Life-saving economics

Summary

Podcast Summary: “Life-saving economics” — More or Less (BBC Radio 4)

Date: October 22, 2012
Host: Tim Harford
Guest: Professor Alvin “Al” Roth, Nobel Laureate in Economics (2012)

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Overview of the Episode

This episode of More or Less dedicates its entire runtime to an interview with Professor Al Roth, who was recently awarded the Nobel Memorial Prize in Economics (shared with Lloyd Shapley). The focus is on Roth’s influential work in “matching algorithms” and “market design,” especially how these mathematical and economic concepts have been used to save lives, notably through improvements in medical exchanges like kidney donation.

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Key Discussion Points and Insights

1. The Origins of Matching Algorithms

[00:57–03:12]

• Tim introduces the foundational work of David Gale and Lloyd Shapley (1962), who proposed mathematical solutions for matching processes—such as college admissions and even marriage.
• How the Algorithm Works:
  • Men (or students) propose to their top choice; women (or universities) hold on to the best offer and reject the rest.
  • Those rejected make a new proposal, and this process iterates.
  • Final acceptances occur when there are no further rejections or offers.
  • Quote:
    • Prof. Roth: “What it means is that there isn’t going to be a man and a woman who would both prefer to be matched to each other, but who aren’t by this matching.” [02:27]
  • This results in a stable match—no pair would rather be with each other than their assigned partners.

2. From Theory to Real-World Market Design

[03:12–03:40]

• Roth began to apply Gale and Shapley’s theory to real markets.
• He notes practical uses:
  • Example: Matching new medical doctors to first jobs in the U.S.
  • In 1995, Roth was asked to redesign the matching scheme for new doctors due to a crisis in the system—launching his career in market design.

3. Tackling Kidney Exchange with Economics

[03:40–06:55]

• Ethical and Legal Barriers:
  • In most places, there’s no legal market for buying/selling kidneys due to repugnance around trading human organs.
  • Roth accepted this ethical constraint and sought an alternative.
  • Host’s Framing:
    • Tim: “To most of us, this kind of thing just doesn’t sound right.” [04:12]
• Kidney Exchange Mechanism:
  • Dialysis keeps patients alive, but transplants are better—especially from living donors.
  • Compatibility issues mean a willing donor might not match their intended recipient, leading to the need for exchanges.
  • Kidney exchange involves two (or more) incompatible pairs swapping donors so each recipient gets a compatible kidney.
  • Increasing Complexity:
    • From simple two-way swaps to complex chains (three-way, four-way, etc.).
    • Real Impact:
      • Roth: “A couple of thousand transplants have been done this way.” [05:57]
• Mathematical Challenge:
  • Maximize the number of transplants for a given pool.
  • Must consider different exchange combinations to get the best outcome.
  • Quote:
    • Roth: “…it would be a waste to do one exchange that would exhaust all the possibilities and just yield two transplants when we could be a little clever and get four transplants.” [06:46]

4. The Concept of ‘Repugnant Markets’

[06:55–08:35]

• Roth’s work led to research on why some markets provoke societal disgust or are legally prohibited (e.g., kidney sales), while others (such as kidney exchanges) are socially acceptable.
• Definition:
  • Roth: “When I use the word repugnant, what I mean is that there are some transactions that parties to the transaction would like to do and other people think that they shouldn’t do them.” [07:17]
  • Illustrative Examples: Eating horse meat is illegal in California, not due to lack of demand, but societal opposition.
• Cultural and Legal Variation:
  • The only legal market for kidneys is in Iran; black/grey markets exist elsewhere, often with poor outcomes.
  • Roth: “Just as there are technological barriers... we also have these other, harder to describe barriers, barriers of repugnance…” [08:10]
• For economists, understanding these sociological boundaries is as important as technical obstacles.

