PracticalLotteries: MMU talk Sept 2008

Practical Lotteries—just the job!

Fairness & Efficiency

in Market Democracies

PracticalLotteries: MMU talk Sept 2008

Action space ‘local’ ‘micro’

ORGANIZATIONindividual

Family

Community

Citizenry

Customers

PracticalLotteries: MMU talk Sept 2008

organisations

Public: govt., quango(Economists’ Theory of Public Choice)

Private: Free market (Heroes of Capitalism; don’t meddle)

agent

PracticalLotteries: MMU talk Sept 2008

‘prizes’

• Market• Merit• ‘Sortitiously’—

– Lottery, or some form of randomization.

Benefits

Burdens

PracticalLotteries: MMU talk Sept 2008

Housing by lottery: Stanford U

PracticalLotteries: MMU talk Sept 2008

Beach huts: Langland Bay, Swansea

PracticalLotteries: MMU talk Sept 2008

Nissan Figaro: special edition

100Langland hutsPC030106.JPG

PracticalLotteries: MMU talk Sept 2008

Wimbledon tennis

PracticalLotteries: MMU talk Sept 2008

Idaho: Whitewater rafting

PracticalLotteries: MMU talk Sept 2008

Huntin’ permits

PracticalLotteries: MMU talk Sept 2008

Netherlands medical school entry

Prof Piet. Drenth, who reported in 1996

PracticalLotteries: MMU talk Sept 2008

Scarce medical treatment

dialysis

PracticalLotteries: MMU talk Sept 2008

Brighton & Hove: school by lottery

PracticalLotteries: MMU talk Sept 2008

Military draft

Rep. Alexander Pirnie, R-NY, draws the first

capsule in the lottery drawing held on Dec. 1,

1969.  The capsule contained the date, Sept.

14. 

PracticalLotteries: MMU talk Sept 2008

Employment (jobs)

• We live in ‘market democracies’

• A job the most important prize– Money

– Status

– Contribution

– belonging

PracticalLotteries: MMU talk Sept 2008

ORGANIZATIONindividual

In a job

Training for a job

Retired from Job

Sub-contractor

Except, maybe:

Some self-employed

Independent income

Job = citizenship for majority

PracticalLotteries: MMU talk Sept 2008

Employment transitions

• Hiring

• Firing

• Promotion

And the role of lotteries in the process

PracticalLotteries: MMU talk Sept 2008

Hiring: short-listing by L• Examples:

– N Ireland: Court Ushers

– Gloucestershire Police (not, but could have!) Remember: lottery choice one-way, so must be openly done

OK for the proles?

PracticalLotteries: MMU talk Sept 2008

Firing: sack by lot• Major example from

China: the ‘luang-gang’

PracticalLotteries: MMU talk Sept 2008

Hiring: short-list of 6/3;spin a wheeel???

•

In Bermondsey we're in the process of selecting our prospective parliamentary candidate (Lab)

IS THIS HOW TO DO IT ?

PracticalLotteries: MMU talk Sept 2008

Is this a joke?

• uncertainty in choosing, but L adds extra uncertainty, so even worse! [technical]

•must always choose the best, but L almost certainly doesn’t [meritocratic]

•(why only from the short-list? Give everyone a chance) [egalitarian]

PracticalLotteries: MMU talk Sept 2008

Justifying Jobs-lotteries

• EFFICIENCY • FAIRNESS

PracticalLotteries: MMU talk Sept 2008

Efficient for whom?

• The Organization:– Duty to choose the ‘best’

• Agent must act to do so

• The Job-Seekers

– Chosen or rejected by the process

• Society

– from which the J-Ss come from, and

– in which the Organization is based

PracticalLotteries: MMU talk Sept 2008

The Organization selection process:

• Only the best will do– Agent to choose

Application form

interview

Who has most Merit gets the JOB

Screening, tests

PracticalLotteries: MMU talk Sept 2008

Signalling:

• Allow some secondary characteristic to decide show ‘commitment’ – good works– additional irrelevant qualifications– higher degree classification

PracticalLotteries: MMU talk Sept 2008

Identifying Merit: interviews

• Kline (1991) human judgement is very poor at separating sheep from goats. Even more scathing is Camerer (1995), who bluntly states that experts make the decision worse through application of their judgement.

• peer assessment of performance, where individuals in a group are ‘surprisingly good’ (Cook, 2003) evidence for jury selection?

PracticalLotteries: MMU talk Sept 2008

Problems with interviews

• Looks• Height• Gender• Weight• Hair (bald men)• Bearded• …..• ….

PracticalLotteries: MMU talk Sept 2008

Testing merit

• Kline (1991) reports a major study on 10,000 employees: This showed that the IQ score of employees correlates with job success, at an average figure of 0.3. ‘No other ability variable achieved an average correlation coefficient of this size’. (he means aptitude tests) (fits with Young’s 1958 idea of

‘Meritocracy’)

PracticalLotteries: MMU talk Sept 2008

So pick the top scorer (= best) every time?

Score

Merit

ABC

So always choose A?

( but if A drops out, and only B and C remain — too close,

so toss for it?)

