U.S. Economists Win Nobel

Posted in : Economics

Two American economists won the Nobel Prize in economics Monday for their research into how to match different actors in given markets, such as job seekers with employers and patients with donated kidneys. David Wessel has details on Lunch Break.

Two Americans won the Nobel Prize in economics Monday for research that has improved the way people are matched with limited resources, such as patients with donated organs or students with their preferred high schools.

lvin Roth, a Harvard University professor who is moving to Stanford University, and Lloyd Shapley of the University of California Los Angeles were honored “for the theory of stable allocations and the practice of market design,” the Royal Swedish Academy of Sciences said.

Their research focuses on how to fairly and efficiently match people with things—be they employers, schools or donated kidneys—when pricing isn’t involved. Their work led to systems used by school districts in New York City, Boston and other cities to place students in high schools; by hospitals to match donated kidneys with patients; and by a program that assigns recent medical-school graduates to hospitals for residency programs.

Messrs. Shapley and Roth worked independently, rather than together.

The academy pointed to Mr. Shapley’s research, starting in the 1950s, that was highly theoretical—he initially examined how spouses select one other—and later was used by Mr. Roth to address real-life situations.

“Now we are able to see the fruits of this 50-year quest, if you wish, and these techniques—initially very much mathematical—are now directly affecting peoples’ lives,” said Tayfun Sonmez, a Boston College economist. Mr. Sonmez, who also has done research on matching kidney donors and patients, said the systems developed by Messrs. Shapley and Roth have made it easier for families to find others for kidney exchanges. “We can use some of these insights to optimally organize these exchanges so that we can save as many lives as possible,” he said.

The academy said the pair’s combined work “has generated a flourishing field of research and improved the performance of many markets.” The award, officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, carries a $1.2 million prize.

Mr. Shapley, 89 years old and a professor emeritus at UCLA, was honored for 1960s-era research, conducted with the late David Gale, that theorized how men and women could be matched for marriage. A “stable” match occurred when each side’s preferences were met. The academy said Mr. Shapley’s algorithm ensured “stable matching” and served to “limit agents’ motives for manipulating the matching process.”

Mr. Roth, 60, later used that theoretical research to address real-world problems. Starting in the 1980s, he first examined the residency system used to assign medical-school graduates to hospitals and determined that the system led to “stable matches.” But not for all. The system couldn’t accommodate doctor couples who wanted to be placed in the same region. Mr. Roth redesigned the system to take into account such requests when placing residents.

Mr. Roth helped redesign New York City’s process for assigning students to high schools in 2004. Under the old system, students would list their top five preferred schools. Schools, in turn, were more likely to admit students who ranked them as their first choice. After three rounds of selections, remaining students were assigned through an administrative process, the Academy said. Some 30,000 students a year were assigned to schools for which they had expressed no preference, the academy said in a description of Mr. Roth’s work. Mr. Roth designed a new system, based on Mr. Shapley’s and Mr. Gale’s initial algorithm, that addressed those issues. In the first year, the number of students assigned to schools they hadn’t requested dropped by 90%.

In a phone interview broadcast during a news conference in Sweden, Mr. Roth joked, “When I go to class this morning, my students will pay more attention.”

He said in a separate interview that one outcome of his research is that schools are responsive to families’ preferences. “School places are scarce resources. What’s a good place for one child may differ from child to child,” Mr. Roth said. The algorithms developed by Mr. Roth and his colleagues let schools use the information provided by parents on which schools would best suit their children. “It would be a shame not to use that information well,” he said.

In a statement released by UCLA, Mr. Shapley’s sons, Peter and Christopher Shapley, said, “We know he is tremendously thankful that his life’s work is being recognized with such a prestigious award and grateful for the many congratulations expressed by colleagues and friends.”

Source: http://online.wsj.com/article/SB10000872396390443675404578058170355506916.html

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