Our View: Praise for state's Nobel winning economists
Congratulations to two California professors for garnering this year's Nobel prize in economics. Lloyd Shapley is a professor emeritus at UCLA. And Alvin Roth recently relocated from Harvard to Stanford University.
"Stanford is building in areas that I'm interested in," Roth said in June. "They're a real center of market design and experimental economics, which will also be exciting."
"Market design" is the field of economics for which the laureates were honored. Unlike some of the less practical fields of economics, market design concerns such seemingly noneconomic decisions as choosing a spouse, designing a school choice program and optimizing kidney transplant programs. It makes strong use of "game theory," which is less about checkers and football than about how people make rational decisions.
Indeed, Shapley studied at Princeton University with John Nash, the 1994 Nobel economics laureate and game-theory pioneer. Nash was the subject of the 2001 movie "A Beautiful Mind," starring Russell Crowe, which mainly concerns Nash's battles with schizophrenia. But the movie also deals with game theory and gives viewers a layman's explanation of what it's about.
"The field they work in is narrow, but one of the most interesting," said Esmael Adibi, the director of the Center for Economic Research at Chapman University. He said economists usually solve a problem by looking at prices in a market, such as when a consumer picks a new TV based on the family budget. But prices sometimes aren't the full story. For example, universities do not accept students for admission based solely on ability to pay the tuition. Other factors are included, such as academic or athletic ability and background.
Adibi said that Roth, building on Shapley's work, was involved in developing the national system of placing medical interns with hospitals.
Previously, the system was haphazard and often didn't put the best interns with the best hospitals.
According to the Nobel committee's announcement, "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."
Shapley blogs almost daily at marketdesigner.blogspot.com. We found this interesting entry by him on Oct. 9: "There are two things underlying school-choice debates around the country:
1. In most big cities there aren't enough good schools for all children.
2. People who live near good schools support a policy of sending children to local schools, and people who don't live near good schools support policies that allow children and their families to choose to go to more distant schools."
We've seen this in California, where moves to advance school choice often are stymied, not just by the teachers' unions, but by parents in districts with fairly decent schools not wanting to change things.
This shared Nobel prize is a great achievement by California residents. One wonders what strategies the two new laureates would offer for solving the state's endemic budget problems and a tax system overly dependent on high but often-inconsistent incomes.