By Marwa Farag
Alvin “Al” Roth M.A. ’73 Ph.D. ’74, senior visiting professor of economics, was awarded the 2012 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel on Monday morning. He shares the prize with Lloyd Shapley, professor emeritus at the University of California, Los Angeles.
Roth, 60, and Shapley, 89, were awarded the prize “for the theory of stable allocations and the practice of market design.” They are expected to split the $1.2 million cash award.
“The combination of Shapley’s basic theory and Roth’s empirical investigations, experiments and practical design has generated a flourishing field of research and improved the performance of many markets,” the Royal Swedish Academy of Sciences said in a press release.
The laureates’ work focuses on matching theory — finding the best way to match agents in markets based on preferences rather than prices. Although they worked independently, Roth built on Shapley’s research foundations using laboratory experiments to apply theory to real-world problems. His work has redesigned the system that matches medical residents with hospitals, New York and Boston high school students with public schools and kidney donors with recipients. Roth’s reforms rely on Shapley’s “deferred acceptance algorithm,” a mathematical formula introduced in a 1962 paper, “College Admissions and the Stability of Marriage,” with David Gale.
“The School of Humanities & Sciences is the basic research core of the University and as such sometimes we’re thought to be a little esoteric and not involved in real world problems,” said Dean of Humanities & Sciences Richard Saller. “So it is a particular pleasure to have Al [Roth] back working on such deeply practical issues as kidney transplants or matching students to schools.”
Roth’s work has led to his recognition as a pioneer in market design, game theory, experimental economics and their real-world applications.
He received the call from Sweden at 3:30 a.m. on Monday morning.
“It was unexpected, we didn’t reach the phone in time,” Roth said. “But they called back.”
This fall quarter, Roth is teaching ECON 285: Market Design, a class open to both graduate and undergraduate students. His class met at 11 a.m. on Monday, immediately following a Stanford press conference at which Roth, Saller, Provost John Etchemendy Ph.D. ’82 and Chair of Economics Jonathan Levin ’94 spoke. Roth ended the press conference early to teach his class, a fact Etchemendy pointed to as a testament to Roth’s excellence at teaching and mentoring.
“What I can say is not only is Al an extraordinary researcher and teacher, admired worldwide by economists but he’s also a heck of a nice human being,” Etchemendy said.
“It’s nice to be the object of attention,” Roth said. “But I also would like to deflect some of that attention to my colleagues who work in this area. The prize is really representative of a whole stream of work.”
Roth is currently professor of economics and business administration at Harvard University and Harvard Business School but is in transition to Stanford, where he will become a full faculty member in January 2013.
“We put a lot of time into developing files for the appointment of senior faculty to evaluate their quality,” Saller said. “It’s nice to have the Nobel committee vindicate our taste.”
Roth is an Alfred P. Sloan fellow, Guggenheim fellow and a member of the National Bureau of Economic Research and the American Academy of Arts and Sciences. He is now the 19th Nobel Laureate in Stanford’s current community of scholars, nine of whom have received the Prize in Economic Sciences. Hoover Senior Fellow Thomas Sargent was awarded the prize last year.
Stanford’s 2012 Nobel laureates, Roth and Brian Kobilka, professor of molecular and cellular physiology and winner of the 2012 Nobel Prize in Chemistry, will receive their monetary awards, gold medals and diplomas at a ceremony in Stockholm on Dec. 10.