four other countries.

Center for Trafficking

The EU has administered the courts in Kosovo since 2008, the year the country the size ofConnecticut declared independence from Serbia after a civil war. Ratel, who arrived in March 2010 as part of the European Union Rule of Law Mission in Kosovo, says the country has become a center for organ trafficking.

Ratel built a case against nine doctors, hospital administrators and recruiters on charges of buying and selling kidneys for patients in Georgia, Germany, Israel, Poland and Ukraine, as well as Canada and the United States.

...

"“This is organized crime,” Ratel says. “There is significant coercion and threats of violence.”

Organ traffickers search the world for hospitals willing to perform illicit transplants. Sometimes, sellers are flown to cities just to wait for procedures, and then traffickers move them to other parts of the globe when they find a recipient and a hospital willing to cooperate.

While the illegal organ trade may be run by seasoned criminals, it depends on the complicity of doctors and hospitals, says Oleg Liashko, a member of Ukraine’s parliament.

“I doubt this could happen without the hospital and doctors knowing about it,” says Liashko, who has investigated organ trafficking and is calling for more-severe criminal penalties in organ transplant laws. “They either know or look the other way because of the money involved. This is corruption, pure and simple.”

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Here's a story that follows up on the U.S. side: Kidney Broker Said to Use Johns Hopkins in Organ-Traffic Case
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And here's a graphic (but probably less credible) story from Egypt: Refugees face organ theft in the Sinai

Lectures on market design by Clayton Featherstone, Eduardo Azevedo, and Jacob Leshno

Good market designers aren't necessarily good teachers, but three recent lectures in our market design class (two of them yesterday) revealed that some of them are great. Here are three who you could get to teach your students next year:

Clayton Featherstone

Eduardo Azevedo

Jacob Leshno

Seattle backs away from transparent (strategy-proof) school choice

It appears that, after a decade of using a school choice system based at least in part on a deferred acceptance algorithm, in the course of making some other changes, Seattle schools may have backed into using a non-strategy-proof immediate acceptance algorithm instead.

Here's a Q&A on How to Rank Schools for the Seattle Public Schools Choice Process for 2010-2011

"My true first choice option school is very popular and hard to get in to. If I list it first on my School Choice form, am I throwing away my chances of getting in?

"For the 2010-2011 school year, you would not be throwing away your chances.

"This year the district is using what it refers to it as the Barnhart/Waldman processing algorithm, named after the school board members who suggested it. It is more properly called the Gale/Shapley “Stable Marriage” algorithm. This algorithm is well studied and understood by computer scientists and mathematicians. It has been specially designed so that there is never an advantage to listing your school choices in any order other than your true preference. The Gale-Shapley paper referenced below is highly recommended. It is well written and does not require special software or mathematics skills to understand. In addition to being used for school assignments in many districts, a variation of this algorithm is used for the yearly matching of graduating medical students to residency programs.

"Note that this will change when the NSAP is complete. The final plan calls for using a simpler algorithm in which families who list a school as their first choice have priority over families who list the school second choice or later. This can result in cases where your best chance for getting into one of your choices is to “lie” and list your second choice first."
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And here's an analysis by a concerned parent, Chris MacGregor, who happens to be a software engineer and took the trouble to examine the school district's school choice algorithm source code: Serious Problem With New Student Assignment Plan
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It sounds like the plan may have been passed hastily, with the change in algorithm being a detail in a more politically charged discussion: Student-assignment plan passed behind closed doors.
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Here's some background on school choice in Seattle, in the form of court documents from 2001, about the use of race as a tie-breaker in school assignment.
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Here's a 1998 story about the adoption of the deferred acceptance algorithm, with some discussion touching on strategy-proofness and making it safe to submit true preferences: New Student-Assignment Plan Set
"The change, devised by board members Scott Barnhart and Nancy Waldman, will extend the district's "hold harmless" rule to all choices. Currently, when students apply to alternative schools, they don't lose their place in line for a regular school.

