Three Harvard graduates won the Nobel prize in economics on Monday for their work using game theory to explain the best method for allocating resources.
The prize committee honored the trio of Leonid Hurwicz, Eric S. Maskin ’72, and Roger B. Myerson ’73 for “having laid the foundations of mechanism design theory.” Myerson and Maskin are graduates of the College, and all three hold degrees from the Graduate School of Arts and Sciences.
Maskin and Myerson met during their undergraduate years at Harvard, where they concentrated in mathematics and applied mathematics, respectively. Maskin, who went on to teach at Harvard from 1985 to 2000, says a course he took as an undergraduate with economics professor Kenneth J. Arrow “grabbed his attention” and inspired him to go into the field that would win him the prize.
Arrow, a Nobel laureate himself, introduced Maskin to Hurwicz, who at the time was pioneering the new field of mechanism design theory.
At 90, Hurwicz is the oldest Nobel laureate in history.
Maskin and Myerson took several classes together while pursuing their PhDs in applied mathematics at Harvard. As graduate students, they began to refine and extend Hurwicz’s work, applying it to practical schemes such as the regulation of markets and auctions.
Professor of Economics Susan C. Athey, an economic theorist who specializes in industrial organization, says that the theories of both Myerson and Maskin have contributed substantially to her own work on auctions.
Athey, who said she considers Maskin a mentor, added that he was “extremely popular” among graduate students during his time at Harvard.
Olivier J. Blanchard, a professor of economics at MIT who co-edited the Quarterly Journal of Economics with Maskin, said that his former colleague is “one of the nicest guys in the profession.”
Maskin left Harvard in 2000 to become a professor at the Institute for Advanced Study in Princeton, N.J. He said he appreciates the additional academic freedom that the institute affords him, but added that he “enjoys teaching students as much as ever.”
The award came as a surprise to Internet prognosticators, most of whom did not consider the theorists likely to win.
“Most of the people who speculate know very little about it,” said Furer Professor of Economics Oliver D. Hart.
Mechanism design theory emerged from the debate over whether a central planner could allocate resources efficiently without knowing everyone’s preferences, according to Abbe Professor of Economics Drew Fudenberg ’78, who co-authored an influential paper with Maskin.
While the winners’ work is theoretical, it has important practical applications, such as federal auctions of the broadcast spectrum.
“Once you know what’s possible, it gives you a framework for what can be done,” Fudenberg said.