Make Me a Match (Rebroadcast)

Sure, markets generally work well. But for some transactions — like school admissions and organ transplants — money alone can't solve the problem. That's when you need a market-design wizard like Al Roth.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:48Stephen J. Dubner?

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• 1:20Stephen J. Dubner?

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• 2:37Stephen J. Dubner?

  Hey there, Stephen Dubner. The holidays are upon us, so we are taking the opportunity to replay what's turned out to be one of the most influential episodes we've ever made. It actually helped save lives. Now, we can't claim credit. We were just spreading the word on the good work done by people like Al Roth, whom you'll meet in a minute. And then, people who heard the episode acted on their own to perform random acts of kindness and courage. I won't tell you what they did. You'll figure that out as you listen. Suffice it to say that during this season of gratitude, we are grateful to have played a tiny role in this most excellent display of human ingenuity and generosity.

• 3:19Stephen J. Dubner?

  The Freakonomics Radio team has been really busy this year, producing dozens of new episodes that are sent out to you each week, free of charge. That's the way it should be. It's why we're here. It's quite possible that if you are a regular listener, you spend in total more than one whole day with Freakonomics Radio during 2017.

• 3:40Stephen J. Dubner?

  It feels safe to say that we've earned a spot in your life. I mean, you're here now, right? Well, you can help us bring you more Freakonomics Radio in the new year. When you do it by December 31st, you'll set yourself up for a nice little charitable deduction on your tax return. So what are you waiting for? Support Freakonomics Radio. Become a member today with your donation. Get your 2017 tax deduction before it's too late. Just go to Freakonomics.com/donate, or you can text the word FREAK to 70101. Thank you so much.

• 4:29Al Roth?

  Okay, I'm Al Roth, and I'm a professor of economics at Stanford.

• 4:34Stephen J. Dubner?

  For many years, Roth had taught economics at Harvard, but he and his wife, who's a human factors engineer, had relocated.

• 4:42Al Roth?

  We had just moved into our new apartment. We had moved to Stanford in September of 2012.

• 4:47Stephen J. Dubner?

  Shortly thereafter, on October 15th, something memorable happened.

• 4:52Al Roth?

  And my wife woke up around 3:00 in the morning and said, "The phone's ringing." And I woke up, and it wasn't ringing anymore. We only had one phone at that point, and it was in her office, which was downstairs. So I said to her, "It's not ringing," and I went back to sleep. And she went down and got the phone, and it started ringing again. It turns out, it's a good thing they call you back. They don't go down their list. And it was the Nobel Committee.

• 5:17Stephen J. Dubner?

  Roth, half asleep, was informed that he, along with Lloyd Shapley, had won the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel, also known as the Nobel Prize in Economics.

• 5:33Al Roth?

  Did you think you had a chance? You know, it's hard to answer that humbly. So I knew that I was on the big list of people who, if I won a Nobel Prize, it wouldn't cause the Nobel Committee to be embarrassed. You know, the newspapers the next day would not say craziness in Stockholm. But, but there are many, many people in that category. So indeed, we had, we were asleep. We were not waiting for a call. And it's an interesting call because one of the things they're concerned about, they have a lot of experience with this, is convincing you that it's not a prank. So the person who first spoke to me said, you know, congratulations, you've won the Nobel Prize. And then he said, and I'm here with six of my colleagues and two of them know you

• 6:18Al Roth?

  and they're going to talk to you now. To persuade you that this is for real. Right. Either that or a very elaborate prank. Exactly. But, but they call you up and they say, so in half an hour, this is going to happen. Get ready. And, you know, I took a shower and got dressed, which was a good thing because there wasn't an opportunity to do that again all day. And what was the rest of the day like then? Well, so at, at five minutes, too, someone calls you back. And again, they're still, I guess, concerned that you shouldn't appear confused on the phone. So what, what she said is she said, point your browser to the, to the Nobel site and you will see your name being announced. And then we will come on the line and have a press conference by telephone. So by the time that happened, I was ready.

• 6:59Al Roth?

  And then the Stanford Press Office fortunately descended on our house at 4:00 a.m. and started fielding calls from journalists. You know, they'd say, Professor Roth is ready now. Are you ready? And I'd get the phone and I'd get five questions from someone and I would speak to many, many people. Apparently, I mostly answered them very, very seriously, but I told a joke or two that I hadn't intended to tell. But people would say to me, oh, I heard you on NPR. You said something a little odd. But, and then there was a press conference. And then at 11:00, I had a class. So people seemed a little surprised. But, you know, that's how we ended the press conference. You know, this was a surprise and it was a Monday and I teach on Mondays. Word had traveled to your students by then, I assume? It had. There was champagne in the classroom. Very nice. Yeah, yeah.

• 7:44Stephen J. Dubner?

  So what kind of work did Al Roth do to land a Nobel Prize in Economics? Well, it's not the kind of work that typically wins a Nobel. He has helped people who need a kidney transplant find a donor. He's helped new doctors find their first jobs. He's helped high school students in New York City find the right high school, even though Roth himself, who grew up in New York City, dropped out of high school.

• 8:08Al Roth?

  I was a, you know, poor, ungrateful student and didn't appreciate what my teachers were trying to do for me. You should tell all your listeners, they should complete high school.

• 8:33Speaker 02

  From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 8:54Stephen J. Dubner?

  I recently visited Palo Alto, California, home to Stanford University and a few other things, to talk with Al Roth. He was, as you've heard, a high school dropout. Don't worry, he did go on to college, many, many years of college. Not finishing high school is not the only odd thing about Al Roth as a Nobel laureate. Consider this: even though he won the prize in economics, and even though he's a professor of economics, he is not technically an economist.

• 9:23Al Roth?

  I mean, my degrees are in engineering. And, you know, I wrote a paper once, a manifesto of market design called "The Economist" as engineer.

• 9:29Stephen J. Dubner?

  Uh huh, yeah.

• 9:30Al Roth?

  So I think of myself as something like an engineer. I'd like to be an engineer.

