The Hidden World of Matchmaking and Market Design

Roth Cover

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.

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.

Comments

Is this economics or operations research?

Yes.

Industrial Organization and Operations Research are so incestuously related as to really be one field.

"a better PR coup for the U.S. on the world stage": the Guardian would headline it "America exploits Africans".

You really do not know what IO is if you think that.

The decision to donate cannot be based on financial gain - economists may see that as a market failure, but do we want poor, living people selling their organs to the highest bidder. Yet, it seems that the organ exchange program devised by Mr. Roth does just that by offering free organ transplants in developed country X to people in poor country Y if living (not dead) people in poor country Y donate their organs to developed county X. Most organs are harvested (that's the term used) from dead people who consented to the donation of their organs while very much alive. I think it would be a great idea to expand the data base of potential dead donors to poor country Y, and to offer "free" transplants to people in poor country Y if they consent to donate their organs but only when they are very much dead. Indeed, the number of organs available for donation from dead people, dead people here as well as dead people elsewhere, could be greatly enhanced with a program designed to encourage people to donate their organs at death. In most states, hospitals and other health care facilities are required to ask patients if they have a living will and a health care surrogate, and to supply the necessary forms if they don't. Why not expand that policy to include encouragement to donate their organs. Of course, paranoid types would worry that if one agrees to donate one's organs, the hospital staff is less likely to take extraordinary measures to save the patient's life, valuing her organs more than her life. I suppose paranoid people may be right some time. But that risk is far more acceptable than encouraging poor, living people to sell their organs to the highest bidder.

Participants in combat sports such as boxing, mma, football might as well be selling their organs.

Shh. You aren't supposed to point out that this moral indignation isn't logical.

Poor people should not have the right to save lives or make money, nor should we encourage them to do either

I just finished reading Roth's book as well, and really enjoyed his "plain words" explanation of the Gale-Shapely proof identifying the conditions of stability of matches. Also, the next-to-last chapter on "repugnant" transactions is great, and I now have a broader view of what a market is

"the broader audience of intelligent readers."

Seductive marketing...

straight to the wish list.

In all these cases (organ donors, residency matching, pre school, etc) the matching algorithm is implemented by a central authority that plans ahead. How come it is not "central planning"? Is it the case that only failed attempts at central planning qualify for the moniker, while successful ones are examples of something else, maybe spontaneous order with a little help from my friends? (This comment addresses the WSJ review)

Would you call other matchmakers like Uber "central planning"?

They are very similar to governments, and they enact their own regulations. The main difference is that "citizens" can leave, but not vote. For an insightful discussion (that precedes Uber but applies to it), see here: http://avc.com/2010/06/platforms-as-governments/

In the absence of laws against it, we would see advertisements to sell kidneys. This is another case of regulation begetting regulation.

Just as any firm is...centrally planned.

The critique of central planning consists in its forbidding (or making moot) decision making outside of a small central body. Roughly, this is because the planners have no direct incentive to get the plan right (they seldom suffer a shortage that pinches them) and (2) as practical matter, they have to ignore a huge amount of changing information in making decisions. In contrast, market actors are directly profit from providing the best value, and their decision making is distributed and can use a great deal more information.

The critiques do not easily apply to a kidney exchange. I think it is closer to creating a regulated market that does a better job than central planning alone. (Sometimes ethical consideration demand the regulation.)

Curious that economists seem to consider residency matching a "successful" example given the history of lawsuits that point out the system enables hospitals to collude, depress wages, keep abysmal working conditions (e.g., 30 hour shifts), endanger patient safety, etc. in the name of "optional" training

Moreover, the system also seems to lower supply (e.g., keeping out or discouraging family-minded people from post grad medical training) and enact artificial barriers without even making the claim / usual justfication of higher quality (whether true or not)

So again, what exactly is praiseworthy about the system? That an economist made it and so everyone should ignore how it rejects most of the tenets of the economists on this site (and the commenters)?

@V You are quite right that matching algorithms can be skewed to benefit one side more than the other side, but they seldom harm either side.

You should parse out which of you list of harms are due to a matching system and which are due to a poor (largely state controlled) medical education market. Residencies were lousy before the matching system, too; fundamentally, residents have very little market power.

Of course, there's even a better solution to the kidney / dialysis problem: fix the obesity epidemic. One thing I'd support is to make your Federal income tax rate equal to your body fat percentage.

PR coup? PR nightmare. We would be painted as rich vampires praying on the poor and sick to prolong our own lives.

So I think. The instinctive reaction of most people will be recoiling in disgust and asking why the rich Americans don't save the Nigerian's life without asking something in exchange as little Good Samaritans should. Never mind most of them are doing nothing to help the Nigerian s8ck guy.

Agree with V above. The residency matching system in the U.S. cannot be seen as successful.

"Please, sir, I want some more..." Even Dickens would recoil from pushing organ transplant market efficiencies beyond the pale. Markets break down for a variety of reasons. I get the point that inefficiencies here result in sub-optimal outcomes for the wealthy nation citizen. But, having worked in West Africa for many years I am afraid a transplant market sited there would amaze even the most free market minded Smithian around. The terms of trade would not adjust fast enough to protect the unfortunate poor country "donors'. But it would create many reporting opportunities for the global media.

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