The Two Marketeers

The absence of pricing impedes
Allocation of goods that one needs,
But economists who
Made markets that do
Were honored today by the Swedes.

UCLA's Professor Lloyd Shapley,
Who theorized gaming so aptly,
Wrote a smart algorithm,
Determining with 'im
How best to pair couples up happ'ly.

Stanford's Professor Al Roth,
Who is younger but from the same cloth,
Found broad application
For Lloyd's innovation
Of optim'ly plighting one's troth.

How can you efficiently allocate goods - such as donor organs, medical residencies and mates - that cannot or may not be priced? It's a good question, and today the committee of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel(yes, that's what it's called) bestowed its 2012 prize on two US economists who answered this question and put the answer into practice. UCLA's Professor Emeritus Lloyd Shapley was a pioneer of game theory in the 1950s and '60s. Among his many accomplishments is the solution to the "stable marriage problem": how to match a group of, say, ten men with ten women, such that none of them would rather be with someone else. The algorithm that Shapley developed with David Gale has broad applications to other matching problems.

Prof. Al Roth, late of Harvard and now of Stanford, applied Shapley's theories to such problems as matching kidney donors who lack the correct blood type to donate to a member of their own family, and matching medical students to residency programs.

A number of econ blogs have written about the two Nobel Prize recipients today, but I particularly enjoyed Economists Do It With Models and the Wonkblog.

And the Nobel Goes To...

The committee bestowed some respect
On the science of cause and effect
With a new Nobel prize
For a couple of guys
Who proved that it's hard to project.

The 2011 Sveriges Riksbank Economics Prize in Memory of Alfred Nobel has been awarded to two Americans who have done pioneering work on the effects of government policy on the macroeconomy. Thomas Sargent of NYU and Christopher Sims of Princeton (pictured right above and below respectively), who were classmates at Harvard and now teach a course together at Princeton, have worked mostly separately and often disagree; the Nobel committee felt that their different approaches were complementary. Mr. Sargent developed complex models to predict the behavior of the economy, while Mr. Sims is skeptical of such models and has focused on direct analysis of economic data.

Harvard Nobel Prize in Economics Prediction Pool

A man of conviction who needs
To declare which economist leads
May wager a bet
On the one who will get
That prize given out by the Swedes.

Nobel Prize season is upon us: on Monday, October 10, the winner(s) of the 2011 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel will be announced in Stockholm. That means that once again it's time for the Nobel Prize in Economics Pool, sponsored by Harvard University. The self-described "world's most accurate prediction market" invites economists far and wide to wager a dollar on the name of each predicted winner. Although practitioners of the Dismal Science failed to predict last year's winners, Thomson Reuters has stepped in with a handy handicapping sheet. Don't delay - entries must be received in Cambridge MA before 11:59 PM this Sunday night!

Fed Nominee Blocked

"Peter Diamond," said Senator Shelby,
"A talented theorist may well be,
But his Keynsian views
I'll flatly refuse,
However deserved his Nobel be."    


If you were a conservative Republican trying to derail the confirmation of a Democratic president's nominee to the Federal Reserve Board of Governors, you could not have done a better job of it than Sen. Richard Shelby (R-Alabama).  After graciously praising Dr. Diamond's accomplishments, and arguing that they lack relevance for the Fed, Sen. Shelby got down to brass tacks: his opposition to "an old-fashioned, big government Keynesian" on policy grounds.

Nobel Laureate's Empty Stocking

As for Christmas the senators flocked home,
Peter Diamond dejectedly walked home
To find naught 'neath the tree
For a Fed nominee
But the medal he picked up in Stockholm.

The US Senate adjourned for the holidays without taking a vote on the confirmation of MIT economist Peter Diamond, President Barack Obama's nominee for the board of the Federal Reserve.  Dr. Diamond, who shared this year's Nobel Prize in economics for his research of the labor market, will face a tougher confirmation fight in 2011, when the Senate returns with more newly elected Republicans.



Happy Holidays to Peter Diamond and all readers of Limericks Économiques!

2010 Nobel Prize

A trio of really smart guys
Were bestowed a prestigious prize
For teaching the mobs
That the market for jobs
Has more friction than many surmise. 

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010 was awarded jointly to Peter A. Diamond, Dale T. Mortensen and Christopher A. Pissarides "for their analysis of markets with search frictions".  It might be added: "...in a complete upset of both the Nobel prediction market and Dr. Goose's personal pick."  But... congratulations... really.

Dr. Goose's Nobel Pick

Richard Thaler and Robert J. Shiller,
More empir'cal than Merton H. Miller,
Through the care that they gave your
Financial behavior,
Make footprints as great as Godziller.

The groundbreaking research by Thaler, of U. Chicago, and Shiller, of Yale, takes the study of finance beyond the purely rational approach embodied by 1990 Nobel Prize winner Merton Miller, into the more reality-based realm of "behavioral finance," thus having a greater impact on solving real-world problems.

Pooled Wisdom

The Harvardian Nobel Prize Pool
Lets you bet which economists rule;
So the ken of the crowd
Will predict the endowed
Of which think tank or graduate school.