Alvin Roth
About
Economist known for work on kidney exchange and market design
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Claims by Alvin Roth (20 of 62)
Marketplace failure differs from market failure
Distinct from traditional market failure, marketplace failure concerns whether a particular marketplace works well; Uber became possible only with smartphones and GPS and has a simple matching problem (nearest driver), whereas Airbnb must elicit unknown preferences by showing pictures, so different marketplaces fail in different ways.
Money turns benign transactions contested
A number of transactions become morally contested only when money is added: adoption is acceptable but paying the birth mother for the baby is illegal almost everywhere under the Hague Convention; surrogacy is legal and paid in much of the US, banned entirely in much of Western Europe, and recognized but unpaid in the British Commonwealth, generating fertility tourism.
Repugnant transactions defined
A repugnant transaction is one that some people want to engage in while others object—not because they are personally harmed, but for moral or religious reasons; this differs from disgusting transactions, which almost no one wants to engage in and are handled automatically by supply and demand.
Marketplaces are small parts of big markets
A useful distinction is that marketplaces are small parts of big markets: there is a big market for transportation, and Uber, Lyft, and municipal taxi services are each marketplaces within it; market design mostly concerns designing marketplaces.
Negative externalities as a general market failure
Markets fail for public goods and negative externalities, as when a manufacturer pollutes air and water as a byproduct without that harm being priced into the product, harming people external to the transaction; this is addressed via regulations and taxes.
Markets are designed and modified, not magical
Markets are human artifacts built by people to serve their participants; they do not appear magically in final form but are designed by companies, modified by users, regulators, and observers over time—like Uber being designed by a company, then regulated by cities and modified through experience.
Commodity vs matching markets distinction
Commodity markets (like the NYSE or Chicago Board of Trade) standardize goods so participants deal anonymously and prices do all the work, whereas matching markets (labor, marriage, podcasts) require you to be chosen as well as to choose, so prices don't do all the work and you care who you deal with.
Commodification standardized wheat trading
Before commodity markets, buying wheat required inspecting each field for water content and grade; the Chicago Board of Trade commodified wheat by defining standardized grades (e.g. number two hard red winter wheat) so buyers could purchase in bulk without caring who they dealt with or inspecting the goods.
Horse meat ban illustrates repugnance
California's 1998 referendum made it a felony to sell horse meat or dog meat for human consumption—not an old cowboy law but one passed by people who see horses and dogs as pets—while there is no law against worm-based or saliva-based foods, because those are merely disgusting and supply and demand handle them, whereas eating horse meat is repugnant to the collective even though some people enjoy it.
War on drugs failing despite enforcement
The US is losing the war on drugs—evidenced by drugs even being smuggled into prisons via drug-soaked book pages—so policies should be judged by consequences not pure intentions; we should experiment with treating addicts more like patients than criminals while not decriminalizing without treatment, learning from places like Switzerland, since Portland's decriminalization had bad city effects without reducing overdose deaths.
IVF is contested as life-giving versus murder
In vitro fertilization, recognized with a 2010 Nobel Prize after producing millions of children, is morally contested because multiple embryos are created and not all used; those who regard the embryo as a living person view IVF as a massacre, while others view it as life-giving, so a transaction occurring millions of times draws both intense praise and condemnation.
Two arguments against paying for kidneys
There are broadly two objections to paying for kidneys: first, that buying or selling body parts is simply wrong because it commoditizes people; second, the more nuanced concern that only poor people would sell and would be coerced into it, turning an altruistic life-saving act into something exploitative that corrupts the medical profession.
US paid plasma supplies the world
Plasma is on the WHO's list of essential pharmaceuticals, yet many countries legally forbid paying plasma donors; there is no widespread shortage only because the US pays donors and exports tens of billions of dollars of plasma products annually, and a recent study found that when paid plasma facilities open, payday loans go down, showing plasma donation substantively supplements low incomes while saving hemophilia and immunodeficiency patients worldwide.
Kidney shortage causes preventable deaths
In the US, about 500,000 people are on dialysis and around 90,000 are on the kidney transplant waiting list, but fewer than 30,000 transplants are done per year, so most people who could live longer healthier lives with a transplant die without one; since healthy people have two kidneys, Gary Becker argued there is no shortage but a surplus, the real problem being that paying donors is illegal so prices cannot adjust supply.
End Kidney Deaths Act incentivizes non-directed donors
The proposed End Kidney Deaths Act would give limited compensation via income tax credits to non-directed donors who donate a kidney anonymously; because the US has only about 500 such donors a year and they can spark long donation chains in kidney exchange, even doubling them would greatly help patients and pay for itself since Medicare bears the high cost of caring for kidney patients.
Moral arguments often ignore trade-offs
A key reason Roth wrote the book is that people making moral arguments often fail to think about trade-offs as economists do; we may dislike paying for kidneys or plasma, but we must weigh that against people dying of hemophilia or immunodeficiency, so policy should be judged by consequences rather than purity of intentions like 'there should be no heroin addicts.'
Kidney exchange solves incompatibility matching
Because a kidney must be physiologically compatible, a healthy person who loves someone needing a kidney often cannot donate to them—sometimes due to antibodies developed through childbirth against the partner's leukocyte antigens; kidney exchange solves this by having incompatible donor-patient pairs swap, so each donor gives to a compatible stranger and their loved one receives from another donor, with chains begun by non-directed donors multiplying the effect.
Paternalism can be justified protection
Paternalism is not inherently a bad word—it might be called parentalism—because behavioral economics shows none of us perfectly decide in our own best interest; just as parents must protect children, consumer-protection bodies like the SEC, prescription-drug requirements, and proposed soda-size limits protect vulnerable adults from poorly understood products and self-harm, so policy can sit between laissez-faire and outright bans.
Medical aid in dying is spreading in the US
Medical aid in dying is a medical-care market increasingly legalized in the US—about 12 or 13 states, with New York set to allow it around August—under restrictive conditions, while some other countries are less restrictive, prompting travel such as Daniel Kahneman's choice to end his life in Switzerland; strong opposition from the Catholic Church and from justices like Gorsuch and Barrett makes a future Supreme Court challenge likely.
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