Nobel Prize for economics goes to two US academics
THE NOBEL PRIZE for economics has been awarded to Americans Alvin Roth and Lloyd Shapley for their independent work into how best to bring different parties together for mutual benefit – work that formed the theoretical underpinning to speed dating evenings and organ transplant exchanges.
The prize, awarded by the Swedish Riksbank in memory of Alfred Nobel, went to the scholars for their abstract theoretical work and efforts to make the findings relevant in practice.
By awarding the prize to an area of economics far outside the current macroeconomic debate over crises, austerity and fiscal policy, the Nobel committee has dodged taking sides in the debate.
Instead, the decision reflects the tradition of finding an important area of economics and awarding the prize to a number of its leading lights even if they have never worked together.
Prof Shapley, of the University of California, Los Angeles, aged 89, received his share of the prize for work on co-operative game theory, in particular the method of finding stable matches between people or groups where no one would prefer to trade or deal with a party other than their current partners, in areas where simple market rules do not apply.
“I consider myself a mathematician and the award is for economics,” he told AP. “I never, never in my life took a course in economics.”
Prof Roth of Harvard University (60) used Prof Shapley’s results in laboratory experiments and in practice to help match doctors to hospitals, organ donors to patients and students to schools.
Prof Roth said he was “surprised” and “delighted” when he got a midnight call at his California home telling him he had won.
For most markets, the allocation of items with a limited supply – TVs or oranges for example – to near unlimited demand is solved by the price mechanism, but in many areas of life there is no market for the allocation of other scarce stuff.
Finding the best way of allocating students to schools, when fees are outlawed or capped, or human tissue to those in need of organ transplants when laws based on ethics prevents a monetary transaction, is much harder.
Prof Shapley undertook the theoretical work into co-operative stable outcomes in those markets in the 1950s and 1960s. A stable outcome is one in which both parties perceive no benefit from seeking an alternative match. – Copyright The Financial Times Limited 2012