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While I remain disappointed that the Nobel Prize in Economic Science has yet to be awarded to Gordon Tullock [2], Armen Alchian [3], Harold Demsetz [4], and Jagdish Bhagwati [5], after reading this essay [6] (from today’s Wall Street Journal) by my GMU colleague Pete Boettke [7] I’m more impressed with yesterday’s award than I was when I first heard it.
Here are the opening paragraphs:
Yesterday Leonid Hurwicz, Eric Maskin and Roger Myerson won the Nobel Prize in Economic Science for their pioneering work in the field of “mechanism design.” Strangely, some have used this occasion to disparage free-market economics. But the truth is the deserving recipients owe a direct debt to free-market thinkers who came before them.
Mechanism design is an area of economic research that focuses on how institutional structures can be manipulated by changing the rules of the game in order to produce socially optimal results. The best intentions for the public good will go astray if the institutional arrangements are not consistent with the self-interest of decision makers.