By Leon Neyfakh
This morning, it was announced that Al Roth and Lloyd Shapley had received the 2012 Nobel Prize in Economics. Roth, whose pioneering work as a so-called market designer has transformed how we assign kids to schools, how we match kidney donors with patients, and how med students are placed in residency programs, was a professor at Harvard Business School until this past summer, when he was hired by Stanford. In the spring of 2011, about a year before he shipped off, the Ideas section sat down with him for an extended conversation about what it means to design a market and the role of economists is fixing societal problems.
Throughout our interview, which led to this Ideas profile, Roth compared economists to mechanics, arguing that instead of merely coming up with theories describing the systems our society uses to distribute resources, economists ought to use their theories to help make those systems better. Here he is explaining the point with an extended analogy that mostly stayed on the cutting room floor when we did our original piece:
Think about the study of biology – say, plants. Early on what botanists did was they described plants. Plants were naturally occurring things. And you went around and you described them. And if you were a good botanist, you had really nice descriptions. So for instance, in the Harvard museums here, in the Peabody, there are these great glass flowers which are really good descriptions of flowers, and people studied them in order to become good botanists... Then you start to get into things like plant-breeding and maybe genetic engineering, and then all of a sudden you’re designing flowers. It was a new thing-- people used to just describe naturally occurring flowers, then they started to design them. So, economists in many ways have been sort of like botanists: we study naturally emerging markets, and sometimes they fail, and we describe that, and sometimes they get reorganized, and we describe that. We’re starting to be able to know enough about how some of those things work that in some cases, when you’ve got a market in trouble, and you think, ‘Who’re you gonna call?’ you could call an economist.
The systems Roth is most interested in are ones in which there are factors in play besides money. Donated kidneys, for instance, aren’t simply sold to the highest bidder, but assigned to people who have the right blood type; by the same token, slots in the best public schools in Boston don’t go to the parents who are willing to pay the most for them. In these scenarios, we need to put in place non-monetary mechanisms to help us figure out who gets what – and Roth and his colleagues in the world of market design are the ones whose job it is to figure out what those mechanisms should be. “A lot of the most important things we get in our lives aren’t primarily mediated by price,” Roth said. “A lot of things that are expensive, like a college education, you don’t get by being willing to pay the most. The people who drive fancy cars are people who like fancy cars and can afford them. But the people who go to Harvard aren’t just the people who can afford a Harvard education-- you have to apply to Harvard and be admitted.”
If it strikes you as somewhat peculiar that an economist would be preoccupied with “markets” that don’t primarily revolve around how much things cost and what people are willing to pay, then you’ve hit on what makes Roth such a stand-out figure in his field. It’s also part of what makes his job particularly challenging sometimes: because most people think of economics as being about prices, they don’t always realize when a problem they’re trying to solve could benefit from the insights of an economist.
“You have to be invited in. Some of the markets we’ve designed we’ve actually knocked on the door and said, ‘yoo-hoo!’ But you still have to be invited in,” Roth said. Usually, he added, “you only get invited in when there’s some crisis.”
Over the course of his career, Roth has found that when he and his colleagues do get invited in – as they did when Boston was redesigning its school assignment system -- it takes some time for him to figure out a “common language” with the on-the-ground experts he’s working with, and absorb the practical difficulties of whatever they’re dealing with.
“Whenever we’ve had successful market design, we find school administrators, we find kidney surgeons, we find people who know a lot about the market, and talk about the issues with them,” Roth said. “Once you find the common language you can learn a lot from them and sometimes teach them a little, and together you make something better than you would have otherwise. That’s part of the fun for economists, of market design. You write a paper in the abstract, and you think to yourself, ‘You know, I can organize that market better than they do -- I wonder why they don’t do it that way!’ And sometimes you find out there was stuff left out of what you knew about [the problem.]”
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Leon Neyfakh is the staff writer for Ideas. Amanda Katz is the deputy Ideas editor. Stephen Heuser is the Ideas editor.
Guest blogger Simon Waxman is Managing Editor of Boston Review and has written for WBUR, Alternet, McSweeney's, Jacobin, and others.
Guest blogger Elizabeth Manus is a writer living in New York City. She has been a book review editor at the Boston Phoenix, and a columnist for The New York Observer and Metro.
Guest blogger Sarah Laskow is a freelance writer and editor in New York City. She edits Smithsonian's SmartNews blog and has contributed to Salon, Good, The American Prospect, Bloomberg News, and other publications.
Guest blogger Joshua Glenn is a Boston-based writer, publisher, and freelance semiotician. He was the original Brainiac blogger, and is currently editor of the blog HiLobrow, publisher of a series of Radium Age science fiction novels, and co-author/co-editor of several books, including the story collection "Significant Objects" and the kids' field guide to life "Unbored."
Guest blogger Ruth Graham is a freelance journalist in New Hampshire, and a frequent Ideas contributor. She is a former features editor for the New York Sun, and has written for publications including Slate and the Wall Street Journal.
Joshua Rothman is a graduate student and Teaching Fellow in the Harvard English department, and an Instructor in Public Policy at the Harvard Kennedy School of Government. He teaches novels and political writing.