The Purpose of Matching Markets?
Alvin E. Roth, the co-recipient of the 2012 Prize in Economic Sciences, won the award in part for using matching markets to fix the long-standing shortage in kidney donation. There have been countless occurrences in which family and friends were willing kidney donors yet were incompatible with their loved ones due to medical reasons, but Roth’s algorithm for solving this issue has already resulted in four thousand kidney transplants that may never have happened otherwise.
Yet it is a wonder as to how practical the usage of matching markets is for other situations in this ever-changing, fast-paced world. Roth himself stated that many markets clear way before certain crucial information is available – publishers buy books before the books are even written and law firms hire employees before the employees even graduate from law school – but if such markets clear, what are the chances that the matches are the best that they could be? Additionally, Roth himself noticed that actual markets, specifically labor markets, never really set prices so that supply equals demand, which was what we mainly focused on calculating in class. This is interesting – and contradictory – because doing so would definitely solve a lot of issues such as, say, high unemployment rates, yet companies do not, as one would predict from the concepts of matching markets, lower wages until only the right number of people apply for the position. Instead, recruiters screen resumes and conduct interviews to be selective of who they want to hire as an employee. Roth claims that this is what initiates competition in the work field, and perhaps, in the long run, what makes the world continue to evolve. But if matching markets exist and are not being used for what they are worth, then what is the purpose of having them at all?