Bristol Festival of Ideas
Alvin Roth from Stanford University, Nobel Prize-winning economist.
Wills Memorial Building, University of Bristol 13th July 2015.
Notes by William Gaskell
Markets and trade are the most ancient hallmark of human civilisation. In the modern world markets have developed with the standardisation of wheat that helped match the quality of grain to the correct market price. But markets are not always standardised. For example markets like eBay have become very big and congested and so we now need to navigate them with a search engine.
· Safety of the market place needs to be considered
· Artificial reputation mechanism to indicate customer satisfaction with supplier is thus implemented for market security
NHS match up doctors with hospitals who most want to be together but the old system didn’t work because of human factors; the best match perhaps would have been the 4th best surgeon by reputation with the 4th best student by reputation but the chance of this would have been miniscule as the match would have come 16th in order of preference. Eventually interviews were used for the doctor and student to agree a match directly at interview.
These are trades that some people like to engage in but others find them offensive. For example buying black market kidneys.
Anecdote: Economists study choices, psychologists study why people don’t have choices.
Question of today:
What makes a market a free market?
A market that has rules that make it work well. Example talked about is AirBnB with excellent reputation management system. The system needs enough sophistication to work effectively. (Perhaps it is to do with keeping people happy by keeping them engaged enough.)
Have the finest notches in financial markets with smallest time intervals to keep them “thick” with lots of trades.
Situations where people have to say yes or no immediately before getting any further opportunities to receive more offers.
Culture changes over time which is why Roth thinks that AT&T got broken up by US antitrust laws but Microsoft didn’t.
Now considering Net Neutrality; which search results should we get and why?
The reason for clumsy draft picks in the NBA is because it is for entertainment primarily.
Best example of a market:
Ethiopia Commodity Exchange is an excellent example of a market as it effectively grades coffee and thus improves overall quality of the whole crop. To me is reminiscent of Chicago Corn Exchange.