University of Chicago economics professor Roger Myerson is one of three Americans to receive the 2007 Nobel Prize in economics for their work in developing mechanism design theory, a field that helps determine how to maximize gain among different parties in a market situation.
Myerson will share the award of $1.5 million with Leonid Hurwicz, a University of Minnesota professor emeritus, and Eric Maskin, a professor at Princeton University’s Institute for Advanced Study.
“We’re somewhat obsessed with ideas because we think they’re important,” said Myerson of his work at a press conference held in his honor in Mandel Hall on Monday morning, following a 5:30 a.m. phone call from Sweden notifying him of the award.
Seated in the press conference audience were a number of past U of C Nobel laureates, including James Heckman, Gary Becker, and Robert Lucas. Myerson was joined by his wife, Gina, and his son Daniel, 23.
Mechanism design theory, pioneered by Hurwicz in 1960 and later developed by Myerson and Maskin, makes more efficient the process of allocating resources when information is dispersed between many parties and when individuals’ incentives are not fully disclosed. The theory has since influenced methods of labor negotiation, auctioning of government bonds, voting procedures, and regulation schemes.
“The theory allows us to distinguish situations in which markets work well from those in which they do not,” said the Royal Swedish Academy of Sciences of the three economists’ work.
Myerson’s specific contribution, the revenue equivalence formula, has deeply influenced the design of modern auctions and is considered indispensable to mechanism design theory at large.
He spoke of the positive social implications of mechanism design theory at the press conference, citing his favorite application as that of mediation and negotiation, the theory’s ability to help parties reach a mutual agreement.
When asked what his big plans were, having won a Nobel Prize, Myerson responded, “Well, I’ve got a seminar on Tuesday,” referring to his economics of information class.
He described the U of C as “a great institution,” saying, “I still haven’t figured out what the secret is…. This place is determined to cultivate minds and one feels it does it very well.”
According to Myerson, the best reward of all has been the knowledge that many of his theoretical papers have made it onto graduate reading lists and have influenced the thinking of younger economists.
On the U of C campus, Myerson is known as a dynamic teacher with a knack for communicating clearly the complexities of mathematical and economic theories.
“I enjoyed his class. It was one of the best I took,” said Francesco Nava, an economics graduate student whose work is advised by Myerson. “He is very good at highlighting mathematical feature; he likes making theory examples. His class is very inspiring. It made me change my mind to go into theory. I think it was one of the most deserved Nobel Prizes in economics.”
“Professor Myerson is an animated and passionate lecturer and among the most humble and approachable I have ever known,” added Adam Clemens, a teaching assistant for Myerson’s class. “He emphasizes that we can make use of economic models without taking them too seriously, and he is quick to point out the difference between results that can be readily understood and results that he himself would not know if someone had not told him.”
Myerson, the Glen A. Lloyd Distinguished Service Professor in Economics in the College, joined the U of C’s faculty in 2001 following a 25-year tenure at Northwestern University.
“Professor Myerson is part of a proud legacy at the University as he joins a list of 23 other University of Chicago faculty and alumni who have received the Nobel Memorial Prize in Economic Sciences, including five current members of our faculty,” wrote President Robert Zimmer in an e-mail to the U of C community.
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel was not one of the original Nobel Prizes but was created in 1968 by the Swedish central bank to honor Nobel’s memory.