Mathematics Helps Three Economists Gain 2007 Nobel Prize

A trio of theoretical economists whose work has a significant mathematical component will share the 2007 Nobel Prize in Economic Sciences.

Leonid Hurwicz of the University of Minnesota, Eric S. Maskin of the Institute for Advanced Study, and Roger B. Myerson of the University of Chicago were honored "for having laid the foundations of mechanism design theory," according to the Royal Swedish Academy of Sciences. Maskin and Myerson hold doctorates in applied mathematics from Harvard University.

Mechanism design is the art of formulating rules of a game to achieve a specific outcome. The theory of mechanism design, which Hurwicz initiated in 1960s and which Maskin and Myerson refined and applied in the 1970s, has enhanced understanding of the properties of optimal allocation mechanisms in cases where ideal market conditions — according to Adam Smith's idea of the market's "invisible hand" — are absent.

The theory helps economists "distinguish situations in which markets work well from those in which they do not," the Academy said in its announcement. It "has helped economists identify efficient trading mechanisms, regulation schemes, and voting procedures." Today, mechanism design theory plays a central role in many areas of economics and parts of political science.

The formal prize ceremony will be held in Stockholm, as tradition dictates, on Dec. 10, the anniversary of the death in 1896 of the prize's creator, Swedish industrialist and inventor of dynamite Alfred Nobel. This year's laureates will receive a gold medal, a diploma, and share 10 million Swedish kronor ($1.53 million or 1.08 million euros).

Source: Royal Swedish Academy of Sciences, Oct. 15, 2007.