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Practical Lotteries —just the job!

Practical Lotteries —just the job!. Fairness & Efficiency in Market Democracies. Action space ‘local’ ‘micro’. ORGANIZATION. individual. Family Community Citizenry Customers. prizes. organisations. Public: govt., quango (Economists’ Theory of Public Choice) Private: Free market

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Practical Lotteries —just the job!

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  1. Practical Lotteries—just the job! Fairness & Efficiency in Market Democracies PracticalLotteries: MMU talk Sept 2008

  2. Action space ‘local’ ‘micro’ ORGANIZATION individual Family Community Citizenry Customers prizes PracticalLotteries: MMU talk Sept 2008

  3. organisations Public: govt., quango (Economists’ Theory of Public Choice) Private: Free market (Heroes of Capitalism; don’t meddle) agent PracticalLotteries: MMU talk Sept 2008

  4. ‘prizes’ • Market • Merit • ‘Sortitiously’— • Lottery, or some form of randomization. prizes Benefits Burdens PracticalLotteries: MMU talk Sept 2008

  5. Housing by lottery: Stanford U PracticalLotteries: MMU talk Sept 2008

  6. Beach huts: Langland Bay, Swansea PracticalLotteries: MMU talk Sept 2008

  7. Nissan Figaro: special edition PracticalLotteries: MMU talk Sept 2008

  8. Wimbledon tennis PracticalLotteries: MMU talk Sept 2008

  9. Idaho: Whitewater rafting PracticalLotteries: MMU talk Sept 2008

  10. Huntin’ permits PracticalLotteries: MMU talk Sept 2008

  11. Netherlands medical school entry Prof Piet. Drenth, who reported in 1996 PracticalLotteries: MMU talk Sept 2008

  12. Scarce medical treatment dialysis PracticalLotteries: MMU talk Sept 2008

  13. Brighton & Hove: school by lottery PracticalLotteries: MMU talk Sept 2008

  14. 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

  15. Employment (jobs) • We live in ‘market democracies’ • A job the most important prize • Money • Status • Contribution • belonging PracticalLotteries: MMU talk Sept 2008

  16. Job = citizenship for majority In a job Training for a job Retired from Job Sub-contractor ORGANIZATION individual JOBS Except, maybe: Some self-employed Independent income PracticalLotteries: MMU talk Sept 2008

  17. Employment transitions • Hiring • Firing • Promotion And the role of lotteries in the process PracticalLotteries: MMU talk Sept 2008

  18. 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

  19. Firing: sack by lot • Major example from China: the ‘luang-gang’ PracticalLotteries: MMU talk Sept 2008

  20. 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

  21. 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

  22. EFFICIENCY FAIRNESS Justifying Jobs-lotteries PracticalLotteries: MMU talk Sept 2008

  23. 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

  24. The Organization selection process: • Only the best will do • Agent to choose Application form Screening, tests interview Who has most Merit gets the JOB PracticalLotteries: MMU talk Sept 2008

  25. Signalling: • Allow some secondary characteristic to decide show ‘commitment’ • good works • additional irrelevant qualifications • higher degree classification PracticalLotteries: MMU talk Sept 2008

  26. 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

  27. Problems with interviews • Looks • Height • Gender • Weight • Hair (bald men) • Bearded • ….. • …. PracticalLotteries: MMU talk Sept 2008

  28. 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

  29. So pick the top scorer (= best) every time? Merit So always choose A? ( but if A drops out, and only B and C remain — too close, so toss for it?) A B C Score  PracticalLotteries: MMU talk Sept 2008

  30. Two glitches on the linear relationship1. fuzziness understood, but not appreciated – a linear relationship with fuzziness understood, but not appreciated – a linear relationship with fuzziness performance - as predicted ‘merit’– IQ score PracticalLotteries: MMU talk Sept 2008

  31. Two glitches on the linear relationship2. Non-linearity : the situation as found – a kinked and fuzzy relationship kinked fuzziness performance - as predicted ‘merit’– IQ score PracticalLotteries: MMU talk Sept 2008

  32. SCORE 50% 25% 0% Percentage of the population achieving that score PracticalLotteries: MMU talk Sept 2008

  33. Ranking: Football Managers Managerial spells of top 50 ranked: —by win ratio —by adjusted win ratio Result:No 1 becomes No 4, No 37 becomes No 1. ‘mediocre’ 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

  34. Possible selection mechanism • ‘agent’ sets relevant minimum criteria for the job • Eliminate all job-seekers who are lacking • (Reduce field by lottery to ~12) • Interviews by (random) peer-group, who each rank ~6 • Roll dice to pick winner PracticalLotteries: MMU talk Sept 2008

  35. 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

  36. 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

  37. 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

  38. 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

  39. FAIRNESS PracticalLotteries: MMU talk Sept 2008

  40. Minimal FAIRNESS • F = treat all who are equal in an equal way • discriminate when X’s merits < Y’s PracticalLotteries: MMU talk Sept 2008

  41. 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

  42. 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

  43. 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

  44. Acceptance Sampling • Take a random sample of n widgets, test: • If 2 or more bad: rejectable; • otherwise accept PracticalLotteries: MMU talk Sept 2008

  45. Balancing the Risks Customer’s Risk vs. Producer’s Risk 50% PracticalLotteries: MMU talk Sept 2008

  46. Combining ‘risks’ for both 100 SCORE 60 10% 50% 0% Percentage of the population achieving that score PracticalLotteries: MMU talk Sept 2008

  47. 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

  48. 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

  49. 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

  50. 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

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