The Royal Swedish Academy of Sciences has decided to award The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2007 jointly to Leonid Hurwicz, University of Minnesota, Eric S. Maskin, Institute for Advanced Study, Princeton, and Roger B. Myerson, University of Chicago, “for having laid the foundations of mechanism design theory”.
Alex Tabarrok tries to explain mechanism design in terms your grandmother would understand.
Tyler Cowen has his doubts about the practicality of their results.
Peter Boettke discusses the relationship between Hurwicz and Hayek and links to Co-Nobel Prize winner Roger Myerson’s views on the connection between Hurwicz, Hayek, and Mises.
Barkley Rosser looks at the influence of the Committee Chair, Juergen Weibull, a game theorist, in the awarding of another prize for game theory so soon.
“In any case, for those who are not aware of it, Hurwicz’s approach to mechanism design looks an awful lot like an effort to figure out how to do central planning right.”
As The New York Times noted:
“The prize winners’ groundbreaking work has been pivotal in assessing how institutions perform under such conditions [where markets supposedly work imperfectly], and in designing the best mechanism to make sure that goals, such as optimal social welfare or maximum private profit, are reached, the academy said. The winners’ work has helped determine whether government regulation may sometimes be necessary.”
As Thomas DiLorenzo sees it the prize was awarded to three mathematicians who clearly do not understand the freshman-level idea that benefits and costs are subjective, and that human beings tend to place different subjective values on goods and services.
Update: Following up on Dr. DiLorenzo’s post, David Bratton in the comments section points out that from Alex Tabarrok’s explication, the Nobel Laureates are reintroducing the notion that there is some kind of more perfect price other than what the buyer and seller may agree upon (something that the government would be very keen on when it comes to spectrum auctions in order to enlarge their coffers).
Moreover, The Financial Times article posted in the Austrian Forum implies a relationship between this prize and the global warming movement:
“One of its uses for the future will come in environmental theory and policy, areas in which professor Maskin has been active this decade, where the mechanism of and domestic and international regulation will be crucial for its success in preventing global warming and other environmental degradation.”