The 2007 nobel prize in economics came as a bit of a shock to me. For one, I hadn't heard of the contribution or of the area of research that won Leo Hurwicz, Eric S. Maskin and Roger Mayerson the prize. It's called mechanism design theory and I have to admit that it is a fascinating idea. The idea is fairly simple: all this while economics was devoted to the idea of understanding and predicting outcomes generated by economic institutions, mechanism design merely reverses the question to ask, given an ideal economic outcome, can economic mechanisms be designed to achieve them.
The first stumbling block we face when we think about this for a bit is that the real problem is one of information. As a concrete example, take the case of an auctioneer trying to sell a painting. The ideal outcome from his point of view is to sell it at the highest possible price. What is preventing him from achieving this is the knowledge regarding the person who values the painting the most. The research that was done, tried to ask questions relating to mechanisms that can generate this information.
There are many kinds of mechanisms that have been studied and analyzed such as the Groves mechanism, the Vikrey auction and the Clarke mechanism and I'll takcle that in another post. But till then, a very good link for an introduction to the theory is right here.
4 comments:
I was very surprised by the decision as well. I have heard Maskin speak, he was here in 2006 for the Marshall Lectures, and he contends to be one of the most boring people on the planet. He was at Cambridge during the 70s so he is claimed as one of ours. Sheesh. I had never heard of Hurwicz or the other guy, but then Micro was never my strong suite, except when KRC was teaching.
Incidentally, had a long dinner conversation about KRC today with some people from College. Mixed feelings really. :)
T
Thanko... please post.. i'm flooded right now.. anything please.. how about a retrospective on eco in stephen's :) that should be fun! (and pepper it with details of the KRC conversation!)
It is rather late to comment on this post though. Mechanism design literature actually, from what little I know follows from all the socialist design models or more popularly known as the planning models- taking in to consideration the informational constraints. I would disagree with T on Maskin. I attended a lecture that he gave in Madras last december and it was quite captivating. If you want to have some fun part of the mechanism design literature, read the marrige matching algorithms and Gale shapley Algorithm for student matching. It is a pity that you are not offered a course on Games and Information by Babu - It is a really good and fun course.
Ragu!! whats up.. Jana told me about your near death experience :) Ya the games course may not happen for us unless they find faculty.
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