Practical Lotteries
—just the job!
Fairness & Efficiency
in Market Democracies
PracticalLotteries: MMU talk Sept
2008
Action space ‘local’ ‘micro’
ORGANIZATION
individual
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.
PracticalLotteries: MMU talk Sept
2008
Benefits
Burdens
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, RNY, 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
Job = citizenship for majority
In a job
Training for a job
Retired from Job
ORGANIZATION
individual
Sub-contractor
Except, maybe:
Some self-employed
Independent income
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 ‘luanggang’
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
Application form
– Agent to choose
Screening,
tests
interview
Who has most
Merit gets the JOB
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?
Merit
A
So always choose A?
( but if A drops out, and only
CB
B and C remain — too close,
so toss for it?)
Score 
PracticalLotteries: MMU talk Sept
2008
Two glitches on the linear relationship
1. fuzziness
understood,
but
understood, but
not appreciated –– a
not appreciated
a linear
linearrelationship
relationship
with
fuzziness
with fuzziness
performance
- as predicted
‘merit’ – IQ
score
PracticalLotteries: MMU talk Sept
2008
Two glitches on the linear relationship
2. Non-linearity
:
the situation as
found – a kinked
and fuzzy
relationship
performance
- as predicted
‘merit’ – IQ
score
PracticalLotteries: MMU talk Sept
2008
SCORE
50%
25%
0%
Percentage of the population achieving that score
PracticalLotteries: MMU talk Sept
2008
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
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 reinvigorate 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
SCORE
60
50%
10%
0%
Percentage of the population achieving that 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 antidiscrimination 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?
PracticalLotteries: MMU talk Sept
2008