• 9:35Stephen J. Dubner?

  A manifesto of market design, Roth calls it. The Nobel Committee's citation noted his "theory of stable allocations and the practice of market design." So what is market design and why can it win you a Nobel Prize?

• 9:50Al Roth?

  Market design is an ancient human activity. You know, when you look at the distribution of stone tools around the Middle East and Europe, you find that long before the invention of agriculture, stone tools were moving thousands of miles from where they were quarried and made. And that's a sign that there were markets for stone tools. There were ways to meet and trade things. And we don't really know much about those markets, but the stone tools, which are very durable, are evidence that markets are older than agriculture. But the Stone Age men who traded those stone tools and weapons had to make markets somehow. They had to make them safe. They had to feel confident that they could bring the things they would trade for these

• 10:35Al Roth?

  stone tools and not be robbed by guys with stone axes who would take their stuff. And that's been a big part of market design for a long time, is making markets safe. Today, we think about fraud and identity theft and securing your credit card. But there was a time when kings thought about securing the roads against highwaymen so you wouldn't be waylaid on your way to and from the market. So if I were the king of England and I wanted to have markets in England, I had to make sure that the roads were safe to get to the market.

• 11:05Stephen J. Dubner?

  Al Roth has now written a book, a really wonderful book, I should say. It's called Who Gets What and Why: The New Economics of Matchmaking and Market Design. If market design is, as Roth says, "an ancient human activity," why does someone like him need to get involved? After all, we're told that markets generally organize themselves, right? There are sellers and buyers, supply meeting demand, with price being the glue that holds it all together. In this regard, the invention of money was a big breakthrough.

• 11:37Al Roth?

  Barter is very hard because you need a double coincidence of wants. You need to find someone who has what you want and who wants what you have.

• 11:46Stephen J. Dubner?

  Right, you happen to have salt, I happen to have wool, and we each want what the other wants, or we find a third party.

• 11:51Al Roth?

  Right, well, so finding the third party starts getting you involved in other things. And of course, money is a great market design invention for helping you find third parties because you can sell what you have for money and then go look for what you want.

• 12:03Stephen J. Dubner?

  But there are some transactions, entire realms of transactions, really, where money cannot do what it does in a typical market, where for whatever reason, supply is not allowed to naturally meet demand with price as the arbiter. And that is where someone like Al Roth comes in handy, the economist as engineer. Because these atypical markets have to be set up differently. They have to be helped along. This is sometimes called a matching market.

• 12:29Al Roth?

  Matching markets are markets where money, prices, don't do all the work. And some of the markets I've studied, we don't let prices do any of the work. And I like to think of matching markets as markets where you can't just choose what you want. Even if you can afford it, you also have to be chosen. So job markets are like that. Getting into college is like that. Those things cost money, but money doesn't decide who gets into Stanford. Stanford doesn't raise the tuition until supply equals demand and just enough freshmen want to come to fill the seats. Stanford is expensive, but it's cheap enough that a lot of people would like to come to Stanford.

• 13:10Al Roth?

  And so Stanford has this whole other set of market institutions, applications and admissions. And you can't just come to Stanford, you have to be admitted.

• 13:20Stephen J. Dubner?

  Or think about this problem, which Al Roth has worked on directly. What is the best way for hospitals to hire newly minted doctors? And for those doctors to find the most appropriate hospital for them to work in? The current system is called the National Resident Matching Program.

• 13:36Al Roth?

  So I got involved in helping it during a crisis in the 1990s. But you have to go back to the 1900s to understand how doctors get jobs. And the 1900s is around the time when the medical degrees as we know them, the M.D. degree, became the dominant medical degree. And about 1900, that's when internships began. So instead of graduating from medical school and immediately beginning to practice medicine, as we say.

• 14:04Stephen J. Dubner?

  A word that's always bothered me.

• 14:05Al Roth?

  Yes.

• 14:06Stephen J. Dubner?

  You should be good at it by now.

• 14:08Al Roth?

  The first job, the standard first job for medical graduates became what was called an internship and is today called a residency. And that's a job where you work in a hospital and take care of patients under the supervision of a more experienced attending physician. And it's a giant part of the professional education of doctors. So it's very important to doctors where they get their internship and residency. And it's very important to hospitals because the interns and residents are a very important part of the labor force of a hospital.

• 14:43Stephen J. Dubner?

  As Roth tells it, there was an arms race between hospitals for the best future doctors. They began grabbing medical students earlier and earlier, sometimes two years before graduation.

• 14:53Al Roth?

  And when you try hiring people two years in advance, it's hard to tell who the good doctors will be. It's also hard for the doctors to tell what kind of jobs they want.

• 15:01Stephen J. Dubner?

  So the medical schools intervened. In 1952, they created the National Resident Matching Program.

• 15:07Al Roth?

  They developed a marketplace that has a form that has survived till today, although my colleagues and I have helped modify it since then. And what that form was, you go on interviews and you find out the salary and the working conditions of the various jobs that you might be offered. And then instead of working the phones and maybe getting an offer that says you have to take it yes or no right now on the phone, what you do is you consider in advance which jobs you would like and you submit a rank order preference. This would be my first choice of the jobs I've interviewed at. Here's my second choice. Here's my third. And the jobs do the same thing. The hospital residency programs do the same thing. And then a match is made in a centralized clearinghouse.

• 15:50Stephen J. Dubner?

  By the 1990s, this system was showing strain. Some people thought the hospitals had too much leverage over the residents. Also, by now, there were a lot more female medical students, some of whom had a significant other who was also a medical student. And such a couple typically wanted to get a residency in the same hospital, or at least in the same region. But the matching program couldn't handle that kind of request. So those candidates might opt out. In 1995, Al Roth was asked to help write an algorithm that could fix these problems. The algorithm worked well, and it now matches more than 20,000 applicants each year. It sounds as though this works pretty well, according to most people involved.

• 16:32Stephen J. Dubner?

  Yes, most people involved in this scenario are pretty happy with how it works, correct?

• 16:37Al Roth?

