At last. Mechanism designers got their Nobel prize. But did they deserve it?
For me economics became a science sometime around 1945* with John von Neumann’s and Oskar Morgenstern’s Theory of Games and Economic Behavior. Naturally, this book was only an outline of things to come and far from finishing the edifice we call today game theory. It took the subsequent efforts of people like John Nash, John Harsanyi, Reinhard Selten, Robert Aumann and Thomas Schelling to complete this beautiful structure of clear rationality expressed through elegant mathematical formulation.
The first Nobel prizes however for the masters of this field came only in 1994 (Harsanyi, Nash, Selten). Maybe it is the traditional reluctance of the Swedes to acknowledge the importance of new fields, or other reasons, it does not matter. But it seems that since 1994 they are trying to correct their mistake by awarding prizes to all the other aforementioned researchers and also people who I consider to be related to GT like William Vickrey, Vernon Smith etc.
It seems microeconomics and especially game theory are accepted now as one of the strongest tools in the social sciences with applications from biology to sociology. Mechanism design is one of these applications and it was chosen to be honoured this year, with the Nobel prize going to Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson “for having laid the foundations of mechanism design theory”.
Mechanism what?
So what is mechanism design and was this honour warranted?
Read moreEconomics Nobel 2007: Playing games and designing mechanisms