Interview with Professor Weber

Most undergraduate economics courses focus on traditional markets in which participants legally transact with one another, resulting in an efficient allocation of resources. Bryan Weber, a new professor at W&M who specialises in applied microeconomics, studies illegal transactions.

“Crime is a job, a type of employment. You can get your income from it. It can be harder to study than other types of employment, but it is still a valid way of analyzing how people get things done,” said Weber when I spoke with him about his research. He recently conducted a study at the University of Milwaukee (his alma mater) and Marquette University in Milwaukee, Wisconsin in order to determine how public transportation systems affect crime. Both of these universities are located downtown and provide transportation for their students. 30-40% of four-year urban universities have similar transportation programs in place. They are popular, but expensive.

“I looked into this because our university was facing budget cuts and I wanted to see if the program was actually working. There is a concern that this type of transportation, which provides easy access to bars, may promote drinking among students even of illegal age, which could in turn increase crime,” said Weber.

Weber reached the opposite conclusion. He found that these transportation systems were associated with about a 25% reduction in campus-related crime, a result that suggests they are worth funding. College campuses are not the only places where people are concerned about the effects of public transportation. As Weber explained to me, many people are concerned that fixed routes can create crime. Particularly, people who live in suburban areas often believe that expanding commuter railways will attract criminal activity from the inner city. Research done by Keith Ihlanfeldt at Florida State University suggests that commuter rails do not increase crime in wealthy areas, though it does seem to have an effect in poorer areas.

“Most of my research suggests that transit systems don’t have as many negative effects as we think, so concern about expanding these networks is not well-founded. They actually work to reduce crime,” said Weber.

Currently, Weber is working with the University of Maryland’s START, The National Consortium for the Study of Terrorism and Responses to Terrorism, to study a more unconventional type of crime. At the heart of the issue, the same age-old economic motivations are at work.

“We are analyzing why terrorists act the way they do, what attacks they choose to carry out– in other words, how they allocate their resources and make strategic decisions,” said Weber. “We are looking at broad collective data collected on US attacks. Many attacks are small, and most fail. Over half the time there are no casualties and the attack is prevented. This indicates terrorist attacks are hard to pull off. We should pay attention to the large attacks that are successful. These are terrorists’ ultimate goal, after all. Studying these attacks can help us prevent them in the future.”

I asked Professor Weber why he studies criminal activity.

“I like the challenge of trying to figure out what to do when information is hard to come by. For example, it’s tough to find good information on sexual assaults and criminal activity in general. Transactions aren’t monitored; one-half of the equation is trying to hide what’s going on. A lot of the information is hidden, so we need to take very educated guesses and use the best techniques available to figure out what happens next.”

For his next project, Weber hopes to study the relationship between education and crime. He specifically wants to look at the unintended effects of school voucher programs, which are popular in his home state of Wisconsin and are spreading across the country. They allow parents to take back their tax money that would have funded a public school and instead use it to enroll their child in a private school. The basic argument in favor of these programs is that they increase competition among schools and give kids access to a better education. However, Weber and others are concerned about the students who are left behind. Generally, these students have less-involved parents and come from disadvantaged backgrounds. Could leaving these students behind increase the likelihood of them participating in criminal activity in the future?

Professor Weber’s paper, “Can safe ride programs reduce urban crime?”, is linked here: http://www.sciencedirect.com/science/article/pii/S0166046214000416. Ihlanfeldt’s research was featured on CityLab last year: http://www.citylab.com/crime/2014/12/the-myth-that-mass-transit-attracts-crime-persists-in-atlanta/383609/. In addition, Professor Weber has a blog, http://bryansweber.com/, where he recently applied statistical analysis to make predictions about the outcome of “The Button” social experiment hosted on Reddit last spring.

Written by Lauren Hurley

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“Who Gets What — and Why” by Alvin Roth

In 2012, Alvin E. Roth was awarded the Nobel Prize alongside Lloyd Shapley in the field of applied game theory for his work concerning stable allocations in market design. In June of this year, Roth published Who Gets What — and Why: The New Economics of Matchmaking and Market Design, a book that sounds like a general introduction to the study of matching markets but often reads like a listing of case studies. Roth spends most of his time explaining research and projects he himself has been involved in, adding definitions and explanations of concepts as an aside. This approach is not bad in and of itself, but it does make the title seem a little misleading.

Roth explains that a matching market is a market in which price is not the sole determinant of who gets what. An obvious example of this is the marriage market: usually you can’t simply pay someone a sum of money and expect them to marry you. Any functioning market, matching or otherwise, has three basic characteristics. They are thick, meaning there are lots of people participating and transacting with each other. They have the means to deal with congestion, meaning they make it possible for lots of people to transact together in a timely manner. And they are safe, meaning lots of people trust the marketplace and are willing and eager to participate. At heart, these three aspects are all concerned with the transmission of essential information. We use marketplaces to gather information about market participants (relayed by their preferences) in order to efficiently allocate society’s resources. An efficient allocation is one in which no participant could be made better off by transacting outside the marketplace (what Roth calls a “blocking pair”). For this collection of information to occur, there must be many participants willing to reveal their true preferences. Markets fail when they are thin, congested, or unsafe. These markets allocate resources inefficiently, and thus we often find people transacting outside the official marketplace in the knowledge that they can find themselves a better deal.

Without the market-clearing power of prices, matching markets are especially prone to these failings. Roth gives an example we can all relate to: the college admissions process. It is no secret that the rate of college applications has been growing over the past several decades. The Common App was created in order to deal with this congestion. Many colleges now use the Common App in their application process because of the thick market it provides. However, there is a downside. With just one application form, it is easy for students to apply to many colleges, even if they aren’t all that interested in attending. How do colleges get information on which students they actually have a chance at enrolling? The supplemental essays– only a student truly interested in attending will take the time to write yet another 500 words. Thus, the Common App wasn’t enough to ease this market’s congestion. While it made it possible for the students to apply to more schools, it forced the colleges to find a way to gather better information on their applicants’ preferences.

Markets naturally evolve this way, through gradual changes that allow participants to make better transactions. Of course, markets still exhibit many inefficiencies. The relatively new field of market design studies the aspects of natural markets that work well in the hopes of tweaking these markets to make them run even smoother or of solving the failings of hopelessly inefficient markets. Roth points out that markets are a human invention, meaning we have more control over them than the processes of biological evolution. Still, when tweaking or designing markets we cannot forget that we are fiddling in a process built by the collective action of billions of people. We cannot simply impose our will: we must accept human nature as it is and carefully examine the effect a particular market design will have on an individual’s incentives and strategies (this is where game theory comes in). Only then can we be sure we will have a thick market with eager and willing participants. In Roth’s words, “The lesson of market design for political debate is that to understand how markets should be operated and governed, we need to understand what rules particular markets need.” (pg. 227)

In the interests of keeping this post short, I won’t discuss any of Roth’s detailed case studies here. However, you can go to http://www.nobelprize.org/mediaplayer/index.php?id=1879

to watch his Prize Lecture, where he explains his work in medical field labor markets, school choice in US cities and kidney exchanges, all subjects he writes about in the book. If you are interested in a more general approach to the study of markets, John McMillian’s Reinventing the Bazaar: A Natural History of Markets is a great introduction. Both of these books were recommended to me by Professor Campbell.

Written by Lauren Hurley