  Well, labor markets are stressful for everyone. So I think you're overstating how happy people are with the labor market. But I think it works very well.

• 16:44Stephen J. Dubner?

  I mean, in the medical residency matching particularly. Or at least as an improvement over what was before.

• 16:50Al Roth?

  It's a vast improvement.

• 16:51Stephen J. Dubner?

  OK, here's my question really for you is this, is broader labor markets. If we consider the medical residency matching program relatively successful, to what preceded it at least, why is it not used more widely in the labor markets?

• 17:03Al Roth?

  Well, the medical market is an easier one to coordinate than many markets, because just about everyone becomes available at the same time. When they graduate from medical school and they all start their jobs, therefore about the same time in July. So it's a market that can easily move people all at the same time. Whereas many markets, think about the market for journalists, they might be hired at different moments. And jobs might become available and need to be filled and not be able to wait for you to consider many jobs.

• 17:37Stephen J. Dubner?

  Yeah, but you and your colleagues are pretty brilliant, and you have mathematical backgrounds. I would think you could deal with rolling admissions, is that right? I mean, for all the talk about how modern labor markets have so many mismatches in them, so many people doing jobs that they don't really want to be doing, so many corporations with all these theoretically qualified people out there, not being able to find the people to fill them without going through a lot of trouble. I mean, hiring practices become more and more complicated. It seems is one way to address the matching problem. But it seems as though your complicated mathematical foundation might provide, ironically, a simpler way to address that problem.

• 18:14Al Roth?

  So I'm not sure that's true. Again, one of the special things about Residency positions is, although they're very different at different places, they're sort of similar to each other. If you're thinking about, should you be a journalist, or an airplane pilot, or a chef, you're dealing with very different jobs with very different employers. And one of the things that we do in the medical match is we make all the jobs available at the same time that allows you to consider them, to have preferences over them. That's hard to do if you're thinking about being a chef or an auto mechanic.

• 18:48Stephen J. Dubner?

  Sure. I'm curious to know, what's a market or scenario that you've looked at before that you thought, boy, I would love to help fix that one, but either haven't had a shot, or maybe tried and failed?

• 19:00Al Roth?

  Well, the markets for new lawyers might fall into that category. And certainly, the fanciest job that top graduates of elite law schools get is a lot like a medical residency. It's a clerkship with an appellate judge. That market is presently in the kind of situation that the doctor market was around 1940, where jobs are being contracted far before law school graduation. And probably a dozen times in the last 30 years, the lawyers have tried to fix this with things like setting dates before which you shouldn't hire and things like that.

• 19:44Al Roth?

  But it turns out, it's hard to make rules that judges have to follow. Judges are a law unto themselves. And they break the rules. They cheat. If you know someone who's in law school now who wants a clerkship, they're probably going to get an offer sometime in their second year, you know, so the middle of their second year, a year and a half before they are ready to graduate.

• 20:04Stephen J. Dubner?

  And what would it take for you to have the authority to get in there and redo that market?

• 20:09Al Roth?

  Well, the question is, is there a desire for judges to coordinate in a way that would control the market? And so far, there hasn't been.

• 20:19Stephen J. Dubner?

  So you can win all the Nobel prizes you want, and there's a limit to your power nonetheless?

• 20:22Al Roth?

  There is.

• 20:32Stephen J. Dubner?

  As complicated as it may seem to match future lawyers or doctors with their employers, consider an even more complicated match: a person who will die unless they can get a kidney transplant.

• 20:44Speaker 03

  You can't buy a kidney. You can't pay for somebody's college education to get a kidney. You can't buy them a car. It's illegal in the United States to obtain a kidney through any kind of valuable consideration.

• 20:56Stephen J. Dubner?

  That is Ruthann Leishman.

• 20:58Speaker 03

  I'm the program manager for the Kidney Pair Donation Program at the United Network for Organ Sharing.

• 21:05Stephen J. Dubner?

  The United Network for Organ Sharing, or UNOS, maintains the registry of all the people in the US who need an organ transplant. According to the National Kidney Foundation, out of the roughly 123,000 people awaiting an organ transplant, more than 100,000 of them, roughly 80%, need a kidney.

• 21:23Speaker 03

  We don't have enough supply of kidneys available. And so the list is ever-growing, but the number of kidneys available for transplant is pretty stagnant.

• 21:33Stephen J. Dubner?

  It's estimated that 12 people die each day in the US while waiting for a life-saving kidney transplant. And that's because, as Leishman says, the demand for kidneys keeps rising, but the supply hasn't risen to meet it. Now, why is that? Consider where most donated organs come from. They primarily come from cadavers, from people who have died, but who have died under just the right circumstances, from a brain trauma, for instance, to allow their still-functioning organs to be harvested for transplant.

• 22:02Speaker 03

  Only about 1% of the population who die are actually able to donate their organs.

• 22:08Stephen J. Dubner?

  So if you need a heart transplant, let's say, you are waiting for a cadaver organ. But a kidney is different from a heart. Why is that? Because humans are born with two kidneys, and yet we really need only one. Which means that in a country like the US with a few hundred million people, there are potentially a few hundred million spare kidneys out there. When someone has kidney failure, typically both their kidneys fail, so they're left with zero healthy kidneys. Whereas the typical healthy person has a perfectly good spare. So while it might seem that there is a massive demand for donated kidneys, remember, there are more than 100,000 people on the list. The fact is that the potential supply is really massive. Here's Al Roth again.

• 22:53Al Roth?

  If you're healthy enough, you can remain healthy with just one. And that means if someone you love is dying of kidney disease, you could give him a kidney and save his life.

• 23:02Stephen J. Dubner?

  If you happen to be a match.

• 23:04Al Roth?

  If you happen to be a match. And that's where kidney exchange comes in.

• 23:09Stephen J. Dubner?

  Ah, kidney exchange. Because remember, unlike some markets where price is allowed to let demand meet supply, organ donation is a market that doesn't allow money. As a society, we've decided it isn't right to reimburse people in any way for donating an organ. Although I should say, some economists have argued that we should rethink that. But for now, at least, kidney donation is reliant on altruism. Which, judging by the backlog of kidney patients waiting for an organ, isn't working so well. And that's why Al Roth got involved.

