A market-design economist wins the John Bates Clark medal

BOSTON parents were fed up. To get their children into public schools they had to submit a list of their preferences. Spots were allocated first to those who put a school top. Only then would schools consider pupils who put them second or third. Sounds fair? Hold on. The best schools are popular. Picking them risks rejection. Good schools are sought after, too. If put second they may also fill up, leaving only places at worse schools. Should parents aim for the best and risk mediocrity, or settle for the good?

On April 20th the American Economic Association (AEA) awarded the John Bates Clark medal, given annually to a leading economist under 40, to Parag Pathak of the Massachusetts Institute of Technology. He researches market design—eg, creating mechanisms to allocate resources without money, such as school places in Boston. Solutions he devised there have been applied widely, from New York to New Orleans. The AEA says that by improving pupil allocation Mr Pathak had “influenced the lives of over 1m public school students”.

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In Boston, as a graduate student at Harvard, Mr Pathak worked with his mentor Alvin Roth (since awarded a Nobel prize) on a new system. It asks pupils and schools to list each other from first to last. A computer program offers places to pupils that schools put top. Pupils take the best offer and reject the rest. Schools work down the list making fresh offers as rejections occur, with each pupil keeping a single, most preferred, offer. Parents no longer need strategies.

Mr Pathak has since pondered related questions, such as whether parents can truly judge schools’ quality. In Boston, he found that charter schools (public schools exempt from some regulation) improved the performance of disadvantaged pupils. Children randomly allocated places there tended to flourish; those elsewhere languished. Parents spotted high achievement, and applications rolled in. But in New York, where parents pay handsomely to live near elite schools, he showed that whether pupils just squeak in or just miss out, they do equally well and attend similar colleges. The best schools get the best pupils, but may not make them better.

When he was growing up in New York state, Mr Pathak “used to dream about attending a selective public school in New York City”. It seems that he needn’t have worried.

This article appeared in the Finance and economics section of the print edition under the headline “School rules”