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March 6, 2014

Nobel laureate addresses honors convocation

Mark A. Nordenberg, far right, presided over his last honors convocation as chancellor Feb. 28. From left are Arthur S. Levine, senior vice chancellor, Health Sciences, and dean of the medical school; Patricia E. Beeson, senior vice chancellor and provost , and honors convocation keynote speaker and Nobel Laureate Alvin E. Roth.

Mark A. Nordenberg, far right, presided over his last honors convocation as chancellor Feb. 28. From left are Arthur S. Levine, senior vice chancellor, Health Sciences, and dean of the medical school; Patricia E. Beeson, senior vice chancellor and provost , and honors convocation keynote speaker and Nobel Laureate Alvin E. Roth.

Three hundred forty-five University Scholars — juniors and seniors in the top 2 percent of their schools — and other student academic awardees, as well as faculty, staff and alumni award winners, were honored at the University’s annual honors convocation at Carnegie Music Hall.

Nobel laureate Alvin E. Roth was presented an honorary doctorate and delivered the keynote address at the Feb. 28 event.

Roth, the Craig and Susan McCaw Professor of Economics at Stanford University and George Gund Professor of Economics and Business Administration Emeritus at Harvard University, won the 2012 Nobel Memorial Prize in Economic Sciences with Lloyd S. Shapley for solving the problem of how to best match players in a market.

Roth’s models have improved pairing of kidney donors and transplant recipients, revamped the system for matching medical residents with employment at U.S. hospitals and created school choice systems to match students with high schools.

Roth did much of the research for which he won the Nobel Memorial Prize as a faculty member at Pitt, using Shapley’s cooperative game theory to explain how matching happens in practice.

Roth earned his bachelor’s degree in operations research from Columbia University in 1971 and his master’s and PhD degrees in operations research from Stanford University in 1973 and 1974, respectively.

He was influential in developing the field of experimental economics at Pitt, serving 1982-98 as the University’s first Andrew W. Mellon Professor of Economics. He also served as a fellow in the Center for Philosophy of Science and a professor of business administration in the Katz Graduate School of Business. Among his many honors, Roth was a recipient of the 1992 Chancellor’s Distinguished Research Award.


Alvin E. Roth

Alvin E. Roth

“One of the big things that we did here at Pitt when I was here that still is making Pitt a center of experimental economics has changed the way we look at many economic transactions. We still look to Pittsburgh and the laboratories here to illuminate us about how transactions work,” Roth said.

“My advice to the soon-to-graduate students is: You should experiment. Don’t settle for what you know. Make sure you are looking for opportunities to make your life work better,” he said.

Roth elaborated on his work, saying economics  is “a bigger subject than you might think about if you just thought of the economics that you read in the newspaper.”

He conceded that much of economics is impersonal: “If you need to buy 100 shares of AT&T stock, you don’t care who you buy them from. You don’t care whether they’ve taken good care of the shares while they’ve had them. You don’t care who sells them to you. The price does all the work.”

HonConvoHowever, “If you just follow the money and think about prices, you miss a lot of good economics,” he said.

“A lot of the most important markets we deal with in our lives are these ‘matching markets’ where prices may be important, as they are in going to college. But they’re not the thing that decides who gets what.”

Pitt, for instance, doesn’t fill its freshman class by raising tuition prices until just enough people come. “It costs money to come to Pitt, but the price is low enough so that a lot of people would like to come, and therefore Pitt gets a lot of applications,” he said.

“You can’t just come to Pitt because you want to and can afford it. You also have to be chosen,” Roth said. “And, of course, Pitt just can’t choose who comes to Pitt. They have to woo students who could go elsewhere.”

Similar are matching markets for jobs or spouses. “These are matching markets in which you can’t just choose what you want, you also have to be chosen,” he said.

Additionally, Roth said, “There are some markets in which we don’t allow prices to be used at all.”

For instance, although donor organs are in short supply and the list of people waiting for transplants is long, it’s illegal in most parts of the world to buy and sell kidneys, he said.

While someone can choose to give a kidney to a loved one, buying or selling organs is considered what Roth called a “repugnant transaction” — “a transaction that some people would like to engage in and other people think they shouldn’t.”

Such repugnant transactions change over time and have played an important role in shaping the modern economy, Roth said.

At one time, charging interest on loans was considered repugnant in Europe. “We could hardly have the capitalist economy that we have today if we didn’t have a market for capital,” he said, noting that while it remains an issue in Islamic society, charging interest is a case in which something that once was widely repugnant has become less so over time.

Conversely, slavery and indentured servitude once were practiced in America but no longer are. These aren’t ancient issues, he noted, citing same-sex marriage as one such issue of contemporary debate. “Some people would like to engage in it and other people wouldn’t like them to,” Roth said. “Americans are very divided about this right now,” he said, noting that nearly 20 states have made it legal and about an equal number have made it illegal.

In addition, “We all recognize some circumstances where we don’t like to see money enter the equation,” Roth said. “There are some circumstances where introducing money into a transaction changes the transaction.”

While paying a restaurant bill is expected, one would never think of offering money to the host after dining at a friend’s home.

“Some of our transactions are arm’s length, like buying stock on the New York Stock Exchange” he said. Others that make up our economic life are quite personal.

People talk and engage in transactions all the time, Roth noted. “We cooperate and coordinate,” he said.

“Language and marketplaces are both human artifacts that occupy people all the time. But they’re human artifacts that no one just made, but they’re human artifacts that evolved incrementally over time.

“Language and economics are fundamentally human things, but as we understand more about markets and marketplaces we have an opportunity to say to ourselves: Are they working the way we want? Can we change the rules? Can we modify them to make them serve us better?

“The economy and marketplaces are human creations. They are collective creations. And we need to understand better how they work so that we can make them work better.”


Mark A. Nordenberg, presiding over honors convocation as chancellor for the final time, closed the event, saying, “We have celebrated academic excellence within the University, we have taken the time to recognize and applaud the very best of what we have become and of what we aspire to be. We have recognized the accomplishment of our students: in the classroom and outside of it. We have recognized the achievements of faculty in teaching, research and public service.

“We have recognized staff members who have distinguished themselves in their service to the University or the community.

“We have recognized outstanding alumni, individuals who clearly took more from the University than their paper diplomas and who have done honor to themselves and the University of Pittsburgh through their life’s work.

“And we have recognized a friend and former faculty colleague who helped us to earn the reputation as a leading center of experimental economics and whose work, begun here at Pitt, has earned the highest forms of recognition in the field of economics.

“Today in this historic hall, then, we celebrate the realization of our founder’s dream: Today we see how the first lighting of a candle in the log cabin academy would grow to become the University of Pittsburgh, continuing to illuminate by deepening our understandings of our region, country, our world and ourselves.

“And by the best of these lights we will continue to find ways to enrich the lives of others.”

—Kimberly K. Barlow