MARKET DESIGN: A NEW APPROACH TO SCHOOL CHOICE, RECRUITING JUNIOR DOCTORS AND KIDNEY TRANSPLANTS

Economics professor Alvin Roth has used the principles of market design to devise a system for putting junior doctors into their first jobs, to propose mechanisms of school choice (now adopted in New York and Boston) and, most recently, to develop a unique organ trading system that eases the shortage of kidneys available for transplant by giving willing donors a strong new incentive to give their kidneys to strangers.

Writing in the March 2008 issue of The Economic Journal, he discusses the lessons learned from his experiences and considered the implications of this experience for similar problems in the UK. Kidney exchange (‘paired/pooled living kidney donation’), for example, has been approved by the UK Transplant and the British Transplantation Society. And there have been recent controversies over the recruitment of junior doctors, and parental choice of schools.

In New York City, the old school choice system left 30,000 students per year assigned to secondary schools they did not choose. In Boston, the problem was different: the old school choice system there made it risky for parents to indicate their true first choice school if it was not their local school.

In both cases, the old systems were replaced by orderly clearing houses designed to make it safe for parents to list their preferences, and to allow families to choose among a wide set of schools without congestion.

Recent controversies over secondary school choice suggest that similar problems exist in the UK, and may not be fully understood in the press. The problem of students who do not receive their first choice school has been blown out of proportion. More serious is the issue of whether substantial numbers of students are still being placed into schools without regard for their preferences.

The labour market for new doctors in the United States is organised through a matching scheme called the National Resident Matching Program (which was redesigned by Professor Roth in 1998). More recently, similar matching schemes have been employed to aid in the recruitment of junior doctors for specialty fellowships.

These markets (like the current recruitment of junior doctors in the UK) had been marked by fragmentation and disorganisation that had prevented fellowship directors from interviewing and hiring the most suitable candidates. An organised system of matching has substantially alleviated these problems in the United States.

The need for kidney exchange (which has begun in the United States and has been approved to begin in the UK) arises because transplantation is the treatment of choice for end stage renal disease. Because a healthy person has two kidneys, and can remain healthy with one, living kidney donation is possible, and in the United States there are now more live kidney donors than deceased kidney donors.

But even a healthy person may not be able to donate a kidney to a loved one, if there are blood type barriers or immunological barriers that make the donor and the intended recipient incompatible. In this case, two or more incompatible patient donor pairs may exchange kidneys, with the donor of one pair giving a kidney to the patient in another pair, and vice versa.

One discovery made in designing kidney exchange protocols in the United States is that it will be useful to be able to accomplish exchanges among both two and three pairs of patients and donors, but that larger exchanges will seldom be necessary.

ENDS

Notes for editors: ‘What Have We Learned from Market Design?’ by Alvin Roth is published in the March 2008 issue of The Economic Journal.

Alvin Roth is Gund Professor of Economics and Business Administration at Harvard University.

For further information: contact Romesh Vaitilingam on 07768 661095 (email: romesh@compuserve.com).