5. The Impact of Market Design

[08:35–08:43]

• Tim notes that few economists can say they’ve directly saved lives through their work.
• Roth describes market design as a “helping profession” assisting surgical colleagues.
• Quote:
  • Roth: “We help our surgical colleagues to save some people’s lives.” [08:43]

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Memorable Quotes and Moments

• On Stability:
  • Roth: “What it means is that there isn’t going to be a man and a woman who would both prefer to be matched to each other, but who aren’t by this matching…” [02:27]
• On Kidney Exchanges:
  • Roth: “It’s now happening, it’s proceeding slower than you’d like, but a couple of thousand transplants have been done this way.” [05:57]
• On Repugnant Markets:
  • Roth: “When I use the word repugnant, what I mean is that there are some transactions that parties to the transaction would like to do and other people think that they shouldn’t do them.” [07:17]
  • Roth: “...barriers about the sociology and social norms and the ways we think about markets that it would be good for economists to understand better.” [08:26]
• On Life-saving Impact:
  • Roth: “Market design is a helping profession. We help our surgical colleagues to save some people’s lives.” [08:43]

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Timestamps for Key Segments

• [00:57–03:12] — Introduction to matching algorithms and the idea of stable matches
• [03:12–03:40] — Application of algorithms to real-world markets and market design
• [03:40–06:55] — Kidney donation: challenges, solutions, and real-world impact
• [06:55–08:35] — The sociology and ethics of “repugnant markets”
• [08:35–08:43] — Reflection on market design as a life-saving, helping profession

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Conclusion

This episode illuminates Al Roth’s pioneering contributions to economic theory and market design, particularly his work translating mathematical matching concepts into practical systems that profoundly impact lives—such as revolutionizing kidney exchanges. It also explores deeper ethical and societal questions, showing how economists must consider both numerical solutions and social acceptability when designing real-world markets. Roth’s nuanced perspective demonstrates that the most effective solutions combine rigorous math with a clear-eyed view of human values and cultural norms.

Transcript

[A]

There are dozens of different podcasts now available from the BBC, including news, documentaries, science, business, arts and sports. The details of them all go to bbcworldservice.com podcasts. Hello, and welcome to More or Less on the BBC World Service, your numerical guide to news and to life. I'm Tim Harford. This week we're lavishing our entire 8 minutes and 59 seconds on one man. Why? Because he's Professor Al Roth, and this week he won the Nobel Memorial Prize in Economics. He didn't win it on his own. He shared the prize with Lloyd Shapley. When Roth was just a boy, Shapley and a colleague, David Gale, published an important mathematical paper about something called matching algorithms. I began my conversation with Alroth by asking him to explain that work.

[B]

In 1962, David Gale and Lloyd Shapley wrote a very remarkable article in which they said, let's think about how in the abstract, college admissions might work, or even marriage. And they thought about a process of iterative proposals and acceptances and rejections that would lead to a good outcome.

[A]

You've got a bunch of men, a bunch of women, all. You've got a bunch of students and a bunch of universities, and you're trying to fix everybody up with a good enough match.

[B]

And their idea was that, say, the men would all start by proposing to their first choice woman, and the women would reject all but the offer they most preferred, but they wouldn't immediately accept that offer. And what the women would do is they would hold the best offer they had received and reject the rest. All the men who had been rejected would. Would make a proposal to their next best choice, to the best choice who hadn't yet rejected them. And at each stage, every woman who got new proposals would look at any new proposals she got. She'd compare them to the proposal that she might be holding, and she'd choose the best of those and reject the others. So someone she held after round one, she might reject after round two if she got a better offer to hold. And that would proceed until no men wanted to make any more offers and no more rejections were issued. At that point, those deferred acceptances could turn into real acceptances. Every man would be married to the woman who was holding his proposal.

[A]

And. And this had some attractive properties. It was. It was stable. So could you explain what stability means?

[B]

Well, what it means is that there isn't going to be a man and a woman who would both prefer to be matched to each other, but who aren't by this matching and you can see that that's true because there are going to be men who would prefer to be match to some women who had rejected their proposals. But the women rejected their proposals because they found someone better.

[A]

So nobody wants to elope. There's no two people you could identify and say they would both prefer each other to what they've been dealt by the algorithm.

[B]

Exactly. Because if a man prefers a woman to someone who he's been matched to, he's proposed to her and been rejected already.

[A]

So that was the theoretical underpinnings of matching algorithms. And what did you do? You picked up Galen Shapley's work and you started to add to it?

[B]

Well, so I started to think about how it might be applied to actual marketplaces. And I observed incidentally, that it had been applied to actual marketplaces, one of which was the one that matches new doctors to their first positions in the United States. And I wrote about that and studied it in similar marketplaces. But in 1995, they had a sort of crisis in that market and they asked me to redesign it. And so that's when I got involved in the part of my work that the Nobel committee has called Market design.

