David R. Henderson  

Designing Men

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That's the title I gave my piece in today's Wall Street Journal on the Nobel prize winners in economics. But, consistent with my experience as author of over 200 op/eds, the editors didn't use my title. The title they used was, admittedly, more informative: "On Marriage, Kidneys and the Economics Nobel."

I don't have the data handy but since 1996, I think I've written the "day after Nobel" article for all but 5 years since then.

One segment:

The article [by David Gale and Lloyd Shapley] presented what is now called the "Gale-Shapley deferred choice algorithm." The key word is "deferred." They showed that if each "girl" (yes, people wrote differently then) rejects all but her favorite of the "boys" who propose, but leaves her favorite hanging to allow for someone even better to come along later--and if each boy who is rejected proceeds to his second choice--then letting this process play out yields stability.

What is stability? It means that there is no boy-girl pair who would both rather be married to each other than to the person they did marry.

Of course, letting that algorithm run is unrealistic. Many girls will accept the boy who is good enough rather than wait until a long sorting-out process is over. But other uses for matching theory make more sense. It turns out that doctors had been using the algorithm to allocate residents to hospitals even before the Gale-Shapley article came along.


There's a video that goes with it. Dan Henninger interviewed me and I didn't let him get a word in edgewise although I didn't realize it at the time. It's hard to do a Skype interview where they can see me and I can't see them. I miss the cues to stop. Also, I got the boy-girl explanation wrong.

Here's a segment on kidneys:

Mr. Roth's solution has not ended that shortage because his solution is essentially one of barter. The only suppliers in the market are those who want kidneys for their loved ones. But his system gives a better match.

There is a more fundamental solution to the kidney shortage. Don't "design" a market; simply allow one. A ban on selling kidneys is essentially a price control of zero and, like other price controls, causes a shortage. There are thousands of "demanders." There are also thousands of potential suppliers who, at a price of zero, are not willing to give up a spare kidney. A straightforward solution is to allow the sale of organs.

Now that the Nobel Peace Prize has been given to such an amorphous entity as the European Union, perhaps next year the Nobel in economics should go to the free market, which would do more than all the market designers to get kidneys to desperate people.


Here's a segment that got edited down:
In 2007, Julio Elias, an economics professor at Buffalo University, debated that issue with Roth on the Wall Street Journal on-line. Elias and the University of Chicago's Gary Becker, who won the Nobel Prize in 1992, estimated that if the ban were ended, anyone willing to pay $15,000 for a kidney could get one and the increase in the number of kidneys offered would mean that thousands of Americans who would otherwise die would live. Roth did not disagree but, instead, argued that the ban exists because many people view the idea of buying and selling kidneys as "repugnant." Roth was careful not to say that he found the idea repugnant.

Roth and Elias are both right. It is wonderful that Alvin Roth exists and is helping to ameliorate the effects of the ban. It would be more wonderful if the ban were ended. Last week the Nobel Peace prize was awarded to the European Union. It seemed strange to give the prize to such an amorphous organization. But that's now a precedent. Maybe next year the Nobel prize in economics should be awarded to the free market, which would do more than all the market designers to get kidneys to desperate people. That such people can't now buy them from willing and often desperate sellers is, well, repugnant.


HT to Alex Tabarrok for checking my work and giving me good comments before I sent if off yesterday morning.


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CATEGORIES: Regulation



COMMENTS (2 to date)
Scepticus writes:

Yes indeed, some people would find the selling of kidneys repugnant even while acknowledging it would save lives. But then many people find the idea of abortion repugnant, but we still allow it, clearly ending many lives. Interesting and frightful at the same time; to think about what a free market would look like for full term babies as well as kidneys.

Ryan V writes:
...the ban exists because many people view the idea of buying and selling kidneys as "repugnant."

This is the standard explanation, but I don't think it holds water.

People find lots of things repugnant. One thing that people find especially repugnant is death. So why do we choose a policy that leads to deaths over a policy that leads to organ sales?

Status quo bias.

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