Tuesday, October 6, 2015

American Economic Association election results, and a request for suggestions...

The American Economic Association has announced the results of the recent election of new officers, who join the existing officers:

2016 Election Results--American Economic Association

Alvin RothStanford University
Daron AcemogluMassachusetts Institute of TechnologyMarianne BertrandThe University of Chicago Booth School of Business
Executive Committee
John CampbellHarvard UniversityHilary Hoynes

As one of the new officers, I will be interested in hearing suggestions about projects that a soon-to-be president with a one year term might usefully undertake.

Monday, October 5, 2015

how can David sue Goliath? A new marketplace for litigation funding

Justice and the courts are in principle available to all, but litigation is expensive. So it may be hard for a plaintiff of limited means (call him David) to receive justice by suing a defendant with deep pockets, such as an insurance company. That will be particularly true if the plaintiff's need is urgent, if the defendant can afford to delay the proceedings (and add to their expense) through legal maneuvering.

But firms that offer to finance lawsuits often have bad reputations, in part because lawsuits themselves often have bad reputations. So litigation financing has suffered from some repugnance, including legislation limiting it.

A new marketplace for litigation financing, called Mighty, has just been launched. It is intended to allow potential investors to bid to support meritorious cases, and thus bring some market discipline to the process.

I earlier had a chance to chat with one of its founders, Joshua Schwadron, who accompanied the launch with this essay: Power to the Plaintiff, from which these quotes are taken:

"Well aware of plaintiffs’ precarious situations, insurance companies often prolong the legal process, waging a war of attrition to get plaintiffs to accept quick, less-than-fair settlements. This happens even in the most clear-cut cases. It’s called “frivolous defense,” a phrase you will have heard much less frequently than “frivolous lawsuits,” even though many scholars believe it is the former that causes our courts to clog, not the latter. And frivolous defense works — it almost always does. It’s a systemic scandal.
The fundamental problem is that defendants enjoy what economists call“monopsony power.” Monopsony power is just like monopoly power, except that one buyer has all the market power instead of one seller. Essentially, the defendant is the only legally authorized “buyer” of the plaintiff’s liability claim. As Stephen Gillers, one of the most prominent legal ethicists in the United States, explains:
“[The defendant] is under no time pressure. It is, furthermore, the only authorized purchaser of [the plaintiff’s] claim, the only one allowed to bid on it. Now it requires no MBA to recognize that if one person is under duress and needs to sell something and another person is the only one legally allowed to buy it, the buyer has an enormous advantage.”
Plaintiff financing provides plaintiffs with funds that enable them to live their lives while they wait for fair settlement offers. It’s not a loan; it’s an investment, which yields a return to the investor only if a plaintiff’s case settles or is won.
"The insurance industry has consistently fought the adoption of plaintiff financing. Just last year, The National Association of Mutual Insurance Companies awarded State Legislature of the Year Awards to three legislators who helped regulate plaintiff financing out of existence in Tennessee.
"If plaintiff financing is such a commonsense solution, why is it not more widespread? First, the market is nascent. A handful of early participants have been bad actors and stifled the practice’s growth by engaging in opaque tactics. Second, skeptics claim that plaintiff financing could lead to an increase in frivolous litigation. But in reality, empirical studies have shown that plaintiff financing does not increase non-meritorious litigation because investors are rational actors who invest only in the cases most likely to win. Finally, plaintiff financing can be rhetorically reduced to the “financing of lawsuits,” a description that is plagued by the ick factor and offends the sensibilities of many."

Here is a WSJ blog post: Personal Injury Plaintiffs May Benefit from New Litigation Funding Marketplace

Here are some older links to litigation financing, and it's repugnance...

February 10, 2015  Updated 02/11/2015
Litigation-finance firms bet on the little guy
Hedge funds, private-equity players fund small businesses' lawsuits.

Litigation Finance Firm Raises $260 Million for New Fund

Litigation Financing Firm Exits Tennessee As New Law Goes Into Effect
By Andrew G. Simpson | July 3, 2014


Sunday, October 4, 2015

Janos Kornai on recent developments in Hungary and its political and economic institutions

Janos Kornai, the eminent Hungarian economist, is not optimistic about recent developments there.

Janos Kornai 

Harvard University; Corvinus University of Budapest

July 11, 2015

Capitalism and Society, Volume 10, Issue 1, Article 2, 2015 


For two decades Hungary, like the other Eastern European countries, followed a general policy of establishing and strengthening the institutions of democracy, rule of law, and a market economy based on private property. However, since the elections of 2010, when Viktor Orb├ín’s Fidesz party came to power, Hungary has made a dramatic U-turn. This article investigates the different spheres of society: political institutions, the rule of law, and the influence of state and market on one another, as well as the world of ideology (education, science and art), and describes the U-turn’s implications for these fields and the effect it has on the life of people. It argues against the frequent misunderstandings in the interpretation and evaluation of the Hungarian situation, pointing out some typical intellectual fallacies. It draws attention to the dangers of strengthening nationalism, and to the ambivalence evident in Hungarian foreign policy, and looks into the relationship between Hungary and the Western world, particularly the European Union. Finally, it outlines the possible scenarios resulting from future developments in the Hungarian situation.

