Nobel Prize to Hurwicz, Maskin and Myerson

Josh Wright —  15 October 2007

for having laid the foundations of mechanism design theory.” Here’s a blurb from the Nobel website on mechanism design:

Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of the properties of optimal allocation mechanisms in such situations, accounting for individuals’ incentives and private information. The theory allows us to distinguish situations in which markets work well from those in which they do not. It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures. Today, mechanism design theory plays a central role in many areas of economics and parts of political science.

Congratulations to the winners!  Here’s Tyler and Alex at Marginal Revolution on mechanism design generally and this year’s Nobel winners. Alex’s post also provides a nice introduction to mechanism design. I’m relatively pleased by this Prize.  Mechanism design is highly formal, but the basic concepts (rational participation, incentive compatability,  truth-telling, etc.) are accessible at an informal level, and it does have potentially very useful real world applications.   The winners are brilliant theoreticians and certainly deserving of this recognition.  All of that said, I do admit that I’m still holding out hope that the Committee will soon recognize the contributions of to property rights, transactions cost economics, and contracting of folks like Alchian, Demsetz, Klein, and Williamson or perhaps finally recognize Gordon Tullock.