• 23:43Al Roth?

  People often ask me how I got involved in kidney transplantation. And I think the romantic thing that they're hoping I'll say is that I knew someone who was ill, or that I was ill. But that isn't the case at all. I entered through the mathematics.

• 23:57Stephen J. Dubner?

  Coming up on Freakonomics Radio, how Al Roth and his comrades used mathematics to save lives.

• 24:04Speaker 03

  We have about 600 kidney pair donation transplants a year right now in the United States. In 2000, we had two.

• 24:11Stephen J. Dubner?

  And Al Roth's greatest hope for his new book, Who Gets What and Why.

• 24:16Al Roth?

  My hope is that this book will help you to see markets in new ways. So may I take you to dinner to celebrate the completion of this book?

• 24:26Stephen J. Dubner?

  That's coming up, but first, a quick reminder that you can do something amazing that will deliver good stuff for many other people right now. This is the time of year when we remind you that Freakonomics Radio is made possible in no small part by the dollars given by our listeners. That means you. You can help us bring you more Freakonomics Radio in the new year. When you do it by December 31st, it will deliver a charitable deduction on your next tax return. Become a member today with your donation. Get your 2017 tax deduction before it's too late. Just go to freakonomics.com/donate or text the word FREAK to 70101. Thank you so much.

• 25:12Stephen J. Dubner?

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• 25:55Stephen J. Dubner?

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• 26:16Stephen J. Dubner?

  Freakonomics Radio is sponsored by Southern New Hampshire University. The best investments are the ones you make in yourself, and no one knows that better than Southern New Hampshire University. With more than 200 online degree programs, no set class times, and low online tuition, Southern New Hampshire University is built to fit your life today and set you up for success tomorrow. Education is an investment. Why not make it a smart one? Apply for free at SNHU.edu/freakonomics. Freakonomics Radio is sponsored by PNC Bank. Boring. Great word, bad rep. Yet, time and time again, here at Freakonomics, we find that when something culture-changing

• 26:58Stephen J. Dubner?

  happens, boring things like calculations and careful planning are usually behind it. Which begs the question, why not apply it to other aspects of life? Like banking, for example. Well, PNC Bank did, since its inception, proving time and again that the best banking strategy isn't the exciting type, but the steady, reliable, definitely-not-YOLO type. PNC Bank: brilliantly boring since 1865. Brilliantly boring since 1865 is a registered mark of the PNC Financial Services Group, Inc. PNC Bank, National Association, Member FDIC.

• 27:36Stephen J. Dubner?

  Al Roth, high school dropout, Nobel laureate, author of the book Who Gets What and Why, began working on organ donation more than 40 years ago, as it turned out.

• 27:56Al Roth?

  So, in 1974, in Volume 1, Number 1 of the Journal of Mathematical Economics, Herb Scarf and Lloyd Shapley, with whom I eventually shared a Nobel Prize, wrote an article about how to trade indivisible goods when you couldn't use money.

• 28:14Stephen J. Dubner?

  And this was a theoretical argument?

• 28:15Al Roth?

  It was entirely.

• 28:16Stephen J. Dubner?

  Entirely theoretical.

• 28:17Al Roth?

  And... Sort of whimsically, they said, let's call the objects houses. And let's suppose everyone has a house. And people have preferences over houses and they can trade houses, but they can't use money. All you can do is barter. You can say, I'll trade my house for yours. Or you could do it among three people. You know, I'll give you my house and you give someone your house and he gives me his house. That's all you can do. How would trade work? So they wrote a paper about that. And I had just gotten my PhD in 1974, when this article came out. And I read their article and I thought, what an interesting problem to think about how to trade without money. So I wrote some articles about that, too, with Andy Postlethwaite and--

• 29:01Stephen J. Dubner?

  Still theoretical, or did you--

• 29:03Al Roth?

  Entirely theoretical. We were talking about how to trade houses. And of course, no one trades houses without money. I can tell you, I've just bought a house in California and money played a role. But it's, you know, the way economists learn about things, the way mathematical economists learn about things, is a little bit the way children learn about things. You find toys to play with. And then by playing with the toys, you gain experiences that might help you with other things. So this is a toy, this toy model, that allows you to think about the question of how to trade goods when you can't use money. And when you can't divide the good. You can't say, you have a big house and I have a little house, so just give me half of your house for my house.

• 29:45Al Roth?

  You know, you say, houses are indivisible, we have to trade.

• 29:53Stephen J. Dubner?

  In 1982, Roth took a teaching job at the University of Pittsburgh, which happened to have an excellent medical center with a prominent organ transplant program. Roth began thinking about kidneys from the perspective of supply and demand. Again, there's a seemingly huge demand for donated kidneys, but in fact, a much, much larger supply of potential kidneys for donation, since healthy people have two, but only need one. So let's say that your spouse, or sibling, or parent, needs a kidney transplant. You could voluntarily undergo surgery to give up one of yours, if that is, you happen to be a biological match.

• 30:33Al Roth?

  If you aren't a match, then you're healthy enough to give someone a kidney, but you can't give the person you love a kidney. So there they are with an indivisible object that we had been calling houses, but now call it a kidney.

• 30:45Stephen J. Dubner?

  Right.

• 30:46Al Roth?

  And here are these incompatible patient-donor pairs, and they have an indivisible object. And it's against the law to buy and sell kidneys for transplantation. So all of a sudden, this toy model that we'd been playing with, that didn't make a lot of sense for houses, because we use money for houses, made sense for kidneys.

• 31:03Stephen J. Dubner?

  Was there a lightbulb moment for you where you saw that the kidney was the, you know, concrete version of what had been discussed in this model? Or no?

• 31:10Al Roth?

  Again, I'd like to say that there was, but there wasn't.

• 31:12Stephen J. Dubner?

  Okay. Were you looking for something to plug into that model?

