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review 2016-03-15 16:53
Who Gets What — and Why: The New Economics of Matchmaking and Market Design
Who Gets What — and Why: The New Economics of Matchmaking and Market Design - Alvin E. Roth

[Preface/Warning: This is a long-ago unfinished review, but, in light of Lloyd Shapley's recent death, I figure it's time for me to just let it fly free as is.]

 

And let the review begin:

Well guys, I think I've discovered a real up and comer in the field of behavioral economics. Wait— what's that? He already won the Nobel Prize in Economics?!? Ok, so maybe I'm not the first to catch on to the brilliance of Alvin E. Roth (damn those Swedes for always being one step ahead of me).

 

However, the greatness of Who Gets What — and Why: The New Economics of Matchmaking and Market Design, Roth's first foray into “popular science” writing, isn't all about sheer intellectual horsepower. Roth (below, L) takes something complex, the economics of matching markets (markets in which price isn't the only determinant of who gets what”), and manages to make the ideas accessible without losing nuance or oversimplifying.*

Roth and Shapley by Jac Depczyk

Roth's fellow laureate, Lloyd Shapley (above, R), co-wrote a seminal paper on similar tricky transactions (those involving “indivisible” goods, without the use of money) in a 1974 issue of the Journal of Mathematical Economics with Herbert Scarf. The Scarf Shapley paper established a set of cyclical trades called “top trading cycles” in which all parties are ideally matched. I'm sure the paper is totally brilliant, but before you jump up to find a copy, just remember that, for most of us, it's…well, I'll let GOB tell you. 

 

GOB Half in English half in squiggly

So what's all the fuss about market design?

Markets are everywhere, and the role of market design is to “helps solve problems that existing marketplaces haven’t been able to solve naturally.” 

 

Kidney Swapping Fun

Roth, being the clever guy he is, starts out with a “market” in which proper matches are a matter of life and death— kidney transplants. When tasked with creating a sort of “clearinghouse” for kidney exchanges (now known as the New England Program for Kidney Exchange or NEPKE), there were several salient factors that Roth and co. had to take into account:

1. Kidneys are “indivisible goods” (you can't just give four people quarter-kidneys and tell them to go on their merry ways)

2. At least in the U.S., money can't be involved (buying kidneys falls into the category known as “repugnant transactions”)

3. There are “paired” patients and donors (people willing to donate a kidney for a relative, or friend, but whose kidneys weren't biological matches for said person)

4. Whenever humans (donors, recipients, doctors, hospital administrators) are involved, there's the possibility of “gaming the system”

kidney exchange chain

Avoiding a level of detail that I will, undoubtedly, misconstrue, I'll just tell you that Roth adeptly describes the intricacy of creating kidney swap

“‘top trading cycles,’ with the property that no group of patients and donors could go off on their own and find a cycle of trades that they liked better.”

Even if kidneys are the last thing on your mind, the challenges overcome in order to make the market: thick (by attracting lots of buyers and sellers), quick (time is of the essence, and congestion is to be avoided), and safe/secure are fairly universal.  

 

Sounds easy enough…

Ok, let's try this new knowledge on for size. Perhaps in a case that's not so far to one side of the commodities—matching market spectrum. 

Archer How Hard Could It Be

You've got your product (say, a metric tonne of it, meaning 1,000 kilos), which means you're looking for someone who wants what you have (supply, demand, nothing fancy here). 

 

What problems could a marketplace possibly have? Well, kind of a lot. In order for things to run smoothly, you have to have the right amounts of: thickness (players at the table), speed, security, and simplicity.

 

Humans, the unpredictable sneaky lot of us, pose a wide array of challenges to marketplaces and market designers. For one, there's the trust factor (security). Even with kidney swapping, they had to deal with scheduling “simultaneous” surgeries, for fear that, once a donor's patient partner had received a kidney, the donor might later renege on the offer. Though this fear turned out to be pretty unwarranted, the point is that you can't just take people at their word (or palabra, if you will). 

 

Archer palabra oc

 

Speaking of trust, how does one know that what one is buying is legit? Parties on either side of a transaction need to have “enough information in order to make an optimal decision.

With “commodities” this often takes place by way of quality control.  In fact, without quality control (think grading of flour, or maple syrup) commodities markets would have to be "matching markets," which would be highly inefficient.

 

Pseudo-conclusion:

So, yeah. This review isn't done. There are so many more Archer gifs, and so many more ideas to communicate. But, seriously, just read the book…

_________________________________

* I'm sure my review with be chock full of oversimplifications, but, then again, I'm no Nobel Laureate

† For his purposes, Roth defines these as “transactions that some people want to engage in and that are objected to by people who may not themselves experience any direct harm.”

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text 2014-11-30 17:44
How Markets Fail progress update: I've read 60%.
How Markets Fail: The Logic of Economic Calamities - John Cassidy

I'm not sure if I should be reassured or terrified by the notion that a nineteenth century journalist could describe the "madness of crowds" in a way that captures modern society so well... 

 

Here's to you Charles Mackay for capturing the irascible societal trifecta of "National Delusions", "Peculiar Follies", and "Philosophical Delusions."

