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And Your 2012 Econ Nobel Winners Are…

October 15th, 2012 · 2 Comments
Markets · Uncategorizable

The recipients of the 2012 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (no really, that’s what it’s officially called) are none other than Al Roth and Lloyd Shapley. (Those of you who picked either of them in the Nobel pool can collect your prizes now.) In related news, Stanford seems to have made a very smart addition to its faculty, and Harvard must be fuming just a little.

I could go through all of the boring CV bullet points for the winners- matching algorithms, market design, yada yada, but you can find that general information in plenty of other sources. (Note that that was four separate links. The last one even features a cute caricature.) I also think it’s cute that there is a post on Al’s blog from about 4:30am with the headline “Blog may be delayed today…” You don’t say.

Instead, my value add to you (or not, depending on how you look at it) will be a round up of the previous pieces I’ve posted on these two fine gentlemen. First up is Shapley, even though I didn’t explicitly reference him by name in a very old post of mine. an excerpt:

First, a definition…a stable match is an assignment where there are no rogue couples, i.e. that no individual has another person that they like better than their current mate that also likes them better than the person they are with. Intuitively, we could say that there isn’t going to be any adultery or something like that.
Now, the process:
1. Each male and female comes up with a rank ordering of all of the members of the opposite sex. (This matching becomes more complicated if we consider same sex couples.)
2. Each day, the girls go out and stand on the balconies of their apartments. Each guy goes and stands beneath the balcony of the girl that he likes best that hasn’t rejected him yet. (In other words, the guys work progressively down their lists until they don’t get rejected any more.)
3. The girls take a look at the guys below their balconies, and each picks the highest ranked one and tells him to come back the next day (which by construction he will). She rejects all of the other guys.
4. This process repeats. If there are an equal number of men and women, the process will repeat until each girl has exactly one guy at her balcony, and she will marry that guy.

What I neglected to mention was that this is referred to as the Gale-Shapley algorithm, and this should give you a pretty good idea of what Shapley’s work was all about (albeit more in labor markets and such rather than specifically in dating markets). In addition, he has a mathematical concept relevant to bargaining algorithms (called the Shapley value, naturally) named after him.

Al “You Can Call Me Al” Roth, similarly, does a lot of work on matching markets such as school choice and kidney exchange. He’s even managed to combine his market design with with an exploration of the concept of repugnant transactions as a constraint on market efficiency. (In other words, not eating horses because people think it’s icky is probably economically inefficient.)

I can’t help but provide a visual that makes me giggle:

Congratuations, you crazy kids. At the very least, the rest of us can rest comfortably knowing that the prize money is going to make the world a more efficient place. Hopefully your experiences aren’t quite as exhausting as what Krugman reports on the Nobel festivities:

SAGAL: You know, you started with the New York Times around 1999 – if not mistaken – writing about economic issues, primarily. And you became very well-known and very influential. You won the Nobel Prize. By the way, winning the Nobel Prize – does that shut up one’s critics?

KRUGMAN: Well, no, it doesn’t shut them up. I mean – but it does mean that people stop saying that you’re an idiot, for about two weeks.

(LAUGHTER)

SAGAL: Two weeks? Because…

KRUGMAN: Two weeks.

SAGAL: I mean…

KRUGMAN: Then it’s right back.

ROCCA: It’s the honeymoon period.

SAGAL: Because I remember at the time, you were engaged in all of these debates, very – sometimes intense, about the Bush economic program and what it would do. And you had a lot of people criticizing you and dismissing you. And then you won the Nobel Prize. And I, in your shoes, would have such a hard time not saying “a-ha!” to everybody.

ROCCA: You should wear it when you go on Stephanopoulos’ show.

KRUGMAN: Yeah. It’s – when it happens, it’s such a blur. They worked me like a dog. I mean, the thing is all for the sake of the Swedes, not for you. And as my wife said, you know, the two great things are first, that you won this; second, that we’re never going to have to do this again.

SAGAL: Really?

KRUGMAN: Oh, yeah.

SAGAL: So you’re saying it’s a pain in the butt to have to win a Nobel?

KRUGMAN: Well, the actual going through the process of collecting it, is thrilling but exhausting and…

SAGAL: Do they make you like, run and chase it? I mean, what are you talking about?

(LAUGHTER)

KRUGMAN: I maybe talked to about eight different – or 10 different groups a day. Oh yeah, I shouldn’t complain.

SAGAL: Right.

KRUGMAN: But it was a very strange, out-of-body experience.

Update: I will keep a list of particularly interesting Nobel commentary here as it unfolds. First up is a very nice post from Steve Levitt on the Freakonomics blog. It’s also worth noting that Dan Ariely links to the NYT article about the Nobel announcement with the caption “What a great way to start the week, one of my favorite people in the world, Al Roth, wins the Nobel Prize in Economics.” That seems to be the general consensus, from what I can tell.

Tags: Markets · Uncategorizable

2 responses so far ↓

  • 1 Dan L // Oct 19, 2012 at 11:12 pm

    Let me preface this comment by saying that I am generally against the “condescending mathematician” attitude–that is, the attitude that math people are just smarter than other scientists, BUT…

    With that said, it’s pathetic that something so simple can be considered ground-breaking (indeed, Nobel-worthy!) research in economics. I suspect that the solution of the Stable Marriage Problem is no harder than a tough Putnam problem. This is not meant to disparage Prof. Shapley, who probably didn’t think all that much of this algorithm either, since it was published in Amer Math Monthly, which is a journal for recreational or expository mathematics.

  • 2 The Nobel in Economics | FavStocks // Oct 20, 2012 at 3:57 am

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