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U of C Prof Wins Nobel Prize in Econ

By Margaret Lyons in News on Oct 15, 2007 3:06PM

2007_10_15.nobel.jpgUniversity of Chicago econ professor Roger Myerson won the Nobel Prize in economics today for "[laying] the foundations of mechanism design theory." Myerson is the latest in a long line of U of C laureates.

Myerson shares the prize with two other economists, but they're not from Chicago, so we don't care that much. Fine, fine, they're Leonid Hurwicz, emeritus econ professor at the University of Minnesota at Minneapolis, and Eric S. Maskin, professor at the Institute for Advanced Study at Princeton

What is mechanism design theory? Let's ask our favorite economist and yours, Chicago's own Freakonomist Steven Levitt:

Mechanism design formalizes ways of thinking about how a social planner, manager, or parent can set up rules so that all parties involved have the incentives to act in the way that the planner/manager/parent prefers. This Nobel is not for the idea that you can design incentives this way, but rather for coming up with ingenious proofs that simplify the task of proving that, indeed, all parties have the right incentives — a task that can turn out to be awfully difficult.