The Matchmaker

The Boston Globe’s Leon Neyfakh has a good piece on Alvin Roth:

Roth has always been interested in the idea that sophisticated theories can be used to solve practical problems. As a graduate student at Stanford University, he earned a doctorate in operations research, which uses math to help organizations run more smoothly. Roth was just 19 when he started at Stanford, having quit high school without graduating at the age of 16 and finished Columbia University in three years. At just 22, he got a job as an assistant professor at the University of Illinois, and in 1977, at just 25, he was granted tenure there….

In the years since, Roth has emerged as a rare figure in the academic world: a theorist willing to dive into real-world problems and fix them. After helping the med students, he designed a better way to assign children to public schools — the system now used by both Boston and New York. He also helped invent a system for matching kidney donors with patients, dramatically increasing the number of donations that take place each year. More recently, he and one of his students have been talking with Teach for America about improving the system it uses to deploy volunteers around the country.

… Inspired by Roth’s work, these rising economists are also setting their sights on real-world problems. Some are looking at dating websites; others are interested in how universities could do better at scheduling their students’ classes. Like Roth, all of them envision a world in which economists, as unlikely as it may seem, are recognized as society’s mechanics.

One minor note, kidney exchanges are great but I wouldn’t describe the increases as “dramatic.” We will need, in addition, other ideas to alleviate the shortage of transplant organs.


This is the last thing one would expect to see on a Libertarian economics website.

We don't need the heavy hand of an economist to design markets.

Markets arise spontaneously.

Like in healthcare financing. Like in matching interns to hospitals. We just need to free everyone to design their own contract. Its just that simple.

Or is it.

Right, a professor who improves the decision-making of private actors and of already centralized systems really disproves the basis of the free market.

You know an efficient market requires intelligent participants, just as your democratic elections require intelligent voters.

Who tools the technocrats?

This is spontaneous. If the government went and mandated that every market in some area abide by the rules of this guy, that would be government fiat, and it probably wouldn't work so great. Instead you have private individuals working to come up with better solutions and deciding what works best for their situation.

This is the last thing one would expect to see on a Libertarian economics website.

It is? How long have you been hanging around here? Notice that Alex didn't endorse - he merely reported.

True, he didn't endorse.

I do think it is ironic, though, that people talk about the "heavy hand of government", and are the same time willing to accept the "heavy hand" of an economist designing a market mechanism where the market has failed.

I would expect to see the Libertarians attacking economists who use mechanism design as much as they attack Krugman. Afterall, both interfere with the spontaneous natural order of things and the preference for the status quo.

We live in the best of all possible worlds.

And, Paul, if you don't think economic market mechanism design is all that different than some of the behavioural economics mechanisms proposed by Thaler/Sunstein, you have to believe that economic Gods created some markets but not others.

I am waiting for those who attack Sunstein and Thaler to point out the difference between one form of mechanism design ala Roth than another ala Thaler.

Maybe they can't see the similarities because it is staring them in the face.

True, he didn’t endorse.

Good. Hold that thought in your mind. Hooooooooooold it.....

I do think it is ironic, though, that people talk about the “heavy hand of government”, and are the same time willing to accept the “heavy hand” of an economist designing a market mechanism where the market has failed.


Some people see market failure all over the place, even when it has not failed. And, by market failure, you also have to define what is the optimal market, which also has a normative aspect to it.

All of which is to say that those who claim that ideological purity for reliance on markets are some of those who would design a market, which is to say again, some do not see the heavy hand of an economist but only see the heavy hand of government, when in many cases they may be the same.

An economist sucked into the rent-seeking milieu of government is unlikely to be a good economist. Many at MR have made that point.

Bill, I think you've been reading and commenting at MR for a while. You should be able to elucidate some of the views you've read here.

Since we are all prone to bias, I have a rule of thumb that helps me accurately gauge when I am more likely to be right than my counterpart in a debate. If I can elucidate my opponent's point of view but he or she cannot elucidate mine, I am more likely to be right.

I propose an exercise for you: when commenting at MR over the next week, only argue for positions that you think us libertarians hold. Make the strongest case possible. Your arguments opposing MR commenters in the future will become wildly more effective as a result - I guarantee it.

Fine piece of ad hominem, but you haven't answered the argument.