• 31:16Al Roth?

  I was looking for a teaching tool. I was teaching the model, and my students would say, "This is an interesting model, but isn't it a little silly? We use, here in Pittsburgh, we use money for houses, professor." And I'd say, "Yes, yes, but this is a toy model. You should study it." But there we were at Pittsburgh, and we had all these transplants going on. And I said, "Well, so supposing it's kidneys?" So we talked about kidney exchange without my ever thinking it would become a practical thing. I was not seeking to design kidney exchange. But in 1998, I moved to Boston to teach at Harvard. And in 2000, the first kidney exchange in the United States was done in New England.

• 32:00Stephen J. Dubner?

  That's an exchange between incompatible patient-donor pairs, as Al Roth calls them, two couples, let's say, with the healthy member of each couple agreeing to give a kidney to the needy member of the other couple. The first kidney-paired exchange ever took place in South Korea in 1991. The first US exchange that Roth mentioned happened at Rhode Island Hospital in Providence.

• 32:24Al Roth?

  And it was covered in the press. It was an unusual thing. And there I was. I had notes about kidney exchange. So with a former student of mine from Pittsburgh, who was visiting at Harvard, Utku Unver, I said to him...

• 32:38Al Roth?

  Look at this, there's kidney exchange. Let's, let's give a class. I was teaching a market design class. Let's give a class on how we would do kidney exchange.

• 32:47Stephen J. Dubner?

  Meaning this one had happened without your help?

• 32:49Al Roth?

  Yes.

• 32:50Stephen J. Dubner?

  And you looked at this and thought, hey, if this is happening on a small scale, we can maybe-

• 32:55Al Roth?

  We can help organize it. We, we, we have played all these years with toy models. We know how to organize on a large scale, trade among people dealing with indivisible goods when you can't use money. We know a lot about this.

• 33:07Stephen J. Dubner?

  Several other economists began thinking about the problem.

• 33:11Al Roth?

  And eventually, we wrote a paper about how to organize kidney exchange if you weren't too worried about logistical problems. So we hadn't yet talked to doctors. We hadn't yet talked to surgeons, although-

• 33:25Stephen J. Dubner?

  Like where the kidney needs to be at what-

• 33:28Al Roth?

  Right, and just-

• 33:28Stephen J. Dubner?

  What kind the preparation is for surgery and so on.

• 33:30Al Roth?

  And how hard it is to do big exchanges compared to little exchanges.

• 33:34Stephen J. Dubner?

  Mm-hmm.

• 33:35Al Roth?

  So we sent the paper to all the surgeons we could think of, and only one answered, and it was Frank Delmonico.

• 33:43Stephen J. Dubner?

  That's a good one to have answered, then, as it turns out, right?

• 33:46Al Roth?

  Absolutely, absolutely. He was, he was the director of the New England Organ Bank. And he came to lunch, and, and he and I have been colleagues on kidney exchange and other things for, for more than a decade now. But we helped him build the New England Program for Kidney Exchange.

• 34:04Stephen J. Dubner?

  One person that Delmonico hired at the New England Program for Kidney Exchange, or NEPKE, was Ruth Ann Leishman, who helped set up their kidney pair donation program. Remember, the Rhode Island transplant had already happened in 2000.

• 34:17Speaker 03

  But that was just done manually, looking at the blood types of the donors and the candidates. And then in 2004, we started working with Alan using his optimization program.

• 34:28Stephen J. Dubner?

  The idea behind using Al Roth's algorithm was to make it so transplant centers could simply enter the medical and demographic data on potential organ donors and recipients, type in a few keystrokes, and then voila, it would produce a match.

• 34:44Speaker 03

  It would really be impossible to do this by hand because of the number of antibodies that we're talking about and the number of people that we're talking about. We really need a computer to look at it, not just to, to do any kind of matching, but really to optimize the matching.

• 34:57Stephen J. Dubner?

  Matching a potential kidney donor is harder than it sounds. Not only does any given person have one of four major blood types, but we also each have our own stew of antibodies and antigens. We're born with a certain amount of inherited antigens, but when our bodies encounter foreign antigens, we develop antibodies that battle them. This can happen during a blood transfusion, for instance. That was the case with a Minnesota woman named Julie Park.

• 35:23Speaker 04

  What really happened was I broke my leg about, I don't know, five, eight years ago. And unbeknownst to me, they gave me a blood transfusion during it. And that just changed a bunch of antigens and antibodies, enough so that Ray no longer was going to be a match for me.

• 35:47Stephen J. Dubner?

  Ray is Julie's husband, Ray Book. They've been married for 24 years.

• 35:51Speaker 05

  Julie and I went to high school together, didn't know each other. Had one date when we were freshmen at the University of Minnesota. I told her I'd get back to her. And at our 20-year class reunion, I got back to her.

• 36:05Stephen J. Dubner?

  Julie and Ray have one daughter, three grandchildren. Julie has been a type 1 diabetic since she was eight years old.

• 36:11Speaker 04

  And it basically, you know, has caused all my medical issues over the years.

• 36:18Stephen J. Dubner?

  Julie got her first kidney transplant when she was 35. It came from a deceased donor.

• 36:23Speaker 04

  And it lasted me quite a while, and that was great. Like 26-plus years. And then that one, for whatever reason, was failing. So all of a sudden, I needed another one.

• 36:38Stephen J. Dubner?

  Ray's blood type is O, which means he's a universal donor.

• 36:42Speaker 04

  We were kind of going down that road, thinking he'd be able to donate to me someday.

• 36:48Stephen J. Dubner?

  But after that blood transfusion, Julie was told by her doctors that Ray was no longer a match. In Julie's body, Ray's kidney would have failed. Ruth Ann Leishman is familiar with Julie's case.

• 37:01Speaker 03

  She had a lot of antibodies. 94% was her antibody level, which means, basically, she only matches with about 6% of the population.

• 37:13Stephen J. Dubner?

