STOCKHOLM - The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2012 was awarded on Monday to Alvin Roth of Harvard University and Lloyd Shapely of UCLA “for the theory of stable allocations and the practice of market design.”
The work concerns a central economic problem, explained the Royal Swedish Academy of Sciences - how to best match different agents. For instance: students and schools, new doctors with hospitals, organ donors with organ recipients.
In a market, prices adjust to meet demand, but in some cases, monetary payments don’t come in, and the market mechanism cannot be applied, and you are left with what is called “market failure.”
How then, do you decide how to allocate resources most in the best possible way? Or in other terms, “how can individuals be paired up when they all have different views regarding who would be the best match?”
Lloyd Shapley and his colleague David Gale created an algorithm to ensure that there is always a stable matching between supply and demand in markets where market mechanisms cannot be applied. Alvin Roth applied this theory to the market for new doctors, using experimental work to design an improved algorithm, adding modifications that take into account specific circumstances and ethical limitations.
Some interesting facts about the Nobel Prize in Economic Sciences:
→ 43 prizes have been awarded since 1969
→ The average age of Economic Sciences Laureates is 62 years
→ The youngest Economic Sciences Laureate was 51 years old, while the oldest was 90 years old
→ The only female Economic Sciences Laureate was Elinor Ostrom, in 2009
→ The Economic Sciences prize is awarded by the Swedish Central Bank