The weekend interrupted the parade of Nobel prizes, setting apart The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2007, more commonly called the Nobel in Economics (even though it's a late addition). This goes to three guys in the US, including the obligatory Chicagoan: Leonid Hurwicz, Eric S. Maskin, and Roger B. Myerson, "for having laid the foundations of mechanism design theory." As the official press release puts it:
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.
I guess it's just more liberal hooey. Arthur Laffer will have to wait another year...
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I guess it's just more liberal hooey.
The funny thing-- and I mean funny, ha ha-- is that when I mention mechanism design in support of market based solutions, I often get blown off as some wild-eyed baby-eating radical conservative.
I was mostly just looking to use the Laffer joke. I don't think this stuff is necessarily liberal, or conservative for that matter.
I don't think it is, either. Or it's both. Since it's a tool, it's probaby both.
Mainly, it seems to be a very formal way to describe and manipulate two intuitive results: First, pure markets are not purely applicable, and second, that with sufficient care and power markets can be guided without destroying them. (I actually know a little-- and I mean a damn little-- about it, because it relates to some of the computer science I studied in grad school.)
I can see cranks on either side getting bent out of shape about it.