  So if Julie went the route that got her her first donated kidney, it likely would have taken a long time to get another one. Given her particulars, one doctor told her, she could wait five years or more, years which, as Leishman describes, are hard on anyone with kidney failure.

• 37:30Speaker 03

  And then they're waiting on dialysis. And then three days a week, they go into a dialysis unit to have their blood cleared of the toxins that the kidney usually removes. Or they're at home at night doing home peritoneal dialysis. And so that's a nightly ritual for people. And it makes it difficult to work. It makes people tired. It makes people sicker. So when they do get a transplant, they may not be in the best health anymore. So it's challenging.

• 38:05Stephen J. Dubner?

  But Julie had the good fortune to be enrolled in a kidney exchange program. And her chances were greatly increased because her husband Ray was offering to donate one of his kidneys to someone, anyone, since he wasn't a match with Julie. This is what's known as being a paired donor, meaning that Ray was offering his kidney under the condition that his wife would receive a kidney donated by someone who was a match with her.

• 38:31Speaker 05

  I wanted to help my wife in any way that I could. So I went out and got tested. All the information went into the computer. We just put it out there into the network. And thank God there's a network like that. And the algorithm obviously worked.

• 38:46Stephen J. Dubner?

  And it worked fast.

• 38:47Speaker 04

  You know, I went on dialysis November 1st. They called me around Christmas time and, you know, told me, "Well, it looks like we've got something, you know, on the schedule here. But, you know, you've got to heal this wound you've got on your foot." So I spent the month of January in bed. So. Anyway, that was January and then we had the transplant February 5th. So, you know, it wasn't, it certainly wasn't five years or more.

• 39:18Stephen J. Dubner?

  The kidney exchange landscape has changed. There have been consolidations. NEPGE, for instance, has been dissolved under a push to create a national program. And the numbers have grown. Last year, for instance, there were just over 17,000 kidney transplants in the US. About one third of those came from living donors, not all kidney paired donation. But still, that's a lot. As Al Roth points out, in one respect, it's even more than it sounds.

• 39:43Al Roth?

  So what that means is in the United States, we now have more living donors than we have deceased donors because deceased donors give two kidneys and living donors only give one. So there are more living donors than deceased donors, but more deceased donor transplants than living donor transplant. But the growth possibilities would be in living donor transplantation because everyone has two kidneys.

• 40:07Stephen J. Dubner?

  The growth possibilities are substantial, not only because the matching algorithm is successful, but perhaps because it's so successful, it has allowed for another kind of kidney donor to enter the program. Ray Book, you'll remember, was a paired donor. But there's also room for what's called a non-directed donor. Ruth Ann Leishman again.

• 40:29Speaker 03

  Somebody who comes into the computer program without a recipient. They don't know anybody who needs a kidney transplant. They just want to donate to somebody and help somebody. Well, they come into the program and they match with a recipient whose donor matches with another recipient, whose donor matches with another recipient. And this can go on and on. And so instead of that non-directed donor helping just one person receive a transplant, they can help two, three, five, 10, 30, 60 people receive a transplant as we go down the line in the chain.

• 41:02Stephen J. Dubner?

  It was one of these incredibly generous people, a non-directed donor, who wound up giving Julie Park a new kidney.

• 41:09Speaker 03

  This chain started with a woman named Jodi.

• 41:12Speaker 06

  Hello. My name is Jody Shakely-Wright.

• 41:15Stephen J. Dubner?

  Jody Shakely-Wright is 42 years old. At the time, she was living in Charlotte, North Carolina.

• 41:20Speaker 06

  In May 2012, I was working as a telephonic health coach for a company in Dallas, Texas, and I worked from home in Charlotte. I had a client who needed to lose 20 pounds so that he could donate a kidney to his sister. And I knew nothing about organ donation at the time. And at first, I wanted to do some internet research to determine how his lifestyle might change after the surgery, as well as what he could expect to do pre-op in order to prepare for the procedure. In my research, I came across something called kidney pair donation. Wasn't really familiar with that at first, but I had also seen around the same time, an episode of Grey's Anatomy. It's actually season five, episode five, if you're interested

• 42:03Speaker 06

  in checking that out. But it's about pair donation. And at first, when I had seen it on Grey's Anatomy, I wasn't really sure if it was a Hollywood thing, or if it really existed. So, did some more research, and sure enough, it was a real thing. And I wasn't looking to donate, but kind of sat back and thought, you know, I'm at a place in my life where I think that I'm healthy enough. I work out of my house, financially stable, and this is something that I could do.

• 42:33Stephen J. Dubner?

  She began working with the transplant center at Piedmont Hospital in Atlanta. She went through a long series of physical and psychological tests.

• 42:42Speaker 06

  They wanted to know if I had considered all of the factors why I should not donate. First and foremost, I was asked to make a few minor lifestyle changes, or at least I felt that they were minor. But things like, they didn't want me to do any death-defying stunts, like ride motorcycles or jump out of airplanes. I had already jumped out of an airplane, so that was okay. But with one kidney, you kind of have to take a little bit more care. So, basically, you know, they wanted to make sure that I was sure about donating one of my kidneys, because I really only have, you know, one to donate. I need the other one to survive. And, you know, they really want you to think about things like, are you going to be okay with the decisions that your recipient makes? Meaning

• 43:24Speaker 06

  that, once you give this kidney up, it's not mine to direct how it's used anymore. And I was really okay with that. That's the recipient's call. I'm giving a gift.

• 43:35Stephen J. Dubner?

  After passing her tests, Shakely Wright's information was entered into the computer program used by the kidney pair donor system, and the algorithm went to work on her data. It quickly found a match: Julie Park in Minnesota. Less than two months later, it was surgery day.

• 43:55Speaker 06

  My surgery was in Atlanta, first thing in the morning. And once they removed my kidney, it's put in a styrofoam container, and it's put on a commercial flight and was flown to Minneapolis.

• 44:09Speaker 03

  Her kidney is actually put on a plane and flown to Minnesota, where it is transplanted into Julie.

• 44:16Speaker 06

  I think I went in about 4:00 in the afternoon, something like that.