But, when students apply to popular regular schools and don't get in, the computer bumps them down the list until it finds a school with a vacancy - even though they may have siblings in their second-choice school or may live right across the street.

Barnhart and Waldman's system will ensure that more students get their real second choice and eliminate bumping down to lower and lower choices, which has discouraged parents and driven some to send their children to private schools, according to Waldman.

At last night's meeting, Waldman said that had happened to her.

Space wasn't available at her first-choice kindergarten, so her daughter was assigned to a school Waldman hadn't even listed. So, Waldman put her daughter in private school for three years."

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Note that Scott Barnhart is a medical prof at U. of Washington, who was matched to a number of residency positions, and so would have been familiar with the medical match.
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And here's a 1996 story (short on detail, but gives some of the political atmosphere) about the run-up to the adoption of the deferred acceptance algorithm that is apparently on its way out: Vote On Reform Plan -- School Board To Tackle Student-Assignment System
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For those of you new to discussions of making school choice simple and safe for parents to reveal their preferences over schools, see the papers here about New York and Boston, and see the Institute for Innovation in Public School Choice which has more recently been involved in the design of school choice programs in Washington D.C., Denver, and New Orleans.

HT: Parag Pathak

Paying bone marrow donors is now legal (depending on how it's done)

Joshua Gans forwards me this, just in on the AP wire from the Washington Post: Court says some bone marrow donors can be paid, overturning law that made compensation a crime

But the ruling makes for some odd distinctions:

"A federal appeals court ruled Thursday that most bone marrow donors can be paid, overturning a decades-old law that made such compensation a crime.

"In its ruling Thursday, the 9th U.S. Circuit Court of Appeals said a technological breakthrough makes donating bone marrow a nearly identical process as donating blood plasma. It’s legal — and common — to pay plasma donors. Therefore, the court ruled, bone marrow donors undergoing the new procedure can be paid as well and are exempt from a law making it a felony to sell human organs for transplants.

"The unanimous three-judge panel of the court did say it remains a felony to compensate donors for undergoing the older donation method, which extracts the marrow from the donors’ bones.

"The ruling overturns a lower court decision barring compensation for all bone marrow donations."
****

See my previous post on that lawsuit here.

What does the NSF do? What should it do? Reports from and about the Social, Behavioral and Economic Sciences, and Dec 1 Webinar

What should the National Science Foundation division of Social, Behavioral and Economic Sciences be doing? They asked and we answered, and now they're having a webinar to report the results: here's the email announcement.

Dear Colleague:

Just a year ago, we stopped accepting SBE 2020 white papers.  The papers were released to the public in February and now we have completed a report, Rebuilding the Mosaic, which briefly describes the process, some of the themes we identified, and the programmatic implications of what we learned.  The report is available at: http://www.nsf.gov/sbe/sbe_2020/index.cfm, and we expect to host a webinar/town hall on December 1.  The login details are below.

All of your papers contributed to our thinking about the future of research in the SBE sciences, and we continue to be amazed at and grateful for your participation.  I hope that you will take a moment to read the report – all of the papers are listed in Appendix 5.  For the foreseeable future, we also expect to maintain the website (http://www.nsf.gov/sbe/sbe_2020/index.cfm), where the papers can be individually found and downloaded, since the report cannot substitute for the many ideas that you have shared with us and with the American people.

Although I have written to you before to express my appreciation, one more time, let me say:

Thank you.

Myron Gutmann

Directorate for the Social, Behavioral, and Economic Sciences

National Science Foundation

Details for participating in the webcast:

Date: December 1 at 11 a.m.

Webcast Title: Rebuilding the Mosaic: Listening to the Future in the SBE Sciences

Dial-in phone number:  888-469-1936

Verbal Passcode: Mosaic

Webcast URL:  http://live.science360.gov/    (will be active on Dec. 1.)

