The Hidden World of Matchmaking and Market Design

Al Roth’s Who Gets What and Why: The Hidden World of Matchmaking and Market Design is an excellent addition to the pantheon of popular economics books. It’s engagingly written, covers new material and will be of interest to professional economists as well as to the broader audience of intelligent readers.

I review the book more extensively for the Wall Street Journal. (Google the title, Matchmaker, Make Me a Market to get beyond the paywall for non-subscribers). Roth is well known for helping to design kidney swaps–when donor A and patient A’ and donor B and patient B’ are mismatched it may yet be possible for A to give to B’ and B to give to A’.

Mr. Roth, however, wants to go further. The larger the database, the more lifesaving exchanges can be found. So why not open U.S. transplants to the world? Imagine that A and A´ are Nigerian while B and B´ are American. Nigeria has virtually no transplant surgery or dialysis available, so in Nigeria patient A’ will die for certain. But if we offered a free transplant to him, and received a kidney for an American patient in return, two lives would be saved.

The plan sounds noble but expensive. Yet remember, Mr. Roth says, “removing an American patient from dialysis saves Medicare a quarter of a million dollars. That’s more than enough to finance two kidney transplants.” So offering a free transplant to the Nigerian patient can save money and lives.

It’s hard to think of a better example of gains from trade (or a better PR coup for the U.S. on the world stage).

One of the most interesting aspects of the book is that Roth has created a new typology of market failure but a very different way of addressing such market failures. Read the whole review for more.