Stanford University’s Alvin Roth is a very rare thing: An economist who saves lives.
The co-recipient of the 2012 economics Nobel got
his prize, in part, for helping to fix a long-standing problem with the
market for kidney donations. Often family and friends were willing
donors for someone who needed a kidney. But for medical reasons they
weren’t a compatible match.
That system became the cornerstone of one of the country’s first kidney exchange clearinghouses.
Roth estimates his work has resulted in roughly 4,000 kidney
transplants that might never had happened if not for the system he
worked to build.
The
market for donated kidneys is an example of what economists call a
“matching market.” These markets govern everything from corporate hiring
decisions to how we meet spouses, but they obey laws more complex than
the simple balancing of supply and demand with prices.
While Roth’s early research focused on somewhat
abstract areas of economics including game theory, over time he has
transformed himself into something of a matching market guru. Roth swung by Quartz’s New York offices recently to chat about his new book, Who Gets What—and Why,
which explains how matching markets work, why almost everyone makes it
illegal to buy kidneys, and why it’s increasingly rare for people to
marry their high-school sweethearts. Here are edited excerpts of our
conversation.
Quartz: One of the ways we usually think about markets is in terms of the market for, say, crude oil or Apple stock. But you deal with “matching markets.” Can you briefly explain what those are?
Alvin Roth: Once you start looking at
marketplaces one of the things you notice is that not all marketplaces
are set up so that their job is merely to find a price at which supply
equals demand. Those are the commodity markets. But lots of markets,
even when they have prices as very important parts of the market, don’t
set the price so that supply equals demand.
Labor markets don’t do that. Quartz doesn’t hire
people by lowering the wage until [only] just enough people want to come
work here. Instead, presumably you get to interview bunches of people
who would like to work here and you get to hire some of them. But you
have to compete.
The name of the book is Who Gets What—and Why. After reading it, I thought you could have added “and When” to the title. There’s this timing component of markets that’s really fascinating. You spend a lot of time on it.
Lots of markets clear very early—before lots of information is available. Book publishing is a good example. Publishers buy books before the books are written and they don’t really know what they’re getting.
If you’re graduating from law school, you get
hired long before you graduate. Before firms really know what they’re
getting. Before you might know what kind of law you really want to do.
Doctors used to be hired two years before
graduation and that’s eventually one of the things that eventually led
to the centralized clearinghouse for doctors [in the US], the National
Resident Matching Program.[...]
You started in a sort-of arcane area of economics, game theory. But it seems that early on you also start looking for opportunities to put these ideas into practice. You seem really interested in finding ways to help people. And I’m wondering if you think that should be the goal of economics? And, if so, what are the value of abstract models?
Abstract models are very, very useful for organizing your thoughts and learning some things that you can’t learn without them. So I wouldn’t want to say that the goal of economics should be building concrete [things] in the world. But that should certainly be one of the goals.
Think about biology, broadly, with medicine as
one part. Not all biologists should be doctors. But it is important to
have doctors too.
And it’s important to have medicine that learns
from biology. And you want biology and medicine to work together so that
abstract, abstruse concerns with things like genes and DNA and proteins
should eventually be translated into medical care and better health.
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