Wednesday, April 23, 2014

"What have we learned from market design?" now freely available from the EJ

My 2008 paper What have we learned from market design? is now out from behind the subscription wall and freely available from the EJ. (It may have been available for some time, but I just noticed it...)  Here's the pdf version.


This article discusses some things we have learned about markets, in the process of designing marketplaces to fix market failures. To work well, marketplaces have to provide thickness, i.e. they need to attract a large enough proportion of the potential participants in the market; they have to overcome the congestion that thickness can bring, by making it possible to consider enough alternative transactions to arrive at good ones; and they need to make it safe and sufficiently simple to participate in the market, as opposed to transacting outside of the market, or having to engage in costly and risky strategic behaviour. I will draw on recent examples of market design ranging from labour markets for doctors and new economists, to kidney exchange, and school choice in New York City and Boston.
The Economic Journal Volume 118, Issue 527, pages 285–310, March 2008

Tuesday, April 22, 2014

More on circumcision

Circumcision is a medical procedure that is also a traditional religious ritual for Jews and Muslims. There are also those who regard it as a repugnant transaction that should be banned, either because of questions about whether it serves a medical purpose, concern about elective procedures on children (an issue of consent, or in some readings, abuse), and antipathy to Jews and Muslims. (In California, a potential coalition to ban circumcision came apart when some of the organizers revealed strong anti-semitic inclinations, and in fact a 2011 law put a stop to the movement: New California law prohibits circumcision bans)
In Israel the anti-semitic component of proposed European bans is regarded as a political issue.

Knesset produces film defending circumcision,7340,L-4485174,00.html 

"After Council of Europe uses Jewish director's documentary to specify risks of religious ritual, Israeli parliament creates film featuring Jewish and Arab hospital directors voicing their support for medical advantages of circumcision"

Recently some new medical evidence suggests that circumcision should be regarded as akin to child vaccination: Circumcision Benefits Outweigh Risks, Study Reports

"The authors conclude that the benefits — among them reduced risks of urinary tract infection, prostate cancer, sexually transmitted diseases and, in female partners, cervical cancer — outweigh the risks of local infection or bleeding. Several studies, including two randomized clinical trials, found no long-term adverse effects of circumcision on sexual performance or pleasure.
“Male circumcision is in principle equivalent to childhood vaccination,” said the lead author, Brian J. Morris, emeritus professor of medical sciences at the University of Sydney. “Just as there are opponents of vaccination, there are opponents of circumcision. But their arguments are emotional and unscientific, and should be disregarded.” ******

Prior posts on efforts to ban circumcision here.

Monday, April 21, 2014

The FCC's upcoming incentive auction, and I propose a new adjective (Milgromesque)

I've blogged before (here) about the FCC's incentive auction being designed by Paul Milgrom and the team he's assembled at Auctionomics. Now it's on the FCC blog, in a post that makes me think we may need to introduce a new adjective into market design. But first, here's the FCC post:

 Getting the Incentive Auction Right, by: Tom Wheeler, FCC Chairman

"Few FCC policies have generated more attention than the Incentive Auction. “Groundbreaking,” “revolutionary,” and “first-in-the-world” are just a few common descriptions of this innovative approach to making efficient, market-driven use of our spectrum resources.

Such attention is warranted. The Incentive Auction is a once-in-a-lifetime opportunity to expand the benefits of mobile wireless coverage and competition to consumers across the Nation – particularly consumers in rural areas – offering more choices of wireless providers, lower prices, and higher quality mobile services.

Spectrum is a finite public resource, and refers to the public airwaves that carry all forms of wireless communication Americans use every day. Twenty-first century consumers in both rural and urban areas of our country have a seemingly insatiable appetite for wireless services, and thus, for spectrum.

Getting the Incentive Auction right will revolutionize how spectrum is allocated. By marrying the economics of demand (think wireless providers) with the economics of current spectrum holders (think television broadcasters), the Incentive Auction will allow market forces to determine the highest and best use of spectrum.

