Alvin E. Roth

Summary: Who Gets What ' and Why by Alvin E. Roth

Overview

"Who Gets What ' and Why" by Alvin E. Roth is a book that explores the field of market design and its impact on people's lives. Roth is an American economist and Nobel laureate who has dedicated his work to understanding how markets can be designed to achieve desirable outcomes beyond just price determination. This book offers valuable insights into the intricate workings of markets and the various mechanisms that shape their outcomes.

Key Points / Ideas

1. Market Design: Beyond Price

Roth challenges the notion that prices alone determine market outcomes. He emphasizes that market design plays a crucial role in shaping who gets what and why. By studying different real-world markets, from kidney exchanges to school admission systems, the author explains how market designers can improve allocation mechanisms to better serve participants.

2. Matching Markets

The book introduces the concept of matching markets, where prices are not the sole determinant of transactions. In matching markets, participants have preferences which need to be considered when making allocations. The author highlights examples such as job markets, college admissions, and even the allocation of public school seats to illustrate the complexities involved in designing efficient matching mechanisms.

3. Algorithmic Market Design

Roth explores the use of algorithms in market design. He discusses how computer algorithms can be utilized to optimize matching processes, ensuring better outcomes for participants. The author presents the example of the National Resident Matching Program, which uses a sophisticated algorithm to match medical students with residency programs.

4. Societal Impact

Throughout the book, Roth emphasizes how market design affects societal well-being. He highlights the importance of efficiency, equity, and fairness in designing market mechanisms. By delving into specific cases, such as the kidney exchange market, the author illustrates how proper market design can save lives and have a profound impact on society as a whole.

Conclusion

"Who Gets What ' and Why" is a thought-provoking dive into market design and its impact on everyday life. Alvin E. Roth successfully challenges the notion that prices are the sole determinants of market outcomes. He presents real-world examples and evidence to support his arguments, making the book accessible and engaging for readers interested in economics and social science. If you want to gain a deeper understanding of how markets work and how they can be designed for the benefit of society, this book is a must-read. It also serves as a gateway to other literature on market design, including similar books like "Thinking, Fast and Slow" by Daniel Kahneman and "Misbehaving" by Richard H. Thaler."