Economics Nobel for saving lives


This year’s Nobel prize in economics went to Al Roth and Lloyd Shapley for their work on markets without prices and the application of that work to real world problems.

The most significant application is Roth’s work on kidney-exchanges. Society finds the buying and selling of kidneys as repugnant and prohibits it. Yet transplants save lives, and people die for lack of a willing donor.

Joshua Gans explains.

As documented in this long profile in the Boston Globe, instead of lamenting, Al Roth took the inability to use prices as a constraint …. He asked if kidney exchanges could work without prices? And the answer was yes. What you had to recognise was that you had a set of willing donors and a set of recipients. The issue was that it took luck for a willing donor to be in the same family as a recipient. But what did not take luck was the notion that a willing donor may match one recipient while the family member of that recipient may match the donor’s loved one. You just had to bring those people together. Basically, add some search and some safety (you don’t want people opting out once their own family member has received a kidney) and you are off the races. Put simply, Roth’s kidney exchange is up and running. Here is an economic theorist who hasn’t just made things more efficient. He has actually saved lives. It is unclear whether it is the economics Nobel he deserved or the Nobel prize for medicine.

There are many things society finds repugnant. Here’s an accessible paper by Roth on repugnance. He considers a host of examples. What sets off our repugnance buttons? Should it?

Do you want a marriage market for heterosexuals which matches couples and doesn’t result in divorce? Shapley and Roth proved there is such a market in theory and it looks a lot like the traditional one where men do the proposing and women the accepting. You can give is a try here.

The allocation of residents to hospital used to be plagued by misallocation and waste. Roth offered a solution that has been widely adopted and works well. He has modified it over time to allow for married resident couples. The list goes on. Like fixing the NFL draft.

Arindrajit Dube argues this prize was for economic planning (as opposed to the alternative of a market economy).

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