Webcast username: webcast

Webcast password: mosaic (case sensitive)

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Earlier, in a statement to Congress, Dr. Gutmann highlighted some of the tangible benefits derived from market design work that the NSF has supported:

Statement of
Dr. Myron P. Gutmann,
Assistant Director, Social, Behavioral, and Economic Sciences 
National Science Foundation

Before the Committee on Science, Space, and Technology Subcommittee on Research and Science EducationUnited States House of Representatives

"3.1 SBE research has resulted in measurable gains for the U.S. taxpayer

Matching markets and kidney transplants. Researchers in economics at Harvard University, the University of Pittsburgh, and Boston College have applied economic matching theory to develop a system that dramatically improves the ability of doctors to find compatible kidneys for patients on transplant lists. Organ donation is an example of an exchange that relies on mutual convergence of need. In this case, a donor and a recipient. This system allows matches to take place in a string of exchanges, shortening the waiting time and, in the case of organ transplants, potentially saving thousands of lives.¹⁰ Similar matching markets exist in other contexts, for example, for assigning doctors to residencies.

Spectrum auctions. Spectrum auctions have generated $54 billion for the U.S. Treasury between 1994 and 2007 and worldwide revenues in excess of $200 billion. Researchers at Stanford University and the California Institute of Technology, supported by grants from SBE, developed the simultaneous ascending auction mechanism as a technique for auctioning off multiple goods whose values are not fixed but depend on each other. The mechanism was then tested experimentally and further refined before being implemented by the Federal Communications Commission. In this auction, all of the goods are on the selling block at the same time, and open for bids by any bidder. By giving bidders real-time information on the tentative price at each bid stage, bidders can develop a sense for where prices are likely to head and adjust their bids to get the package of goods they want. This process enables "price discovery," helping bidders to determine the values of all possible packages of goods. These auctions not only raise money, but ensure efficient allocation of spectra so that the winners of the auction are indeed the individuals who value the spectra the most. Applied with great benefit for the U.S. taxpayer in the FCC spectrum auctions, this method has also been extended to the sale of divisible goods in electricity, gas, and environmental markets.^11"

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Here's an earlier post on congressional testimony:

NSF Social, Behavioral and Economic Sciences--attack and defense

School Choice and Education Reform at Brookings

The Brookings Institute hosts a session on School Choice and Education Reform, featuring Joel Klein, who was chancellor of New York City schools when the high school choice plan there was revamped.

"Large numbers of parents choose where their children are educated by moving to a school district or neighborhood that gives them access to good public schools, but school selection through residential choice is not an option for parents who are poor or unable to relocate. These parents are forced to take whatever is available to them through their local school district, and the schools that serve them do not have to worry about competition. While some districts are satisfied with this status quo, others have embraced policies that make school choice widely available and expose schools to the consequences of their popularity.

"On November 30, the Brown Center on Education Policy at Brookings will host a discussion exploring the critical role of school choice in the future of education reform. Senior Fellow and Brown Center Director Russ Whitehurst will preview the Education Choice and Competition Index – an interactive web application that will score large school districts based on thirteen categories of policy and practice – and announce the Index’s initial rankings of the 25 largest school districts in America. 

"Following his remarks, Joel Klein, the executive vice president of News Corporation and the former New York City Schools chancellor, will deliver a keynote address offering his reflections on the successes and challenges surrounding the expansion of public school choice in New York City"
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The Brookings Institute has also published a companion website and report: The Education Choice and Competition Index: Background and Results 2011. The report contains a ranking of school choice plans around the country.

One of the criteria is the "Assignment Mechanism

Our framework places considerable emphasis on the processes by which students are assigned to schools, treating it as a major category for evaluating choice and competition.  The antithesis of choice is an assignment mechanism based on residence, with little or no chance of parents being able to enroll their child in a school other than the one in their neighborhood. In contrast, the paragon of assignment systems is one in which students are assigned to schools through an application process in which parents express their preferences and those preferences are maximized.  We score districts based on where they stand with respect to these two poles. "

The report is here: The Education Choice and Competition Index: Background and Results 2011.

