For some reason, the awarding of Nobel Prizes this year has captured my attention. The awarding of the prize for economics (not one of the original endowed by Alfred Nobel) to Americans Alvin Roth and Lloyd Shapley for their work on markets brought up interesting topics about efficiencies, especially when money isn’t involved.
The New York Times explains what they each worked on:
Their work primarily applies to markets that do not have prices, or at least have strict constraints on prices. The laureates’ breakthroughs involve figuring out how to properly assign people and things to stable matches when prices are not available to help buyers and sellers pair up.
Mr. Roth, 60, has put these theories to practical use, in his work on a program that matches new doctors to hospitals and more recently for a project matching kidney donors. Public school systems in New York, Boston, Chicago and Denver use an algorithm based on his work to help assign students to schools. A professor at Harvard, he recently accepted a new position at Stanford.
Mr. Shapley, 89, a mathematician long associated with game theory, is a professor emeritus at the University of California, Los Angeles. He made some of the earliest theoretical contributions to research on market design and matching, in the 1950s and 1960s.
In a paper with David Gale in 1962, Mr. Shapley explained how individuals could be paired together in a stable match even when they disagreed about what qualities made the right match. The paper focused on designing an ideal, perfectly stable marriage market: having mates find one another in a fair way, so that no one who is already married would want (and be able) to break off and pair up with someone else who is already married.
NPR’s Planet Money put together an excellent blog post chronicling the careers of the two and featuring several interesting stories from recent years. One of the best links in the post is to this Boston Globe story from last year about Roth’s work. It’s well written and chronicles his move from theorist to practical problem solver.
I like the fact this work and story isn’t about making money. It’s not a business story talking about “masters of the universe” or an acquisition or private equity. It’s business principles that help other people. Roth and Shapley’s work has led to more efficient matching of kids to public schools, creating efficient ways to match kidney donors and recipients, and residents with hospitals.
Think of all the good created when these mathematical theories are used to solve practical problems – happier doctors, people with kidneys and kids placed in schools of their choosing. Instead of going to Wall Street and applying math to make money, these two have applied it to help others, making them truly deserving of the prize.
Then, there’s the Nobel Peace Prize awarded to the European Union. From the NYT story:
Members of the Nobel committee lauded six decades of reconciliation among enemies who fought Europe’s bloodiest wars while simultaneously warning against the hazards of the present. The decision sounded at times like a plea to support the endangered institution at a difficult hour.
“We see already now an increase of extremism and nationalistic attitudes,” said Thorbjorn Jagland, the former Norwegian prime minister who is chairman of the panel awarding the prize, in an interview after announcing the award. “There is a real danger that Europe will start disintegrating. Therefore, we should focus again on the fundamental aims of the organization.”
Yet on the very day that the award was announced in Oslo, leading European policy makers again publicly bickered over how to deal with Greece’s bailout. Germany’s finance minister, Wolfgang Schäuble, rejected calls from the French head of the International Monetary Fund, Christine Lagarde, to give Greece more time to make additional spending cuts to rein in deficits.
But some weren’t so happy about the choice. The Associated Press reported that many in the EU were skeptical about the decision of the Nobel committee.
In hard-hit countries such as Greece and Spain, where the European debt crisis has sparked severe hardship, unemployment and violent protests, the prize was met with disbelief.
“The peace prize? The way things are going, what will happen in the immediate future? Peace is the one thing we might not have,” said Giorgos Dertilis, an insurance company worker in Athens.
It’s hard to reconcile a prize being given to a block of countries that can’t resolve their debt issues with one given to men who’ve saved lives. But the media should all be lauded for not shying away from the controversy and for their coverage of all the prizes.
