Game theorist Shapley GS ’53 wins economics Nobel Prize

“They’ve been talked about as likely winners for a long time now, so it’s not really a huge surprise they’ve been chosen,” Princeton economics professor Dilip Abreu GS ’83 said. “It was a matter of when — more than if.”

But Shapley, 89, expressed surprise in an interview with The Daily Princetonian.

“I didn’t know this was coming,” Shapley said. “I’m not an economist. I’m only a member of the faculty of the economics department at UCLA.”

Shapley was honored with the award for his analysis of how to design stable matching systems for two parties in a transaction. The concept of stability, which Shapley developed in the 1950s and 1960s, is a central model in cooperative game theory.

Shapley worked with David Gale GS ’49 in the 1960s to develop the Gale-Shapley algorithm for stable matching. Using the algorithm, the two researchers proved that it is possible to make all marriages stable for any equal number of men and women.

Stability in the algorithm was proven mathematically, but it wasn’t until Roth came along that the algorithm became anything but theoretical.

Roth used the Gale-Shapley algorithm and unexpectedly applied it to practical issues, including matching students with high schools and doctors with hospitals.

“Roth has been doing a bunch of work that has kind of made people think that this abstract mathematical work has relevance for lots of practical problems,” Princeton economics professor Stephen Morris said. “So you might say that it’s the work of Al Roth and others like him that have brought Shapley’s important work to everyone’s attention in recent years.”

The Nobel Prize Committee explained on its website that, though the two researchers did not work together, the two share the prize this year because “the success of their research is due to the combination of Shapley’s theoretical results with Roth’s insights into their practical value.” The committee said that the prize rewarded “a flourishing field of research, where theory, evidence and design are used interactively” and allows the field to continue to grow and hold promise for the future.

Shapley received his Ph.D. in mathematics from the University in 1953. Albert Tucker, a leading game theorist, advised him on his doctoral dissertation, “Additive and Nonadditive Set Functions.”

He also researched alongside mathematics professor emeritus John Nash GS ’50 and professor emeritus at Yale Martin Shubik GS ’53 during his time at the University.

Nash, who won the Nobel Prize in economics in 1994, said he met Shapley at the RAND Corporation and that they had “a lot of interactions.” Nash, also a game theorist, explained that Shapley’s work is not traditional economics research.

Get the best of the ‘Prince’ delivered straight to your inbox. Subscribe now »

“Some game theory might be valuable to poker players or military strategy, but not considered for economics,” Nash said.

“He was very private and very intense, enormously bright,” Shubik said about Shapley as a student. “He is probably one of the highest IQ persons I have known … To me, Lloyd Shapley is without any question the greatest mathematical game theorist alive and one could argue, he was one of the greatest mathematical game theorists ever.”

Shapley taught at the University from 1952 to 1954 before going to research mathematics at the RAND Corporation for 27 years. He has been on the faculty of UCLA since 1981.

Eric Maskin, who won the Nobel Prize in Economics in 2007 while he was a visiting lecturer at the University and knows this year’s winners well, described Shapley as “amazingly shy and unassuming in person.”

“You would never expect someone that matter of fact and unassuming was such an important figure,” Maskin added, also saying that Shapley was a “legendary figure.”

Along with Maskin, the Nobel Prize has honored numerous Princeton-affiliated economists in recent years, including economics professor Christopher Sims and visiting economics professor Thomas Sargent last year for their data-centered approach to decision-making under uncertainty. Wilson School professor Paul Krugman won the award in 2008 for his work on global trade patterns.

“The Nobel Prize kind of labels you as somebody who is at the top, the frontier, of the profession,” Sims said in an interview, adding that Shapley “has been a leader in game theory since a long time ago.”

Sims described the first few weeks after the announcement of the Nobel Prize as a “blizzard” for the winner. During this time, he said, the winner is asked to write a Nobel lecture and to travel and speak at a variety of events while simultaneously responding to a “barrage of press inquiries” and deciding whom to bring to the ceremony in Sweden.

Roger Farmer, the chair of the economics department at UCLA, implied that the blizzard has hit Shapley full on in the first day following the announcement. “Lloyd is a little overwhelmed,” he said.

Other Princeton economists, including economics professors Angus Deaton and Nobuhiro Kiyotaki, were considered top contenders for this year’s prize.

Staff writers Monica Chon and Carla Javier contributed reporting.