Our latest Freakonomics Radio episode is called “Make Me a Match.” (You can subscribe to the podcast at iTunes or elsewhere, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)
The gist of the episode: Sure, markets generally work well. But for some transactions — like school admissions and organ transplants — money alone can’t solve the problem. That’s when you need a market-design wizard like Al Roth. Read More »
The 2013 Nobel Prize in Physics was recently awarded for symmetry breaking and its consequence, the Higgs boson—a particle so well known that, according to the president of the American Physical Society, “[i]f you’re a physicist, you can’t get in a taxi anywhere in the world without having the driver ask you about the Higgs particle.” Teaching the symmetry unit in my own course this semester, I couldn’t help wondering about symmetry as I drove through an apparent example of symmetry: roundabouts or traffic circles.
Roundabouts use two complementary systems for controlling traffic flow: (1) Traffic in the roundabout has priority, or (2) traffic entering the roundabout has priority. The choice seems so symmetric, like choosing right- or left-hand traffic. In the United Kingdom, traffic in the roundabout has priority. In contrast, on many Massachusetts roundabouts, including one on my commute, entering traffic has priority. Read More »
I awoke yesterday to the happy news that two of my friends won the Nobel Prize in economics.*
Gene Fama was one of the three recipients. He and I share two important beliefs about the world. First, we value empirical research in economics — i.e., getting deep into the data to understand what is going on. Second, we both believe that golf should be played quickly! So every weekend, at least once, Gene and I get up before the sun rises and get in 18 holes (walking) in about 2.5 hours. Gene is 74 years old — he didn’t take up golf until his sixties, and I’ve seen him post a scorecard with multiple birdies on it.
Gene believes deeply and fundamentally in markets, which is why pairing his prize with Robert Shiller, a market skeptic, is quite odd. But Shiller is a wonderful economist — someone whose work I read a lot and was inspired by early in my own career — and I’m glad he was chosen. Read More »
When I talk about economists, one of the greatest compliments I give is to say that they changed the way people think about the world. Al Roth definitely fits into that category. The type of economics he is best known for is what is called “Market Design.” Essentially, it means bringing market-type thinking to areas in which historically non-market allocation mechanisms have been used. A few examples of the areas Roth has explored are matching fledgling doctors to hospitals for their residency, matching students to public schools in school choice programs, and matching kidney donors with those who need a kidney.
I know Roth changed my thinking because the first time I read Roth’s work in this area I had a strong reaction: this isn’t really economics. Read More »
A nice analytic giblet from a Times profile of new Nobel economists Thomas Sargent and Christopher Sims:
Because of his father’s College Board connections, Mr. Sims got hold of an old SAT exam, which he and Mr. Willoughby used to conduct a statistical analysis. They found that on multiple-choice questions in English and social studies, the “longer answers tended to be correct.” In math, they determined that the number that was “closest to all of the other numerical choices” was probably the right one.
Last week we posted about Harvard’s Nobel Prize Pool, where people could place bets predicting this year’s winner of the Nobel Prize in Economics for $1 per entry. The Harvard economics faculty ran the site for a few years, dubbing it, “the world’s most accurate prediction market.” Apparently, Harvard wasn’t too keen on the idea, as the following notice now appears on the site:
Unfortunately, we have been advised by Harvard University to immediately shut down the Nobel pool due to legal reasons, and we have decided to comply with this request. We will fully reimburse the money of all participants, and we apologize for any inconvenience this creates for you. All participants will be contacted by email.
For anyone who watched the site closely over the last week, do you remember the odds for the actual winners, Thomas J. Sargent and Christopher A. Sims?
Next Monday, the Nobel Prize Committee will announce the recipient(s) of the 2011 Nobel Prize in Economic Sciences. If you think you know who’s going to score this year’s prize, head on over to Harvard’s Nobel Pool, “the world’s most accurate prediction market.”
Each entry will cost you $1; all entries and bets must be received by 11:59 PM on Sunday, October 9th. If you’re looking for inspiration, past predictions can be found here. And if you haven’t already, listen to our Freakonomics Radio podcast, “The Folly of Predictions,” to find out where we stand on the whole notion of predictions.
So Freakonomics readers, who are you betting on?
As a physics student, I found that I could solve most of the problems simply by looking at derivations and listening carefully to my reactions to the equations. A soft voice inside me would say, “No, that term just doesn’t seem right. Go and find out what went wrong there.” Or, “Ah, these terms hang together and the result feels right. It must be okay.” And it almost always worked out. My piano teacher would do the same when playing an unfamiliar piece of music. She could play it just by making sure it sounded right.
Were these just party tricks? Or was a more fundamental process going on? Read More »