Lessons of the 2012 Nobel Prize in Economics

Richard Cornes and José A. Rodrigues-Neto have penned down an article on "Is Policy Too Important to be Left to Empiricists? Lessons of the 2012 Nobel Prize in Economics". The article surveys the contribution of Roth and Shapley. I reproduce the conclusions verbatim from the article. The last point mentions domains where matching markets can be useful in Australia.


  1. First, it could be dangerous to dismiss basic research as necessarily less important because of its lack of obvious immediate impact on pressing problems of the day.
  2. Second, some of the most applicable and useful ideas often come along first in the most abstract forms. They require time to mature and to prove their true value; in this case a few decades. This does not fit with the politics of the democratic electoral cycle.
  3. Third, the power of abstract mathematical ideas should never be underestimated. Looking to social sciences or policy studies through the lens of what seems to be of immediate national significance will probably lead to myopic incentive schemes that are detrimental to mathematics and to the creation of powerful abstract new ideas and concepts. 
  4. Fourth, Matching Theory is a great example of the breadth of current economic theory. It explores the ideas behind allocation of resources, and their implications for human wellbeing. 
  5. Finally, Matching Theory is an area with proven positive results in terms of public policy. However, in Australia, high school graduates are not allocated to universities with the use of a centralised mechanism that uses the DAA. The implementation of such a scheme would improve access of students to universities and would also lead to better matches between the two sides of the market. There are plenty of other areas that could benefit if Australian policymakers decided to use Matching Theory to formulate and implement better public policies.

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