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3 U.S. Economists Share Nobel for Work on Flawed Markets
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VIDEO | Americans Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson won the Nobel economics prize Monday for developing a theory that helps explain how sellers and buyers can maximize their gains from a transaction.
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Hurwicz, who grew up and was educated in Poland, emigrated to the West during World War II. He gained interest in mechanism design after the war, when economists were intensely debating whether socialist reforms and a planned economy could work. Rather than delve into the ideology behind these debates, Hurwicz used math and economics to come up with a theory of how to design efficient programs that would take into account real-world problems.
[an error occurred while processing this directive]Maskin and Myerson showed that the theory had broad applications.
After the 2000 election showdown in Florida, for example, Maskin wrote an article in Scientific American proposing a mechanism that he said might have prevented the debacle. The problem that put the election in the hands of the Supreme Court was that each of the major candidates, Al Gore and George W. Bush, got 48 percent, a minority, of the vote, with several third-party candidates splitting the rest.
This issue would not have arisen, Maskin said, if voters had originally been asked to rank the candidates in order of preference, rather than choosing just one. The state's electoral votes of would go to the candidate who was ranked the highest overall.
"Simply put, mechanism design is all about whether your goals are attainable by some mechanism," Maskin said yesterday.
The theory has led to the development of complicated algorithms that help insurance companies match customers to the right policies and medical students to the proper internships.
This is the eighth consecutive year that the economics prize has gone to Americans. The award, officially known as the Prize in Economic Sciences in Memory of Alfred Nobel, was created in 1968 by the Swedish central bank and is not one of the original Nobel prizes. The winners share a cash award of about $1.5 million.
