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Patt Morrison Asks

Alvin Roth, Nobel matchmaker

Roth earned his 2012 Nobel Prize in economics for market design and matching theory — creating ways to pair 'buyers' and 'sellers' happily and fairly when price isn't a primary consideration.

November 13, 2012|Patt Morrison
  • Alvin Roth, a Harvard Business School professor who is currently a visiting professor at Stanford University, reacts during an economics class after receiving a toast from students for being awarded a Nobel Memorial Prize in Economic Sciences.
Alvin Roth, a Harvard Business School professor who is currently a visiting… (Darryl Bush / Associated…)

Alvin Roth earned his 2012 Nobel Prize in economics for market design and matching theory — creating ways to pair "buyers" and "sellers" happily and fairly when price isn't a primary consideration. For instance? Kidney exchanges, in which cost can't legally play a role but donors and recipients with just the right assets and needs still must find each other. Roth's algorithms can be used to make good matches in even the thorniest situations: bringing the lovelorn together with potential mates, and bringing together the right charter and public schools with the right students.

The professor just made his own school match, leaving Harvard to return to Stanford, where he did graduate work. Roth won the Nobel at the same time as UCLA's Lloyd Shapley, whose game theory work engaged him as a student. When the first call came from Stockholm last month, Roth slept through it; Stockholm called back.

Most economic big thinking seems so theoretical; yours has everyday applications.

Market designers try to help marketplaces work better, and we have a very broad view of what's a marketplace.

Your economics doesn't sound like "the dismal science" at all.

Economics is about being human. We study how people get along with each other, how they coordinate, how they compete, how they mate and match, what kind of choices they make at critical junctures. Not dismal at all. I think of economics as a form of higher gossip. These are economic questions, but they're also very human questions.

You based your work on calculations developed by UCLA's Lloyd Shapley (and his coauthor David Gale).

They thought of their work as being a very abstract mathematical formula. I saw a connection between operating marketplaces and the algorithm that was in [their] 1962 paper.

Before that, was the technical term for this sort of matchmaking "a crapshoot"?

It's a crapshoot because money isn't what decides it precisely. It's not a crapshoot who drives Rolls-Royces. If you have the money and you want a Rolls-Royce, you can have one. But if you have the money and want to go to Stanford, you can't just choose to go to Stanford. You also have to be chosen. There are lots of important markets like that. You can't just choose to work for Google; you have to be hired.

These are two-sided markets, where both sides have preferences and both sides make choices. It's a mistake to think money doesn't play any role, but economists have for a long time focused on commodity markets where money decides everything, [where] price adjusts until supply equals demand. We try to understand the market-making process for somewhat more complicated markets than commodity markets.

You began by working out a formula for matching medical students with hospital residency programs.

Because residency programs pay a salary, money is a factor, but it's not the essential factor. When you're trying to get a [residency] or a place in college, when you're trying to get a kidney, [efficient] market design depends on details. Arranging matches for kidney patients and donors is very different from arranging places in schools. We try to create a marketplace with a lot of possible transactions, that deals with the congestion of many possible transactions and that makes it safe for people to do their transactions. But it's different each time.

The New England Organ Bank organized a kidney exchange using your ideas. There aren't many Nobel economists whose work saved lives.

I'm a little uncomfortable with that description. We helped our surgical colleagues organize their work so they can save lives. You can't do kidney exchange without the cooperation of a lot of people.

Do you have an opinion on whether the organ market should be pecuniary?

That's a big and controversial question. I know people with opinions on both sides. The shortage of transplantable organs is growing, not diminishing, even though we have great successes at using organs more efficiently and eliciting live donor organs more efficiently with kidney exchange. So I'm at least open to the discussion.

One interesting non-money factor you consider is repugnance.

When I speak of repugnant transactions, I mean transactions some people don't want to do and other people don't want them to do. People have strong intuitions about economic transactions, and economists sometimes fail to appreciate the role these play. It's against the law to buy and sell kidneys. That's one of the reasons they're such a scarce resource. I don't think there's a law in California against eating cockroaches, but nobody wants to eat cockroaches.

You can eat horse meat in many places around the world but hardly at all in the United States, and it's a felony in California. The reason there's a law against eating horse meat isn't that nobody wants to eat it; some people do want to eat horse meat, and other people don't want them to. So economics is much more than buying and selling things. Economics is one way of looking at how we organize ourselves as human beings.

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