Amidst all the celebration of Lloyd Shapley and Alvin Roth's Nobel, there's something nagging at me.
Their achievement was to show, theoretically and empirically (pdf), that we don't necessarily need a price mechanism to produce an allocation that is stable and Pareto optimal. Another process can do so, which works for matching students to schools, kidneys to recipients and for marriages, among other things.
But there is another mechanism that also achieves such a result. It's Ariel Rubinstein's jungle (pdf) economy. He shows that, under certain conditions, allocating scarce resources to the strongest agents according to their preferences will also give a stable, Pareto optimal equilibrium.
And, of course - in theory and under some conditions - a free market will also achieve this.
We have, then, not one or two but three ways of getting to a stable Pareto efficient outcome.
However, most of us, I suspect, don't think Rubinstein's jungle economy an especially pleasant place to be - even though it achieves the same desiderata as the (theoretical?) free market and Shapley-Roth process: stability and Pareto optimality.
Which raises the question: what do the latter have to make them desireable that the jungle economy lacks?
I don't think economic growth is the answer: ceteris paribus, I would rather live in a free market economy with zero growth than in a zero-growth jungle economy.
Nor is it that the market and matching economies do away with the power that generates the jungle allocation. One feature of Shapley-Roth processes is that they favour the side doing the choosing. Power thus helps determine allocations, as in the jungle.
Nor is it sufficient to say that the Shapley-Roth process saves lives. It does, but Rubinstein claims that the jungle allocation also does so by removing the need for violence.
And I don't think it's good enough to make the empirical claim that we in fact rarely see Rubinstein's jungle economy working as well as theory implies: the same is true for free market economies.
What I'm edging towards here is a point made (pdf) - in a different context - by Amartya Sen, that Pareto optimality isn't as great an ideal as economists think.If you can't abolish slavery without making slave-owners worse off, then slavery is Pareto optimal.
To return to the question: why do we cherish the market economy over the jungle economy? I suspect one reason is Deirdre McCloskey's - that a market (sometimes) promotes more attractive virtues than other societies. It is, perhaps, significant that the English have a longer tradition of freeish markets than the Serbians.
And this is where my nag arises. If Pareto optimality is not sufficient to make an allocative mechanism attractive, what else is needed, and do Shapley-Roth processes possess it?