• 44:20Speaker 03

  Julie's husband, the same day, is having his kidney recovered at a hospital in Minnesota.

• 44:28Speaker 05

  It was a very emotional time. I told my kidney, "Go and do a good job and take care of somebody." And I shed some tears.

• 44:37Speaker 06

  So Ray's kidney, at the same time that my kidney was flying from Atlanta to Minneapolis, his was flying from Minneapolis to Atlanta for the second recipient in the chain to receive her kidney.

• 44:49Stephen J. Dubner?

  So Ray Book donated his kidney as a paired donor so that his wife, Julie Park, could get a kidney from a stranger, the non-directed donor, Jody Shakely Wright. And who got Ray's kidney?

• 45:01Speaker 05

  We did find out it was a woman that got my kidney. So, and she was in the next room next to the woman who was donating to Julie.

• 45:10Speaker 06

  Now, my recovery room in Atlanta was next door to Ray's recipient's recovery room. And I had the respect enough not to barge in there and introduce myself, although I have to be honest, I really wanted to. All I know about her is that she's doing well.

• 45:32Stephen J. Dubner?

  That recipient had also come into the kidney exchange with someone willing to give her a kidney, but she wasn't a match.

• 45:40Speaker 03

  So this person in Georgia who received Ray's kidney, her daughter, the same day, went to the operating room and donated her kidney. And that kidney stayed right there in the same hospital and went to somebody on the deceased donor waitlist who didn't have a living donor available to them.

• 46:04Stephen J. Dubner?

  So this one act of kindness by Jodi Shakely Wright.

• 46:08Speaker 04

  Who donated out of the goodness of her heart. She didn't even have anyone she was donating for.

• 46:15Stephen J. Dubner?

  This one act had a multiplier effect.

• 46:17Speaker 03

  So what Jodi did by entering the program without a recipient attached to her is she was able to unlock matches that otherwise wouldn't have been possible.

• 46:28Stephen J. Dubner?

  It also wouldn't have been possible without the algorithm created by Al Roth and his colleagues.

• 46:33Speaker 03

  It's saving a lot of lives. It's, we have about 600 kidney pair donation transplants a year right now in the United States. In 2000, we had two. We would have stayed doing two or four or six a year without the algorithm.

• 46:46Speaker 06

  The entire process is incredible. I don't have that much knowledge about algorithms. It's been a little while since high school and college, so I'd have to revisit some of my math skills. But I do know that it's amazingly complex. And just to match blood types and antibodies, and especially knowing that at this time there are almost 124,000 people in need of an organ. So how somebody begins to sift through all that is beyond me.

• 47:17Stephen J. Dubner?

  But thankfully, it's not beyond everyone. Al Roth again.

• 47:22Al Roth?

  This is about exchange. You know, the thing, we can call it kidney exchange, is there's real exchange going on. So when I started talking to surgeons, they didn't automatically think of economists as fellow members of the helping profession. But when I talk about it nowadays, you know, I say, exchange, you know, that's what economists study. Of course, this is a subject for economists. But initially, many people found it odd that economists were getting involved in organizing surgeries.

• 47:48Stephen J. Dubner?

  You write in the book, or maybe hint in the book, that all this work that you and others have done to try to solve this problem will hopefully be obviated one day not too long from now, when there's either medical treatment or perhaps artificial organs. Yeah, I mean.

• 48:04Al Roth?

  Oh, I hope so. I think that your grandchildren and maybe mine will, will just be appalled. They'll, they'll say to you, you know, grandpa said, tell me again, you used to cut the organ out of a dead person and sew it into a sick person, and that was modern medicine? And, and we'll have to say to them, yeah, yeah, we were proud and lucky to be able to do that. It saved lots and lots of lives.

• 48:25Stephen J. Dubner?

  And even more antediluvian, perhaps, would be the notion that you'd have had to create this complicated way to get a living donor to match with a, a donor, yes?

• 48:33Al Roth?

  Right. So my hope is that stem cell technologies will allow you to grow a new kidney the way you grow the ones you have originally. But we're far from that now. And while that may eventually happen, everyone who has end-stage renal disease today will be dead by that time. So, so our responsibility is to try to take care of the people who are sick today, even though there will be better ways to take care of them in the future.

• 48:58Stephen J. Dubner?

  What's it feel like to have played a role in helping redesign? I don't know if you call this a market. It is, it is a market, yes?

• 49:07Al Roth?

  I call it a market. I mean, it's not a market where money plays a role, but, but it's exchange, and you want to get efficient exchange, you want to get as, as many and as good quality transplants as you can. So, so absolutely.

• 49:19Stephen J. Dubner?

  So there are a bunch of people out there who are alive, who would not have been alive had not you and others working with you done what you've done. What's that feel like?

• 49:28Al Roth?

  Well, many others. It feels good, but, but economics in general does good things for people. So I think that it,

• 49:40Al Roth?

  Maybe an illusion to say, here we are, saving lives is not great, and it is great. But imagine all the other good things that markets do. You know, the economy has been immensely productive. We all live much, much longer than people like us lived even 100 years ago. And this has to do with the rapidly increasing prosperity that the world experiences because of the way markets work. So the big job of economists, of market designers, is to help that process along. It's been going along for many, many centuries without the help of economists, but it goes by trial and error.

• 50:22Al Roth?

  And maybe we can reduce some of the errors and make some of the trials go more quickly and more fruitfully.

• 50:28Stephen J. Dubner?

  The last chapter in your book is called Free Markets and Market Design. Do you happen to have a copy with you?

• 50:35Al Roth?

  I don't, but I remember it.

• 50:36Stephen J. Dubner?

  I'm glad you do. I do have a copy. I'd like you to read, then, if I may, pass you the book, the first two paragraphs there.

• 50:51Al Roth?

  Thinking about the design of markets gives us a new way of looking at them, noticing them and understanding them. My hope is that this book will help you to see markets in new ways. So may I take you to dinner to celebrate the completion of this book?

• 51:05Stephen J. Dubner?