[A]

At about this point in the story, Al Roth started thinking about other markets which might benefit from his attention, such as the market in human kidneys. Of course, in most of the world there is no legal market in kidneys because although there are plenty of people who really need a new kidney and would be prepared to pay for one, and although most of us have one more kidney than we really need and could use a little extra cash, we're collectively rather squeamish about the idea that human organs should be bought and sold. To most of us, this kind of thing just doesn't sound right. The cost for a kidney or pancreas is US$140,000. The cost for a heart, lung or liver is US$290,000. Unlike many economists, Aulth accepted that a conventional market in kidneys is going to be a non starter. And so he set about working on an alternative.

[B]

What the issue is if someone's kidneys have failed, they can live for a while on dialysis, but they really need a kidney transplant. And there's a vast shortage of kidneys from deceased donors. And it's better for you in any event, to get a kidney from a living donor. And the reason that's possible is if you're healthy, you have two kidneys and you can remain healthy with one. So you could give a kidney to someone you Love. But you might be healthy enough to give a kidney, but the person you love might not be able to take your kidney because there are matching issues about which kidneys work for which people. They have to be compatible. So you might want to give someone a kidney, be healthy enough to give a kidney, but not able to, but incompatible with your intended recipient. And that's where kidney exchange comes in. And exchange is something economists are good at. You could get together with another incompatible patient donor pair, and if things worked out right, then each patient could get a compatible kidney from the other patient's donor. And that's how kidney exchange started. And that's a simple exchange like that just has two pairs. But now we're able to help our surgical colleagues organize more complicated chains of exchange that allow more people to receive live kidneys.

[A]

And this is now happening. You've got three way kidney exchanges, four way kidney exchanges. I mean, it's this, this isn't just an abstract idea.

[B]

It's now happening, it's proceeding slower than you'd like, but a couple of thousand transplants have been done this way.

[A]

Tell us about the maths of that. Why is it an interesting mathematical problem?

[B]

So the question is to figure out how many transplants can you get out of a given pool of patient donor pairs. Let me give you a very simple example. Supposing there are two incompatible donors, patient donor pairs at a given hospital who could exchange with each other. So that would be a great thing. We'd get two transplants that we otherwise wouldn't get. But it might be that each of those pairs could actually also do a simple two way exchange with each each with a different pair. So then we'd get four transplants because we'd have two exchanges instead of one exchange. So you'd like to be able to look at the whole database of patient donor pairs and say, look, we can get four transplants if we do the exchanges right. In a sense, it would be a waste to do one exchange that would exhaust all the possibilities and just yield two transplants when we could be a little clever and get four transplants.

[A]

I suppose it was this work on kidneys that led you to write your quite famous paper on repugnant markets, where you explored ideas of why there are certain kinds of markets, for instance, buying and selling kidneys that just make people go, well, that's just disgusting. And other kinds of markets, exchanging kidneys as you've described, that are fine.

[B]

When I use the word repugnant, what I mean is that there are some transactions that parties to the transaction would like to do and other people think that they shouldn't do them. So I use the word repugnant a little differently than, say, I use the word disgusting. I'm sitting in California now, and there's no law in California against eating cockroaches, but there is a law against eating horse meat. You can't legally sell horse meat for human consumption in California. And that's not because no one wants to eat horse meat. It's because some people want to eat horse meat and other people don't want them to. So that's a repugnant transaction. And in much of the west, we have laws against buying and selling organs for donation. That's not universally true. The one place I know of where there's a explicitly legal market in kidneys is the Islamic Republic of Iran. And there are plenty of places, unfortunately, where there are gray and black markets that work badly and where the sellers, the donors, are sort of victimized. But that's a different question than whether a carefully regulated, legalized market might improve welfare or not. I'm fascinated by the fact that just as there are technological barriers, just as we don't know how to transplant pig kidneys into people, for instance, we also have these other, harder to describe barriers, barriers of repugnance, barriers about the sociology and social norms and the ways we think about markets that it would be good for economists to understand better.

[A]

There aren't many economists who can say that they've saved somebody's life, but I think you could say that.

[B]

Well, you know, market design is a helping profession. We help our surgical colleagues to save some people's lives.

[A]

Professor Al Roth, who this week won the Nobel Memorial Prize in Economics. And that's all from me. Do please keep your questions and your comments coming more or [e-mail] our website is BBC.co.uk more or less, where you'll find some of our best stories in written form. More or less. We'll be back next week, and until then, goodbye. This is a BBC podcast. You can get all our podcasts and our terms of [e-mail] podcasts.