15 October 2007

Nobel Prize in Economics goes to...

Speculations of who will get this year's Prize were pretty intense, but finally the verdict is there:

Leonid Hurwicz, Eric S. Maskin, and Roger B. Myerson.

(click for bios; for the rationale of why the Prize went to these three American economist, go here)

Many of you may be probably wondering what the mechanism design theory is and, more importantly, since Noble Prize winners should make a contribution to humanity, what practical relevance it has for us. Well, it had an impact on the development of game theory, allowing economists to analyse the sources of market failure. It seems to me that Guardian is offering a pretty good explanation of what this economic animal is.


Talking about the game theory, I have seen recently an interesting BBC three-part documentary: "The Trap. What Happened to Our Freedom".  

It touches upon game theory and modern economics, putting them in a wider social perspective.

Do I personally recommend watching it? Yes, if you like uncovering fallacies and sophistry (which is something economists are good at and do like...)


Coming back to international economics, let me present you the article headlines for this week. On Wednesday, we should have a brilliant piece on carry trade by Kasia Burzynska of Gdansk University (Poland) and later (on Saturday) a research article on how Indonesia adapts to changing conditions in international economics by Barbara Kits of University College Utrecht (The Netherlands).


Remy Piwowarski said...

Apologies for not working links... Now it should be all right..

Anonymous said...

Although the doc can come across as slightly over repetitive, i genuinely enjoyed the games he played with concepts we take for granted. Do you agree with his version of game theory? i think it would be an interesting test case in small social circumstances. if you were to increase the gains of one outcome, will people act causally different?

Remy Piwowarski said...

The opinion I would like to present here is just a short reflection full of many mental shortcuts, so don't take it too literally... This is a topic for a big article..

For me the authors of the doc drastically underestimate the significance of free markets and free economy and see them as the source of all possible evil.

True, markets never work perfectly, but what they imply is that they should be superseded by the state, which is a solution as bad as giving a free reign to markets. There is a role for the state in eliminating market failure, but the doc's whole anti-market rhethorics is completely out-of-place...

Remy Piwowarski said...

3 more things that annoy me:

1) Authors of the doc do not provide ANY stats for their bold statements e.g. about changes in British bureacracy.

2) They completely dismiss public choice theory and they give no argument why the theory is wrong... True, I wouldn't go as far as dismissing all state intervention on the basis of public choice, but I think that it gives us some intuition on what may happen in policy making...

3) They make their point on the basis of one case, not seeing that the case leading to powerful argument to the contrary is there too... Shock therapy didn't work well in Russia, but consequences in Poland were more positive... Free-market policies, as the authors of the movie imply, didn't work in Philippines, but what about Chile?

As I said, these are just random thoughts, but I could give you some back-up in literature if you wish so...