More immediately, the Incentive Auction will deliver tremendous benefits for U.S. consumers across the country.

In developing such an auction, we must also be guided by the rules of physics. Not all spectrum frequencies are created equal. Spectrum below 1 GHz – such as the Incentive Auction spectrum – has physical properties that increase the reach of mobile networks over long distances. The effect of such properties is that fewer base stations and other infrastructure are required to build out a mobile network. This makes low-band particularly important in rural areas. A legacy of earlier spectrum assignments, however, is that two national carriers control the vast majority of low-band spectrum. As a result, rural consumers are denied the competition and choice that would be available if more wireless competitors also had access to low-band spectrum.

Low-band physics also makes this slice of spectrum essential in urban areas, since it permeates into buildings better than does high-band spectrum. With more and more Americans opting for wireless-only connectivity, they should not run the risk of being unable to place a 911 call from the interior of a building just because their wireless company has the wrong spectrum.

While many factors go into determining the quality of wireless service, access to a sufficient amount of low-band spectrum is a threshold requirement for extending and improving service in both rural and urban areas.

As part of the Incentive Auction process, we will also make available on a nationwide basis spectrum for unlicensed use (think Wi-Fi). With the increased use of Wi-Fi, this spectrum has also become congested. Opening up more spectrum for unlicensed use provides economic value to businesses and consumers alike.

Whether television broadcasters participate in the Incentive Auction will be purely voluntary, but participation in the Incentive Auction does not mean they have to leave the TV business. New channel-sharing technologies offer broadcasters a once-in-a-lifetime opportunity for an infusion of cash to expand their business model and explore new innovations, while continuing to provide their traditional services to consumers. We will ensure that broadcasters have all of the information they need to make informed business decisions about whether and how to participate.

Yesterday, I provided my fellow Commissioners a draft Report and Order that will determine many significant issues and policy decisions related to the Incentive Auction. The Commission will also make additional decisions to implement details pertaining to the Incentive Auction in the coming months.

Reaching this stage is a major accomplishment, and was only possible thanks to outstanding work of public servants from across the FCC.

A policy that has never been tried before comes with the perception of risk. We all know, however, that risk is the partner of reward. I will continue working with my fellow Commissioners, FCC staff, and all other interested parties to minimize the risk and maximize the reward of the Incentive Auction. I am confident we will get this right, and the rewards will be great for all Americans."

Now for that new adjective, prompted by the first sentence of chairman Wheeler's post:

Mil·grom·esque: adjective. of or related to market design. “Groundbreaking,” “revolutionary,” and “first-in-the-world.”

First Known Use of MILGROMESQE



Update: Paul Milgrom writes (in an email whose subject line is "Evan Kwerel"):

Hi Al:
Thanks for your friendly review of the incentive auction, but while I am excited about my role as the consulting team leader, you give me far too big a share of the credit. And, I don't even mean the contributions of the amazing professors on my Auctionomics team -- Jon Levin, Ilya Segal and Kevin Leyton-Brown -- without their huge contributions, our part of this project would not be possible. What they have done is very important, but among the many folks in and out of the FCC who have contributed to this enormous project, the biggest economics hero is Evan Kwerel, who not only had the vision and chutzpah to push for a full market solution to the problem of spectrum reallocation, but also the insight to get the property rights settled in a way that enables competition among broadcasters who offer to relinquish their their broadcast licenses for cash.
The property rights are an absolutely essential and widely under-appreciated part of this story! Until 2012, there was disagreement and confusion about what rights the broadcasters had to their licenses: Did they own them? Could the FCC cancel the licenses or allow them to expire? What rights did the licensees have? In that situation, endless legal and political battles could have delayed the urgently needed spectrum reallocation for years or even decades. Instead, Evan Kwerel's vision included a political solution by which broadcasters would get the right to SOME channel in their home band (UHF or VHF), but not to their particular channel. That way, if the FCC eventually clears channels from Y to Z nationwide for wireless broadband, it can do so either by buying those rights or by buying broadcast rights from broadcasters in lower numbered channel from X to Y-1 and and retuning the broadcasters in the higher channels to use the newly available lower channels. There are lots more details to this because the engineering problems are hard ones, but the core fact is that this definition of rights makes an auction possible, and creates the possibility of a Pareto improvement with voluntary transfers of licenses. Nothing in the whole design is more important than this!
Incidentally, the political deal built into the 2012 legislation also provides a retuning fund of up to $1.75 billion to pay broadcasters who must change to another channel, plus protection to ensure that the new channel is as good for reaching viewers as the old one. The whole structure sets the stage for a Pareto improvement. If we can solve the challenges that this auction poses, I'm hopeful that it may eventually live up to the hype it is getting.

