Definitely need to spend some time at 18/8 – Scott
The Nobel Prize for Economics has been awarded to American game theorists Alvin Roth and Lloyd Shapley.
From the press release:
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2012 was awarded jointly to Alvin E. Roth and Lloyd S. Shapley “for the theory of stable allocations and the practice of market design”
This year’s Prize concerns a central economic problem: how to match different agents as well as possible. For example, students have to be matched with schools, and donors of human organs with patients in need of a transplant. How can such matching be accomplished as efficiently as possible? What methods are beneficial to what groups? The prize rewards two scholars who have answered these questions on a journey from abstract theory on stable allocations to practical design of market institutions.
Lloyd Shapley used so-called cooperative game theory to study and compare different matching methods. A key issue is to ensure that a matching is stable in the sense that two agents cannot be found who would prefer each other over their current counterparts. Shapley and his colleagues derived specific methods – in particular, the so-called Gale-Shapley algorithm – that always ensure a stable matching. These methods also limit agents’ motives for manipulating the matching process. Shapley was able to show how the specific design of a method may systematically benefit one or the other side of the market.
Alvin Roth recognized that Shapley’s theoretical results could clarify the functioning of important markets in practice. In a series of empirical studies, Roth and his colleagues demonstrated that stability is the key to understanding the success of particular market institutions. Roth was later able to substantiate this conclusion in systematic laboratory experiments. He also helped redesign existing institutions for matching new doctors with hospitals, students with schools, and organ donors with patients. These reforms are all based on the Gale-Shapley algorithm, along with modifications that take into account specific circumstances and ethical restrictions, such as the preclusion of side payments.
Even though these two researchers worked independently of one another, the combination of Shapley’s basic theory and Roth’s empirical investigations, experiments and practical design has generated a flourishing field of research and improved the performance of many markets. This year’s prize is awarded for an outstanding example of economic engineering.
Shapley was born in 1923 and is affiliated with UCLA.
Roth, born in 1951 and affiliated with Harvard, wrote this fun paper on repugnant markets (featuring insights on dwarf tossing) and helped design systems for matching kidney donors with those in need of transplants and matching New York City students to public schools. He also blogs on the subject.
Other economists thought to be in the running were Kenneth Rogoff and Carmen Reinhart (whose pro-austerity theories led us to call them the most dangerous economists in the world) and Robert Shiller. We hadn’t seen much talk of Roth and Shapley beforehand, but then again no one seems too surprised by the announcement.
Then again … Stanford put up a “No Parking, Potential Nobel Ceremony” sign yesterday …
Read more: https://www.businessinsider.com/alvin-roth-and-lloyd-shapley-win-nobel-2012-10#ixzz2A092TWSg