On November 15, former Pitt Econ professor (and Nobel Laureate) Alvin Roth returned to the Department of Economics. During his visit, Roth gave a seminar talk, while also meeting with students and faculty.
Roth’s talk was on, “Controversial Markets”, which can be thought of as markets where transactions are potentially “repugnant”.
For example, in many states, eating horse meat is illegal, as citizens have deemed such consumption a violation of social standards, i.e. “repugnant”, and therefore banned it. Other markets where repugnancy limits consumption are easy to think of: prostitution; surrogacy; gambling; drug use; indentured servitude; restrictions on same-sex marriage.
Before a packed room of over two hundred attendees – many of whom were forced to stand – Roth summarized his work on controversial markets and explained what it has shown in understanding what is and what isn’t repugnant.
The subject of controversial markets fits neatly with Roth’s body of work, in which he’s made a career of studying markets.
From theory to economic engineering
Roth is a microeconomist, who’s research has revolved around market design. His work has made major contributions to the fields of game theory, matching theory, and experimental economics; however, his biggest contributions have been to solving actual market design issues.
One example is Roth’s work on the National Resident Match Program (NRMP), which is the mechanism that places medical school students into residency training programs. Roth analyzed the theoretical properties of the NRMP, and then offered solutions to its issues – namely that of placing married medical school students into the same residency training program as their significant other.
Roth also famously worked on matching markets that placed students into different public schools; in both New York City and Boston, public school boards rely on methods developed by Roth and his co-authors to assign students to different schools across the city.
Contributions such as these resulted in Roth winning the 2012 Nobel Memorial Prize in Economic Sciences, which he shared with Lloyd Shapley, a microeconomist who also studied market design. In their announcement of the prize, the Royal Swedish Academy of Sciences cited Roth’s body of work as, “an outstanding example of economic engineering.”
Kidneys, and what’s repugnant where
In addition to the NRMP and public school matching markets, Roth has also been central in designing one controversial market: kidney exchange.
In the US – and most everywhere else – buying and selling kidneys is explicitly prohibited. The reason for this is that most people think of kidney sales as repugnant transactions. What is legal, however, is for a kidney to be donated; if a friend of yours needs a kidney, and you are a match, then you can offer to donate one of your kidneys to said friend.
The trouble with kidney donations is that they must be between two people who are matches: if your blood type is not compatible with your friend’s type, then his body will reject the transplant. In this way, many people who would like to donate to a friend are unable to.
The fix that Roth and co-authors – including Pitt graduate Utku Ünver – proposed to this problem is that of a kidney exchange. In a kidney exchange, two pairs of recipient-donors who are incompatible with each other (e.g. you and your friend with the different blood type) are paired together. The donors in the pairs swap places, allowing them to be paired with a recipient for whom they are compatible (see this video for an explanation).
While Roth and his colleagues were able to set up a kidney exchange program in New England, and successful kidney exchanges occur frequently throughout the US, the market would be even more dynamic if it were to be global, as this would allow for more exchanges.
However, repugnancy has made establishing a global kidney exchange market difficult; the concern is that donors will be overwhelmingly from poorer countries and therefore taken advantage of.
To try to better understand the populace’s opinions toward potentially repugnant transactions such as kidney exchange – and how these opinions differ across countries – Roth recently worked with Pitt Associate Professor of Economics, Stephanie Wang. In their project, Roth and Wang surveyed Americans, Spaniards, Germans, and Filipinos on three potentially repugnant transactions: global kidney exchange, surrogacy, and prostitution.
For each of the repugnancies, Roth and Wang created hypothetical situations, in which the exchange involved someone from the developed nation (US, Spain, Germany) receiving the (potentially) repugnant good, while paying someone from a developing nation, the Philippines.
What Roth and Wang found across the surveys was that tastes toward repugnant transactions are inconsistent across nations. For example, while Americans were most supportive of legalizing surrogacy and global kidney exchange, they were also the least likely to support prostitution. The surveys also revealed that certain repugnant transactions weren’t considered that repugnant at all: global kidney exchange and surrogacy both received broad support across the four nations.
Roth at Pitt
Roth joined the faculty of Pitt in 1982, serving as the Mellon Professor of Economics until 1998, at which point he joined the faculty at Harvard. While at Pitt, Roth did much of his groundbreaking work on redesigning the NRMP and on designing kidney donor match programs.
Roth also helped to establish the University’s Pittsburgh Experimental Economics Laboratory (PEEL). In the decades since its founding, PEEL has attracted faculty, outside researchers, and graduate students to Pitt, and helped to establish Pitt’s world-renowned reputation for experimental economics.