November 23, 2017
Friday, November 18, 2016

‘All market design is political’

By Tomás Brockenshire
Herald Staff

Winner of the 2012 Nobel Prize for Economics, Dr Alvin Roth, on organ transplants, refugees and dating sites

Finding the best-suited school for a child or facilitating an organ transplant may seem like monumental tasks, but the work of economist Dr. Alvin Roth has made it a little simpler.

The 2012 Nobel Prize for Economics co-recipient was recognised for his contributions to finding real-life applications for the theory of how job-seekers match with each job-offer in the labour market and how to improve organ donation protocols. During a trip to Argentina this week, following an invitation by the University of CEMA, Roth met with the Herald to discuss his work and how it applies to not only the Argentine bond market — but also dating, refugees and organ donation.

Tell us how your work has contributed to understanding real-life markets?

In the United States about 15 percent of the live donor kidney transplants are now done through kidney exchanges which my economist colleagues and I helped our surgical colleagues organise so that it could become a standard form of transplantation in the United States. And that’s something that could grow in Argentina as well.

In a number of American cities we have helped design school choice algorithms that help families get children into schools that they like. I’ve helped design a number of labour markets, like the one in which new American doctors get their first jobs. Sometimes it was congestion, sometimes it was about making the market thicker, and sometimes it was about making the market safe to participate in. And to be successful, a market has to do all of those things.

Applying your matching markets theory to bonds and Argentina’s bond activity, governments can offer prices and interest rates but they also have to be chosen by investors. Is that a form of matching?

I’m not an expert on the Argentine bond market, but mostly I think of bond markets as commodity markets and not matching markets, but of course bonds are also contracts and therefore the possibility of default and things like that enter into the evaluation of a bond. And that can make it, to a certain extent, a matching market because you do care who you are matching with. You care who has insured the bond ... there are very few markets that are perfect commodity markets. And as soon as you start caring with who you are dealing with you have some of the elements of a matching market.

How important are elections then for bond markets and in terms of who backs that debt?

We just had an election in the United States. And nobody used to talk about defaulting American bonds and I don’t think that our new president-elect was making a thoughtful comment when he spoke of that but of course you can imagine that American bonds will be less desirable under a new administration than they were under old administrations.

But you don’t think Treasury bonds are going to tank.

I don’t think that the US is planning to renegotiate its debt by defaulting on its bonds, that’s something that may work in real estate development but it doesn’t work for sovereign debt. And I hope that our new president will realize that.

In terms of matching markets, do volatile economies like the Argentine economy make it more difficult for matching to take place?

Certainly during the recession that we had in the United States, the rate of living organ donation among the poorest two-fifths of Americans went down, because it is a little bit costly to donate a kidney. You have to take time off work and got to be near to the hospital and rent a hotel room, so the economy has an impact on that. I would like to see us do a better job of relieving organ donors of these costs, so that they didn’t depend on the economic environment so much.

Have you studied the organ donation system in Argentina?

Argentina does pretty well in deceased donor transplants per million population, they are in the middle of the world. But there are very few living donor transplants per million population, so that is something that could be improved because Argentine hospitals and surgeons are well-equipped. The technology exists. Even compared to Uruguay there are not very many live donor transplants.

What do you think the reasons are for that?

I don’t know the reason. There has been at least one kidney exchange but it required the intervention of a judge, so there are problems with Argentine laws that prevent kidney exchanges. We had similar problems in the United States and we were able to amend federal law to make kidney exchange more available. Because a kidney exchange is a way to make living donor transplantation more available. Sometimes you love someone enough to give them a kidney and you are healthy enough to give them a kidney, but you can’t give the person you love your kidney, because they have to be well-matched. With kidney exchange you can give someone else your kidney that matches them and get for the person you love a kidney which matches him or her.

Are there matches in which over the long-term it might be preferable that they no longer apply?

Well in labour markets there are lots of matches that are short-term appointments. Interns, doctors’ first jobs are not forever. An internal medicine residency lasts for three years, a surgical residency lasts for five years. These are beginning positions and you want the doctors to move on. And often they have subsequent matches. Not every match is forever. When you look at matrimonial and dating sites, there are sites that try to arrange marriages and then there’s Tinder, which is maybe for quicker relationships.

How does your work relate to those kinds of dating sites? Is there any application of your work?

There is certainly an application for understanding how different sites approach it. Remember every marketplace has to help make the market thick, and once it is thick, there is a lot of congestion, you might have trouble evaluating all of the possible transactions so they have to deal with congestion. For example makes the market thick, but it is very congested, there are lots of emails that go unanswered. There are other sites like eHarmony which try to match you to a small group of people that you can then talk to. And everyone that you are talking to is also in a small group, so they have time to talk to you. And then there are sites like Tinder which try to make every transaction fast, so that you can look at many people quickly.

You have said in the past that refugees know where to go but they can’t get there. The president has said that he is in favour of resettling Syrian refugees. What kind of an impact does that have in economic terms?

In the United States immigrants have been very good for us. About 10 percent of people living in the United States now were born elsewhere. And if you look back a generation, or two generations, or three generations you get up to very high percentages. Most of us come from somewhere. That of course changes the size of our workforce, it changes the age distribution of our workforce. In prosperous economies there often aren’t enough young people to support the old people but immigrants are young by and large. So in the United States we have very successfully assimilated generations of immigrants. I hope this won’t stop.

The anti-immigrant rhetoric seen in the United States and Europe, is that a failure of matching systems? Or are there other explanations?

All market design is political, because in order to get net markets accepted you have to convince lots of people.And immigration is of course very political. Again, it is very funny (to see) anti-immigrant rhetoric in the United States because we are all from somewhere. We are a nation of immigrants, and we do very well by having immigrants. But there’s growing concerns about particular things — about crime, terrorism. These are not large problems in the immigrant population but they are very visible, so to succeed in continuing to welcome immigrants we will have to learn to deal with these things. You always have to deal with the political pressures of the day.


  • Increase font size Decrease font sizeSize
  • Email article
  • Print
  • Share
    1. Vote
    2. Not interesting Little interesting Interesting Very interesting Indispensable

  • Increase font size Decrease font size
  • mail
  • Print

    ámbito financiero    Docsalud    

Edition No. 5055 - This publication is a property of NEFIR S.A. -RNPI Nº 5343955 - Issn 1852 - 9224 - Te. 4349-1500 - San Juan 141 , (C1063ACY) CABA - Director Perdiodístico: Ricardo Daloia