

Nobel Prize in Economics awarded to Roth and Shapley for matching algorithm work - traldan
http://www.nobelprize.org/nobel_prizes/economics/laureates/2012/popular-economicsciences2012.pdf

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john_horton
Their work has nothing to do with central planning in the sense of committee
deciding on production quotas---it's actually about how to allocate
indivisible resources (school positions, kidneys, residency slots etc.) in
situations where using money isn't feasible and/or the market has broken down
due to problems like congestion or lack of market thickness.

~~~
bo1024
I think results like Shapley's and Roth's present an interesting commentary on
the usual "philosophy of economics".

1\. These results are all about finding good solutions to allocation problems
without using money or in cases where money isn't or can't be applied.

2\. These results do tend to show that a "centrally planned" solution can be
better for everyone than a "free market" solution. But as you say, by central
planning I really just mean that some entity takes in everyone's preferences
and outputs a global allocation, with the nice property that everyone is happy
with what they got and nobody can find a way to deviate from their assignment
and be better off. One might argue that a "free market" would find the same
solution eventually, but it might be slower.

These two results are sort of the opposite of the Invisible Hand stuff as well
as the common assumption that, for instance, everyone values money the same
(which underlies the justification for much of economics). So I think they're
really cool in that respect.

~~~
john_horton
well put.

FYI - Here's a link to an interactive illustration of the deferred acceptance
algorithm that I posted a few years back on HN:
<http://mathsite.math.berkeley.edu/smp/smp.html>

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gmoore
There is no Nobel Prize in Economics

[http://www.alternet.org/economy/there-no-nobel-prize-
economi...](http://www.alternet.org/economy/there-no-nobel-prize-economics)

~~~
guylhem
Wasn't that due to Nobel girlfriend leaving him for an economist? Read
something about that but can't find the surce at the moment (bad connectivity)

And I don't see that in the first 2 pages. Or was that about the math nobel
prize ?

~~~
cschmidt
I believe that was the reason for the math nobel

~~~
jdale27
<http://www.snopes.com/science/nobel.asp>

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0ren
I find it interesting that they awarded the prize to Shapley after Gale's
death[0]. I always thought that there was some rule that prevented them from
awarding the Physics Nobel Prize to Aharonov after Bohm died[1].

[0] <https://en.wikipedia.org/wiki/Stable_marriage_problem>

[1] <http://en.wikipedia.org/wiki/Aharonov–Bohm_effect>

~~~
yairchu
You are correct, Nobel prizes are not awarded to the dead, unless they die
just after announcing the prize and before the ceremony
([http://www.guardian.co.uk/science/2011/oct/03/nobel-prize-
aw...](http://www.guardian.co.uk/science/2011/oct/03/nobel-prize-awarded-dead-
scientist?intcmp=239)). Gandhi was denied the prize for this reason.

In this case, it is simply the post title being misleading, as it's not the
Nobel prize these folks won, but the Nobel memorial prize in economics, which
is a relatively new prize which is not part of the 5 Nobel prizes which had
been given by Nobel's estate for more than a century.

Edit: oh I see they didn't reward a dead in this case, misread your comment..

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pm90
I recognized their names from the first example in the classic book "Algorithm
Design" by Kleinberg and Tardos. But there it was called Gale-Shapley
Algorithm.

~~~
_delirium
The algorithm is due originally to Gale and Shapley, in a 1962 publication in
the _American Mathematical Monthly_ , but Gale isn't eligible due to the rule
against posthumous awards. Roth is included because he was the first to apply
it practically in economic-matching settings, quite a few years later.

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thmcmahon
Josh Gans provides a good summary on Roth and Shapley over at Core Economics
<http://economics.com.au/?p=9423>

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nirvana
The so-called "nobel" prize in economics does not come from the estate of
Alfred Nobel. It comes from the central bank. Thus it is not surprising to see
it given to people that central banks would favor (often people whose theories
try to justify inflationary policies.)

This one seems to be given for work that could be said to claim that central
planning really can work after all.

~~~
zissou
Both Shapley and Roth are microeconomists, so the fact that you are bringing
up banking and inflation is a clear signal that you don't understand anything
about economics. If you want to harp on Nobel Prize winning economists
regarding their work on macroeconomic theory, you're 1 year too late.

Shapley and Roth deal with topics that fall, at the highest level, under the
field of game theory, but more specifically market design. Market design
relies heavily on mechanism design, which can also be called reverse game
theory. In game theory, you're interested in determining the best strategy
given a set of conditions (the players, their strategies, the timing of their
moves, their payoffs and the information they have [or don't have]). On the
other hand, mechanism design is concerned with what the conditions have to be
in order to achieve a specific objective or outcome. Hence, mechanism design
problems map well onto many problems of regulation.

For example, let's say there is a Senator, call her Mrs. X, who is interested
in passing a bill that achieves outcome Y. The mechanism design solution is
then the set of rules that lead to outcome Y occurring. Setting the right
rules refers to Mrs. X drafting a bill that includes mechanisms such that
every actor in the game HAS AN INCENTIVE to play the strategy/strategies that
lead to outcome Y.

How does this fit in with market design? Well, besides generally using
mechanism design to align the incentives of both the buyers and sellers, there
is a deeper point to be made about market design here. All so often in
economic theory it is assumed that a market already exists, and the analysis
is then on understanding the inner functions of that market. However, what
that type of analysis leaves out is how that market even came into existence
in the first place. In what ways were incentives aligned such that both buyers
and sellers found a match for one and other to begin with? In other words, why
is this market here and how did it get here? These are the nature of the
questions that market design tries to answer. By understanding how and why the
actors in the market are doing what they are doing, you begin to understand
how markets form. And if you understand how markets form, you can apply that
know-how to the formation of new markets, or to improve old ones.

~~~
traldan
Great explanation, thanks for posting that!