PracticalLotteries: MMU talk Sept 2008

Two glitches on the linear relationship1. fuzziness

‘merit’ – IQ score

performance- as predicted

understood, but not appreciated –

a linear relationship with

fuzziness 

  

 

understood, but not appreciated – a linear relationship with fuzziness

PracticalLotteries: MMU talk Sept 2008

Two glitches on the linear relationship2. Non-linearity

‘merit’ – IQ score

performance- as predicted

the situation as found – a kinked

and fuzzy relationship

: 

 

   

PracticalLotteries: MMU talk Sept 2008

Percentage of the population achieving that score

SCORE

0%25%50%

PracticalLotteries: MMU talk Sept 2008

Ranking: Football Managers

‘mediocre’

Managerial spells of top 50 ranked:

—by win ratio

—by adjusted win ratio

Result: No 1 becomes No 4, No 37 becomes No 1.

Dawson P M & Dobson S (2002)Managerial Efficiency and Human Capital: An Application to English Association Football, Managerial and Decision Economics (2002), 23, 471-486

PracticalLotteries: MMU talk Sept 2008

Possible selection mechanism

1. ‘agent’ sets relevant minimum criteria for the job

2. Eliminate all job-seekers who are lacking

3. (Reduce field by lottery to ~12)

4. Interviews by (random) peer-group, who each rank ~6

5. Roll dice to pick winner

PracticalLotteries: MMU talk Sept 2008

Efficient for the Organization?

Chosen candidate just as good as ‘best’

Doesn’t waste time/money on futile selection rituals

Complies with all discrimination legislation

‘grit-in-oyster’: ensure a few mavericks re-invigorate the organization

PracticalLotteries: MMU talk Sept 2008

Efficient for Society?

• No ‘token’ employees taken on

• employees feel no need to complain about discrimination (esp if untrue)

• But, teamwork compromised?

PracticalLotteries: MMU talk Sept 2008

But a lost payoff: less Social Control?

• Maybe rent-seeking is good. Encourages learning, good works. Keeps kids off the streets?!

PracticalLotteries: MMU talk Sept 2008

Efficient for Job-Seekers?

No more ‘signalling’ or ‘rent-seeking’

- so no need for extra time/effort on pointless qualifications, activities

(not trivial: eg Swansea Econ students spent an avg. 2 months extra study to get better grades)

PracticalLotteries: MMU talk Sept 2008

FAIRNESS

PracticalLotteries: MMU talk Sept 2008

Minimal FAIRNESS

• F = treat all who are equal in an equal way

• discriminate when X’s merits < Y’s

PracticalLotteries: MMU talk Sept 2008

more FAIRNESS

• Fairness when awarding jobs: – Measure relevant merit (and be able to show why)– All job-seekers who show merit which is not

significantly* less than the top scorer should then in all fairness be treated equally.

* statistically speaking at 90% (say) confidence level

PracticalLotteries: MMU talk Sept 2008

SUPER-FAIRNESS

• ALL qualified JobSeekers be given a chance proportional to their merits. 

*Qualified with validated, relevant and necessary qualifications;

*Merit, as measured above

PracticalLotteries: MMU talk Sept 2008

An industrial example: FAIRNESS between equals

• Supplier delivers batch of widgets;

• Customer tests a few (random sample), finds a faulty widget

• —rejects the lot?

PracticalLotteries: MMU talk Sept 2008

Acceptance Sampling

• Take a random sample of n widgets, test: – If 2 or more bad: rejectable;

– otherwise accept

                                                                            

PracticalLotteries: MMU talk Sept 2008

Balancing the Risks

Customer’s Risk vs. Producer’s Risk

                                                                            

50%

PracticalLotteries: MMU talk Sept 2008

Combining ‘risks’ for both

100

60

0%

10%50%

Percentage of the population achieving that score

SCORE

PracticalLotteries: MMU talk Sept 2008

Fairness: Equality of Risk

• ‘economic reform’ = risk-shedding• rent-seeking, signalling risky for job-seeker• Employer’s risk: once in job difficult to sack

‘Aleatopia’: risks shared equally by both parties

Defend the weak against the strong

PracticalLotteries: MMU talk Sept 2008

Objection 1 to jobs-by-lottery

• Not legal to force Corps or quangos to do this?

• But….state hugely interferes eg in anti-discrimination laws

• NR shows Corporate Socialism• Corporate shills influencing the elected govt

to featherbed them? Case for Sortition maybe!!

PracticalLotteries: MMU talk Sept 2008

Objection 2 to jobs-by-lottery

• Forcing less than the ‘best’ (as in Acceptance Scheme above) creates inefficiency?

• a reasonable price to pay for Fairness?

• recover the progress of Happiness in Market Economies

• Jobs freed from rent-seeking, discrimination

PracticalLotteries: MMU talk Sept 2008

Benefits of jobs-by-lottery

• less need for job security. If you leave one, realistic chance of another soon;

• can take on a wide variety of roles, leading to a more interesting, varied life;

• can accept only men builders, only Jewish lawyers.(but most unlikely)

PracticalLotteries: MMU talk Sept 2008

And ROTATION?