The Royal Swedish Academy of Sciences awarded the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (there is no actual “Nobel Prize” in economics) today to Leonid Hurwicz of the University of Minnesota, Eric S. Maskin of the Institute for Advanced Study and Roger B. Myerson of the University of Chicago “for having laid the foundations of mechanism design theory.”
I think maybe I’ve sort of heard of Hurwicz before. But Maskin? No. Meyerson? No. Mechanism design theory? No.
I’m not an economist, so that isn’t saying much. But I also don’t remember any of those names coming up in any of the pre-Nobel speculation among econobloggers (there’s a nice roundup in this Greg Mankiw post and the list of links to it).
What does this mean? Mainly that most economists have a pretty narrow view of their own discipline, and the economists who maintain blogs or get quoted in the press a lot tend to be macro types who don’t know a lot about off-the-beaten track stuff like mechanism design theory. Which means it’s nice that the Swedish academy seems to try so hard to get away from just looking at citation indexes and such to find people who came up with genuine innovations.
So what is mechanism design theory? Well, I’ve been reading the info from the Nobel people and it apparently comes out of game theory and “provides a tool for characterizing the optimal institution for any given set of conditions, thereby enabling a much deeper scientific analysis of the merits of alternative institutions.” Sounds like an excellent thing to keep handy in the garage.
Also, I’ve just figured out why I’ve heard of Hurwicz. He was part of the Cowles Commission gang in the 1940s. The Cowles Commission was a small research center, founded in Colorado Springs in 1932 by a Chicago Tribune heir who initially wanted to study the stock market. It moved to the University of Chicago in 1939, and its true glory years began after Ukrainian mathematical economist (and former teen-aged politician) Jacob Marschak took over in 1943. “I pick people with good eyes,” Marschak said later, and seemingly every second economist he picked to join him at Cowles went on to win a Nobel: Tjalling Koopmans, Kenneth Arrow, Gerard Debreu, Herbert Simon, Franco Modigliani, Harry Markowitz … and now Leonid Hurwicz.
Updates:
Greg Mankiw remembers Maskin as “a great teacher and colleague” at Harvard and says he thinks Maskin bought Einstein’s old house when he moved to Princeton. (In other words, he doesn’t seem to know much more about mechanism design theory than I do.)
Tyler Cowen calls MDT (I think it’s time we went with the acronym) “precisely the kind of work which is going out of style in the broader profession” and provides a bundle of links regarding Maskin’s work and a somewhat smaller bundle on Myerson. Later: And now he gets to Hurwicz.
Meanwhile, Mike Moffat at About.com actually predicted a week ago that Maskin would win! (Via Tyler Cowen.) And to think that some people argue that being affiliated with About.com is bad for the New York Times.
Alex Tabarrok, further establishing Marginal Revolution (which he produces together with Cowen) as the go-to blog for today’s Nobel coverage, offers “Mechanism Design for Grandma.”
Maskinophile Mike Moffat now gloats, as well he should. Oh, and he got married over the weekend. Congrats!
Freakonomist Steven Levitt says both Maskin and Myerson (he doesn’t know Hurwicz personally) “may challenge George Akerlof for the title of nicest people to win the Economics Nobel.” I know George Akerlof and he is seriously nice (so is his wife), so this is a daunting prospect. All the ice in Sweden may melt when these men arrive in Stockholm. (What, it’s already melting? Never mind.)