Alex, for a long time many economists have been embracing engineering (I don't remember, however, anyone that called himself a mechanic). I'm sure you are familiar with the long discussion about economists as social engineers so I'm surprised that you have only a minor note to add to the piece on Roth and one focused on an issue of your special interest. I'd have expected you to correct the author about his misunderstanding of the interests and activities of academic economists.
Bill, follow my advice --vote with your feet and move to paradise (from your comments I got the impression that you like Tom Friedman and may like to move to China --if you decide to do it I can write you a recommendation letter to work at PBC).

I was here first, and as I understand it, you are in a different country. From your comments, I detect that you used to call people communists who disagreed with you, at least by implication, that is what you are saying.

Your statement, " (from your comments I got the impression that you like Tom Friedman and may like to move to China –if you decide to do it I can write you a recommendation letter to work at PBC" is appalling.

Follow my advice: be rational and cut the name calling.

I worked more than 3 years in China in the 1990s and I still have some friends in PBC. I don't remember any of the many Chinese with whom I worked to argue with me about my advice on how to reform state enterprises and the banking system.
Sorry, I got the wrong impression about your views on Tom Friedman. Neither Dan Quayle was JFK nor you are TF. Maybe you haven't heard that TF has been promoting the China's authoritarian model to solve U.S. problems, or maybe you don't have a sense of humor.

And again be rational --stop your misery and vote with your feet.

Where in your imagination did you get anything about my views on Tom Friedman??? Point to it.

Maybe you meant Tom Fredman. He was our mailman when I was a kid, and always looked up to him.

I still did not receive an apology for your statement calling me a communist. My comment was that economists can be just as authoritarian in designing market mechanisms as any government, yet economists do not see themselves as the heavy hand when they are the market designers. Disagree? Fine. But, cut the name calling.

I don't want to add to your misery but I must share with you this report
I'm sorry that the great recalculation is hurting you and all American males (don't buy Arnold Kling's story that unemployed males are enjoying life). I hope you find your paradise soon so you can vote with your feet.
In the meantime I'll tell TF that you think that I think he's a communist, but that you are not TF because you are not a communist, you are just another (please fill the blank).

E. I'll fill in the blank for you: "Great and Wise Person Whom I Admire."

Bill, and E.,

I edited a whole book on making markets/economists as engineers etc, Entrepreneurial Economics!


And, don't take my comments as critical of mechanism design! Or of finding the most efficient way of doing things. But, as I said above, some do not see the heavy hand of an economist who designs a mechanism but only see the heavy hand of government, when in fact, mechanism design often involves the government to enforce the rules or develop a consensus of the rules.

My simple point is that mechanism design has normative aspects and has goals and objectives that people who either participate in the exchange or who are affected by it have voice. Mechanism design is the act of a regulator, or else you wouldn't need to design anything.

Libertarians already agree that the free market requires a regulatory mechanism, and that private actors can improve efficiency by regulating their own mechanisms.

The difference is, the only forced central regulatory mechanism is the minimal law against violence and fraud, the basic state of mutually equal liberty and security.

You need to relearn the basics.

I'm confused. If some rules for operation of the market have to be set, what difference does it make whether they are set by some people or by those same people with the advice of an economist?

You are right, and they often are.

Obviously, you're not an economist...

Social mechanics... Be afraid. Be very afraid.

Alex wrote about mechanism design here, when it resulted in an econ Nobel.

What I find ironic is that Bill is complaining about how a market failure required ideas like Roth's (and as mentioned in the article, he deals with problems that arise without "markets" in the traditional sense), when one of the biggest problems (kidney shortages) has basically been solved in Iran but can't be here because the government prohibits selling kidneys! I don't want into an ideological markets vs government thing, but that is the elephant in the room Alex alluded to and strangely hasn't received mention in the comments. For my part in "pulling the rope sideways", I'll say that Austrians (like Richard Florida) over-rate the importance of alert entrepreneurs. As Edison said, it's 1% innovation (like Roth's) and 99% perspiration. Although innovation is something of a public good that can be widely replicated once demonstrated.


I apologize in advance because I rarely attend to the conversations here and don't have an ear for intelligent dogma, but when you say that markets are spontaneous, how do you reconcile then the data from the original bid/ask auctions done by Edward Chamberlin and Vernon Smith? Design of auction mechanism mattered, without an intelligent design, you don't get the wonderful, if they are, properties of prices that clear according to the predictions of supply/demand postulates.

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