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review 2014-08-19 14:55
Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain
Think Like a Freak - Stephen J. Dubner,Steven D. Levitt

This book won't be 2.5/5 stars for everyone. If, like myself, you enjoyed Steven and Stephen's earlier volumes, Freakonomics and Superfreakonomics, then congratulations! — you've found a subject area that interests you (albeit a sometimes nebulous one that can show up under the guise of a variety of disciplines). If, for some reason, you only feel comfortable learning about the ways in which data and patterns can reveal the inner workings of our world with these two Freakonomists, then this book is for you.

 

However, I'm an ever-curious being with little patience; and, thus, haven't been sitting around just waiting for the Steven/Stephens to give me the go ahead. I thought of giving a list of recommended reading here, but one of the cool things about Freakonomics is that its principles can be applied to almost anything — for me this has included books on the philosophical nature of humanity as well as ones that helped me figure out how to run a G-D factor analysis to draft my fantasy football team (spoiler alert: it wasn't that helpful for football purposes, but learning how to use R opened a whole new world of statistical computing fun for me). 

 

So go forth and "Think Like a Freak," but, honestly, you might not need to read this book in order to do that. 

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review 2014-08-05 17:35
The Righteous Mind (a pre-review)
The Righteous Mind: Why Good People Are Divided by Politics and Religion - Jonathan Haidt

Recommended required reading:

Before I begin anything that bears even a slight resemblance to a review, I want to say that I am incredibly grateful that a friend (a real, live human one at that) suggested I read (or re-read, as it were) Daniel Kahneman's Thinking, Fast and Slow before taking on Haidt's oevre. I wholeheartedly endorse the aforementioned recommendation, so do with that what you will.

 

Excuses, excuses:

I am absolutely committed to reviewing this book...at some point. Jonathan Haidt does an excellent job of using analogies to help his readers understand lofty propositions in moral philosophy. For example, he likens the five dimensions of moral foundations theory* to taste receptors on the tongue. 

 

I was feeling clever (and in the mood for a bit of procrastination) and thought: 

"Hey Mara- maybe you should be super cool and awesome and do a quick illustration of moral foundations as tastebuds." 

"Good thinking Other Mara, your ideas are always great and never take unexpected and/or detrimental turns, let's do it!" 

Well, shock me, shock me- turns out that both Mara and Other Mara were quite rusty in their illustrator skills, and it took an inordinately long amount of time, with less than satisfying results. But, since the collective Maras wasted their time, here is our "moral taste buds tongue" for you to ogle while they get some big kid work done and (hopefully soon) write a real review. 

 

Moral taste buds tongue

 

 

 

_____________________________

*  He adds a sixth, ultimately, but that's a tale for another time. 

 

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review 2014-04-24 19:44
Mistakes Were Made (But Not by Me): Why We Justify Foolish Beliefs, Bad Decisions, and Hurtful Acts
Mistakes Were Made (But Not by Me): Why We Justify Foolish Beliefs, Bad Decisions, and Hurtful Acts - Carol Tavris,Elliot Aronson

"People will do anything, no matter how absurd, to avoid facing their own souls." - C.G. Jung

 

"Memory is a complicated thing, a relative to truth, but not its twin." - Barbara Kingsolver

 

Neither of the quotes above were included in this book, but they speak to some of the ideas at its core. Anyone who has any social psychology, experimental methods course, and/or given cursory attention to the bevy of material out there about how the human mind and we, as people, work, will find a lot of familiar concepts in Mistakes Were Made. That is not to say, however, that it's not worth reading. 

 

The overarching principles being examined are those of cognitive dissonance and self-justification. And, before you get all defensive (get it?) these are normal and necessary facets of a human mind-brain (as Krieger might call it). I was going to go into this elaborate robot "does not compute" comparison to illustrate the nature of cognitive dissonance, but then I figured that I'd leave it to Lucille Bluth. 

 

Lucille Bluth Queen of Cognitive Consonance

 

Basically, the reasoning parts of our brain shut down when confronted with "dissonant" information, and the emotion circuits light up. "These mechanisms provide a neurological basis for the observation that once our minds are made up, it is hard to change them."

 

As Lucille points out, much of this occurs with respect to our sense of self as well as our need to find explanations for current problems are situations. Confirmation bias and confabulation are just two of the means by which we find evidence for what we're looking for, and causes that aren't there and there are plenty of great research and case studies (some of which is in this book) that illustrate these ideas.

 

These ubiquitous feats of mental gymnastic give rise to various appalling truths, one of which is best described by research psychologist John Kihlstrom.

"The weakness of the relationship between accuracy and confidence is one of the best-documented phenomena in the 100-year history of eyewitness memory research."

So, basically, the least accurate (in this case witnesses) tend to have the most confidence in their accuracy. And the implications of this aren't restricted to the courtroom. I'm not sure I love the choice of case studies of this phenomenon among professionals in this book (the recovered memory movement in therapy, and gross miscarriages of justice in, well, the justice system), as they undermine quotidian examples (we literally do this all day every day). However, the finding that was, to me, most chilling was that in these cases "training does not increase accuracy; it increases people's confidence in their accuracy."

 

So, in keeping with the spirit of the book, I have to acknowledge my own sequential bias, I've read a lot of other books that covered this material and because it was new to me then, I'm prejudiced to think it was more interesting in those books...so do with that what you will. 

 

Recommended reading:

 

        

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