His first paragraph:
"Hungary is a small country, poor in raw materials, with a population of only 10 million. No civil wars are being waged on its territory, nor are there any popular uprisings or terrorism. It has not become involved in any local wars, and it is not threatened by immediate bankruptcy. So why is it still worth paying attention to what is going on here? Because Hungary, a country that belongs to NATO and the European Union, is turning away from the great achievements of the 1989–1990 change of regime—democracy, rule of law, freely functioning civil society, pluralism in intellectual life—and attacking private property and the mechanisms of the free market before the eyes of the whole world; and it is doing all this in the shadow of increasing geopolitical tensions"

Saturday, October 3, 2015

Repugnance watch: sports gambling is largely illegal, while fantasy sports leagues are thriving

Itai Fainmesser points me to this story in the NY Times, about how some things are illegal while similar things are legal--the legal distinction being between games of chance and games of skill:

Daily Fantasy Sports and the Hidden Cost of America’s Weird Gambling Laws

"An entire industry has emerged out of a legal loophole for something that looks a whole lot like sports gambling, which is illegal outside of Nevada and a few other states.
"The fantasy sports industry argues that its service is not gambling at all, but rather a game of skill. It’s the sort of game specifically allowed by most state laws and by a 2006 federal law restricting online gambling that carved out protections for fantasy sports leagues. The industry is right about that much. It is a skill, and it unquestionably rewards those who apply dogged analytics to assembling their fantasy lineups.

Although daily fantasy sports advertisements target casual fans, a disproportionate share of the contest entries — and even more disproportionate share of the winnings — go to people who play the game on a scale most armchair sports fans couldn’t imagine. An analysis of Major League Baseball contests by Ed Miller and Daniel Singer published in the Sports Business Journal found that 1.3 percent of fantasy players paid $9,100 in entry fees on average, accounting for 23 percent of all entry fees and 77 percent of all profits."

Who Gets What and Why: podcast at Ideas Books

Craig Barfoot at IdeasBooks interviews me about Who Gets What and Why: our conversation ranges over repugnant transactions, kidney exchange, and my treadmill desk.  You can find the podcast (about 20 minutes) here: http://www.ideasbooks.org/news/2015/10/1/episode-9-alvin-roth-who-gets-what-and-why

Friday, October 2, 2015

Cap and Gown at Exeter

When I was at Exeter University in July, I not only attended a conference on market design, but also put on a cap and gown and became an honorary graduate. (I had to give back the cap, but some pictures arrived in the mail just now...)
Here I am with the Chancellor, Baroness Floella Benjamin.
Baroness Floella Benjamin and Al Roth.Exeter.July 2015

Thursday, October 1, 2015

BBC show on algorithms and kidney exchange (tv documentary)

David Manlove writes from Scotland:

"BBC4 have just shown a documentary on algorithms, which featured the Gale-Shapley algorithm and kidney exchange in the UK.  In particular, it shows an excerpt of you and Lloyd Shapley receiving the Nobel Prize.

The programme was shown on 24 September – see http://www.bbc.co.uk/algorithms.  Viewers outside the UK probably cannot watch the footage, but I noticed that someone has posted the programme on YouTube.  It can currently be seen at https://www.youtube.com/watch?v=Itvwa85YkEg.  The stable marriage part starts at 20:50 and the kidney exchange part follows (from 25:40).  You and Lloyd Shapley are shown at 21:35.

In general I reckon they did a great job of making a complex subject accessible - and I thought that Marcus du Sautoy in particular was very engaging.”

David's work on kidney exchange in the UK is featured in the video, which you can also see below

Wednesday, September 30, 2015

The Integration of Immigrants into American Society --report of the National Academies

There's a new report from the National Academies of Science, Engineering, and Medicine: The Integration of Immigrants into American Society

"The United States prides itself on being a nation of immigrants, and the country has a long history of successfully absorbing people from across the globe. The integration of immigrants and their children contributes to our economic vitality and our vibrant and ever changing culture. We have offered opportunities to immigrants and their children to better themselves and to be fully incorporated into our society and in exchange immigrants have become Americans—embracing an American identity and citizenship, protecting our country through service in our military, fostering technological innovation, harvesting its crops, and enriching everything from the nation’s cuisine to its universities, music, and art.

Today, the 41 million immigrants in the United States represent 13.1 percent of the U.S. population. The U.S.-born children of immigrants, the second generation, represent another 37.1 million people, or 12 percent of the population. Thus, together the first and second generations account for one out of four members of the U.S. population. Whether they are successfully integrating is therefore a pressing and important question. Are new immigrants and their children being well integrated into American society, within and across generations? Do current policies and practices facilitate their integration? How is American society being transformed by the millions of immigrants who have arrived in recent decades?

To answer these questions, this report summarizes what we know about how immigrants and their descendants are integrating into American society in a range of areas such as education, occupations, health, and language. "

Here's the press release, and here's the report in brief, and you can purchase the whole report here.

Some snippets:
from the press release...
"“Integration is a twofold process that depends on the participation of immigrants and their descendants in major social institutions such as schools and the labor market, as well as their social acceptance by other Americans,” said Mary Waters, M.E. Zukerman Professor of Sociology at Harvard University and chair of the committee that conducted the study and wrote the report. “The U.S. has a long history of accepting people from across the globe, and successful integration of immigrants and their children contributes to our economic vitality and a vibrant, ever-changing culture.”  There are 41 million immigrants and 37.1 million U.S.-born children of immigrants in the United States today.  Together, the first and second generations account for one-quarter of the U.S. population."

from the report in brief: