The award of the Nobel memorial prize in economics to Lloyd Shapley and Alvin Roth is overdue: Mr Shapley should have shared the 1994 prize with John Nash and others, while Mr Roth has been a leading contender in recent years. The choice is a particularly good one because economists have acquired some bad habits, and Mr Roth’s example may serve to break them.
Mr Shapley is one of the key figures in co-operative game theory, which for decades looked both abstract and pointless, a poor relation to regular game theory. However, co-operative game theory is finally coming into its own in a world where computerised auctions are used to award assets or contracts in clusters. Mr Shapley has added a new page to the thick catalogue of useless ideas that turned out to be useful after all.
In contrast, the practical application of Mr Roth’s ideas has never been in doubt. Building on work by Mr Shapley and David Gale, Mr Roth designs algorithms for matching things. Mr Gale and Mr Shapley considered a whimsical problem: how to design a centralised system for allocating husbands and wives in a way that there is no possible male-female combination with a mutual desire to elope.