And it's conclusion (drumroll....) is

"The high score overall goes to New York City, with Chicago in second place.
Both received letter grades of B. The low score goes to Orange County, Florida,
which received a grade of  D. New York  performed  particularly  well in  its
assignment mechanism,  its provision of relevant performance data,  and  its
policies and practices for restructuring or closing unpopular schools.  Chicago, in
contrast to New York, has more alternative schools, a greater proportion of
school funding that is student-based, and superior web-based information and
displays to support school choice.  If the best characteristics of Chicago were
transferred to New York and vice versa, both would receive letter grades of A."

Early admissions and early decision

A number of stories follow this year's trends in early admissions (with Harvard back in the early game).

Early applications on rise at colleges
"High school seniors hoping for an advance nod from Harvard University have swamped it with an unusually large group of early applications that represent the most economically and ethnically diverse set of students in the school’s history.

"Harvard canceled its early action program in 2006 because of worries that privileged applicants were getting an edge and holding back attempts to recruit a more diverse student population, a fear backed up by studies showing that early deadlines tend to draw a whiter, richer applicant pool than conventional winter and spring cutoff dates do.

"But the school reinstated the program this year and announced yesterday that it drew 4,245 applicants, an increase from the 4,010 who applied in 2006. Almost 72 percent of this year’s applicants need financial aid, and numbers of African-American, Latino, and Native American students are all up."
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see also

The Flock of Early Birds Keeps Growing
"In the end, the story of early-action in 2011 is not really about what happens at the most-selective colleges (they will be just fine, by any measure). The story’s really about how, in the wild ecosystem of enrollment, one institution’s actions and policies will affect another—and what that will mean for individual students down the line.

"At Georgetown, Mr. Deacon suspects that Harvard and Princeton siphoned many early applicants out of his institution’s pool this year. So he expects that Georgetown’s yield for early-action applications, which dropped from 60 percent to 46 percent back in 2007, will go back up to where it used to be, which would be good news for the university."
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Harvard College Receives 4,245 Early Applications
"“Early admission programs tend to advantage the advantaged,” then-Interim University President Derek C. Bok said in a statement in 2006. “Students from more sophisticated backgrounds and affluent high schools often apply early to increase their chances of admission, while minority students and students from rural areas, other countries, and high schools with fewer resources miss out.”

Harvard and Princeton retreated from that stance earlier this year, with each announcing the return of early admissions within hours of each other. Though Harvard administrators had hoped other colleges and universities would follow suit in eliminating early admission, that trend never materialized.

In the February announcement of early admission's return, Fitzsimmons argued that the circumstances had changed and that a broader group of students sought to apply early."

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This story in the NY Times Choice blog starts with a good table listing schools with binding early decision (including some universities with two rounds of binding early decision), non-binding early action, and restrictive/single-choice early action. (They even have a printer-friendly version of their chart.)

Quick links to economics job market candidates, from the NBER

If you are hiring new Ph.D. economists this year, it's time to begin inviting them to interviews at the ASSA meetings in January. If you haven't started doing your homework yet, this big list of candidates from the NBER might help. It lists Ph.D. Candidates in Economics, in alphabetical order from Alabama (1) to Yale (18) (where the numbers in parenthesis are the number of candidates, by my count).

(Some of the NBER's links seem to be from last year, here's Penn State's list for this year (7).)

Sampling from the NBER's big list yields some big producers of new Ph.D.s (and I have surely missed some). But see the ones below, with ten or more new Ph.D.s on the market.
I wouldn't have guessed this order.

Harvard (31), of whom I'm particularly fond of these 5);
NYU (25);
Northwestern (25);
Cornell (24)
MIT (23);
UCLA (21);
UC Davis (20)
Maryland (20):
OSU (20)
Chicago (19);
Columbia (19);
Wisconsin (19);
LSE (18);
Michigan (18);
Yale (18);
Princeton (16);
Stanford (16);
UCSD (15):
BU (14);
Berkeley (13);
Brown (13)
Duke (12);
Penn (12);
Illinois (10);
Minnesota (10);
Rochester (10):
Cal Tech (9) [I know, 9 isn't double digits...]