Al Roth and Peter Coles’ class on Market Design met from 9am until noon on Fridays the spring semester of my Junior year. I’ve never been a morning person, and my mornings that spring started at 5:30 or 6:30 to row House Crew (go Adams!). It’s a testament to the teaching and material in the course that I didn’t drop the damn thing, and instead had probably my best undergraduate academic experience. This paper comes the closest to summarizing, I think, the ideas that kept me from falling asleep.
The Economist as Engineer is, in effect, a summary paper of two different strains of research. The most prominent is Al’s work on the National Residency Matching Program, The NRMP serves to match MD graduates to their first jobs, and when Al took over responsibility for it the thing was breaking — students were beginning to go outside the match, taking exploding offers, and hurting the process. Al’s redesign of the match has held up to this day. It’s such an incredible thing to see an economist take something broken, diagnose it, and fix it. The use of computer experiments to enhance theoretical principles is extensive and heartening, and leaves you with the impression of reading a well-documented solution to a challenging problem.
To be frank the second half of the paper — on combinatorial mechanisms for wireless spectrum auctions — does not hold up as well. This is a function, I think, of the first half of the paper being so strong and also the fact that the issue of how to run a good spectrum auction continues to be open to this day.
I can’t help but feel the reason that section was added was as an attempt to stretch “Design Economics” into a field, rather than an isolated example. (What I’ve dubbed “Constructive Economics” could be fairly regarded as equivalent to the “Design Economics” of this paper, but I prefer constructive because it feels more accessible and highlights the non-constructiveness of the bulk of the discipline.) In addition to all of the very sound and well-reasoned research ideas in the work (nearly all of them backed up by the kind of nit-picky, rigorous, time-consuming studies and don’t end up really meriting anything more than a footnote), the paper takes on a remarkably strident and revivalist tone for something published in Econometrica. I mean, these are the second and third sentences of the abstract:
Market design involves a responsibility for detail, a need to deal with all of a market’s complications, not just its principle features. Designers therefore cannot work only with the simple conceptual models used for theoretical insights into the general working of markets.
Al closes his paper by quoting himself, and I’ll close this post by quoting him quote himself:
Just as chemical engineers are called upon not merely to understand the principles which govern chemical plants, but to design them, and just as physicians aim not merely to understand the biological causes of disease, but their treatment and prevention, a measure of the success of microeconomics will be the extent to which it becomes the source of practical advice, solidly grounded in well tested theory, on designing the institutions through which we interact with one another.
It’s a stunning vision of the future, better than coffee early on Friday mornings.