  Okay, that's great. So Al, you interested in continuing this conversation over a bit of dinner, then?

• 51:10Al Roth?

  That sounds like a great idea.

• 51:16Stephen J. Dubner?

  Al, do you have any ideas for where we can go grab a bite, then?

• 51:19Al Roth?

  Well, we could go to California Avenue. There's a thick market for restaurants there.

• 51:24Stephen J. Dubner?

  We didn't really get into that. What do you mean by a thick market?

• 51:26Al Roth?

  Lots of restaurants and lots of people who like to eat at them.

• 51:29Stephen J. Dubner?

  And thickness is good in a market because why?

• 51:32Al Roth?

  Well, if we didn't have a reservation, which I know that you did make.

• 51:37Stephen J. Dubner?

  Did I? Did I?

• 51:38Al Roth?

  Someone in your office made a reservation. But if we didn't have a reservation, the advantage of a thick market is we could just walk down California Avenue and open doors and say, do you have room for two guys at this hour? And we'd eventually get to one.

• 51:51Stephen J. Dubner?

  Okay, let's go. We went to a nice place in Palo Alto on California Avenue called Spalti, northern Italian.

• 51:59Stephen J. Dubner?

  Uh, Al, are you interested in something to drink?

• 52:00Al Roth?

  Uh, yeah. So, we're gonna split a half bottle of that Santa Margarita?

• 52:05Stephen J. Dubner?

  We could order food as well.

• 52:07Al Roth?

  I'll have the salmon.

• 52:11Stephen J. Dubner?

  Chicken marsala.

• 52:14Stephen J. Dubner?

  Thank you very much.

• 52:22Stephen J. Dubner?

  Salmon? Salmon here.

• 52:24Al Roth?

  Thank you.

• 52:26Stephen J. Dubner?

  Thank you so much. Some peppers? I'd love some pepper, please. Thank you.

• 52:33Stephen J. Dubner?

  Thank you.

• 52:39Stephen J. Dubner?

  You wrote about something that was so fascinating to me. It was just a tiny little aside, but I just wanted to ask you, not about it per se, but about, um...

• 52:51Stephen J. Dubner?

  What it's like to do the kind of work you do and the things that you learn about these fields where you're coming from outside. So, is it, when you're writing about organ transplantation, you wrote that if, let's say, a husband and wife, um... If a spouse needs a kidney and the other one is willing to donate, and they might be physiologically, blood type, tissue type, they might be compatible, but that if they've had children, there might be a higher chance of rejection because proteins intermingle or something during, uh...

• 53:19Al Roth?

  So, it turns out...

• 53:21Stephen J. Dubner?

  Which sounded made up to me, but I believe you because you're, you know, a Nobel laureate.

• 53:24Al Roth?

  There you go. So, one of the things that could stop you from taking my kidney is that you might have antibodies, preformed antibodies, against some of my proteins. So, if you have antibodies against my proteins, then your immune system is waiting, ready to attack my proteins if they should show up in my kidney, for instance. But mostly, you shouldn't have antibodies against human proteins that you don't have. You have to be exposed to those proteins to develop antibodies. So the chance that, so if I didn't know my blood type, the chance that you could take my kidney is somewhat over 50%. But the chance that my wife can take my kidney is only about 30%. And the reason is, we're parents.

• 54:08Al Roth?

  And in the course of childbirth, not pregnancy, but childbirth, my wife might, my wife's immune system might have been exposed to some of the proteins that our boys inherit from me. And if so, her immune system might have developed antibodies that would now be prepared to attack my kidney if it should appear. So, so for parents, husbands donating to wives is harder than other donations.

• 54:36Stephen J. Dubner?

  And I assume that's just one of many strange, interesting, fascinating things you learn in your work about realms that you knew, right? Nothing coming in.

• 54:43Al Roth?

  Market design is an outward-facing part of economics, which means we're always learning new things. You know, economics is about almost everything that people do, which means the nice thing for being an economist is it means we can learn things from almost anyone. And of course, you have to learn a lot about kidney surgery to be able to help surgeons organize surgeries. You have to learn a lot about medical practice and education in order to help organize labor markets for doctors. You have to learn a lot about New York City schools to be able to help high schools do their admissions process.

• 55:21Stephen J. Dubner?

  And that learning is a chain of its own, like the kidney donor chain that Al Roth and others helped create, and which is saving lives. And as Al Roth and people like him continue to learn, they pass that knowledge along to people like you and me, making all of us a bit wiser, a bit more curious, a bit better off every day.

• 55:44Stephen J. Dubner?

  Cheers.

• 55:53Stephen J. Dubner?

  Thanks for listening, and please remember, it is a great time to make a donation to keep more Freakonomics Radio coming in the new year and to claim your tax deduction. Just go to freakonomics.com/donate, or text the word FREAK to 70101. Thank you so much. Coming up next time on Freakonomics Radio, we talk about one of the most important and unfortunately elusive components of a healthy, happy society: social trust.

• 56:20Speaker 07

  Social trust is an extraordinarily interesting variable and doesn't get anywhere near the attention it deserves. But the basic idea is trying to understand what is it, the fabric of society that makes economies and indeed just people get along in general? So it's an issue which has got long roots, but it doesn't mean that governments have done very much about it until very recently.

• 56:40Stephen J. Dubner?

  How to create more social trust? That's next time on Freakonomics Radio.

• 56:48Stephen J. Dubner?

  Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Greg Rosalsky. Our staff also includes Alison Hockenberry, Merritt Jacob, Stephanie Tam, Harry Huggins, and Brian Gutierrez. You can subscribe to Freakonomics Radio on Apple Podcasts or wherever you get your podcasts. You should also check out our archive at freakonomics.com. You can stream or download every episode we've ever made. You can also read the transcripts and find links to the underlying research. We can also be found on Twitter, Facebook, or via email at [email protected]. Thanks for listening.

• 57:41Stephen J. Dubner?

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• 58:14Stephen J. Dubner?

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• 58:58Stephen J. Dubner?

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• 59:22Speaker 08

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