Sunday, April 20, 2014

Saturday, April 19, 2014

Tanzverbot: dancing bans in Germany on Good Friday

Sven Seuken points out this story from last year related to the German ban on dancing--Tanzverbot--on Good Friday: Ban on Dancing on Good Friday Draws Protests; Conga Line in Cologne

"FRANKFURT—Every year on Good Friday, Germany becomes a little like the fictional town in the movie "Footloose"—dancing is verboten.

The decades old "Tanzverbot," or dance ban, applies to all clubs, discos and other forms of organized dancing in all German states."

Here is Wikipedia on dancing bans

Friday, April 18, 2014

School Choice: IIPSC gets a new website

The Institute for Innovation in Public School Choice has a new website. (They/we have been too busy designing school choice systems to update it in the last few years. I'm in that situation myself...)

One of its pages is on School Choice Research, which focuses on the ongoing investigations of Atila Abdulkadiroglu and Parag Pathak, with various colleagues, to assess the effects of school choice on student outcomes. The site presently lists the following representative papers:

 “Explaining Charter School Effectiveness.” American Economic Journal: Applied Economics, 5(4): 1-27, 2013.

Thursday, April 17, 2014

Did I ruin the medical labor market?

Students of economics are sometimes surprised that many of the things they know aren't known by everyone.

So a number of people have emailed me the blog post on the Forbes magazine web site that is headlined How A Nobel Economist Ruined The Residency Matching System For Newly Minted M.D.'s, and subtitled Match Magic: How One Economist Hurt Physicians and Patients.

In it, a graduating medical student who apparently just went through the Match a month ago argues that she would have done much better if there hadn't been a match, since then she could have picked a better job, in a nicer city, at a much higher wage. And she would have been spared the expense and inconvenience of interviewing. Because in a free market you are free to choose the job you want. That's the way economists get their jobs, she concludes.

A quick search of the web quickly reveals that other docs have a different view of the match and of markets more generally. Here's a post from a blog site called Skeptical Scalpel, which begins this way

"A blog post entitled "How a Nobel Economist Ruined the Residency Matching System for Newly Minted MDs" appeared on the Forbes website. In it, Amy Ho, the medical student author, lists all the things she considers wrong with the National Resident Matching Program (the "Match").

"I would have commented about this on the site itself except that I have a lot to say, and in order to post a comment, I would have had to agree to allow Forbes to post tweets in my name. No, thanks.

"The title of the post is misleading. As the author noted, the Match as been around since 1952. It was established to make the process of finding a residency position fair for all graduating medical students. Alvin Roth, the economist who shared a Nobel Prize based in part on his work with the Match algorithm, simply refined the process in the 1980s and 1990s to make it even more fair. Roth didn't ruin the Match; he made it better.

"Ms. Ho blames the Match for the fact that 25% of those enrolled in 2014 failed to obtain a residency position. But even if the Match did not exist, there would still have been more than 34,000 people seeking some 26,000 positions, and 8000 doctors would not have found jobs..."

The NRMP data are here: 
94.4% of seniors at U.S. medical schools were matched in the main match. (Table 4).

MobLab is free for academic use.

Moblab, the experimental software for using experiments to teach economics, is now free.  This should make it easier to adopt. 

I'm one of their advisors, and I'm very enthusiastic about bringing experiments into the classroom.