The University of Chicago Magazine

For Chicago’s newest Nobel laureate in economics, winning the prize is “first and foremost about ideas.”

The October 15 press conference added to “a rich tradition,” Provost Thomas Rosenbaum told his Reynolds Club audience, “going back 100 years, when Joseph Michelson won the first American Nobel in the sciences.” The latest in a long line of laureates with a University connection was the day’s honoree: Roger B. Myerson, the Glen A. Lloyd distinguished service professor in economics, one of three Americans who shared the 2007 prize (officially known as the Sveriges Riksank Prize in Economic Sciences in Memory of Alfred Nobel) “for having laid the foundation of mechanism design theory.”

Meet the press: economist Roger B. Myerson arrives on campus, post Nobel.

Mechanism design theory, which uses game theory to study how best to allocate resources, began with work done 50 years ago by co-winner Leonid Hurwicz of the University of Minnesota. (Hurwicz, LLD’93, was a researcher with the Cowles Commission from 1950 to 1955, when it was located at the U of C, and is married to Evelyn Jensen Hurwicz, AB’45). Myerson and co-winner Eric Maskin of the Institute for Advanced Study—who both earned PhDs in applied mathematics at Harvard University in the 1970s, where they studied with 1972 Nobelist Kenneth J. Arrow—have led a generation of economists who expanded on Hurwicz’s theoretical framework for evaluating economic mechanisms.

Myerson, said Chicago economics chair Phil Reny, “made a path-breaking contribution” to the optional design of auctions, work now known as the revenue equivalence theorem, by discovering “a fundamental connection between the allocation to be implemented and the monetary transfers needed to induce informed agents to reveal their information truthfully.” His work has served as a basis to set up auctions like those used to allocate the use of airwaves or the right to emit carbon dioxide. The author of Game Theory: Analysis of Conflict (1991) and Probability Models for Economic Decisions (2005), Myerson also has developed computer software for auditing formulas, as well as simulation and decision analysis to be used with Microsoft spreadsheet software.

Taking his place at the podium, the 56-year-old Myerson—who in 2001 joined Chicago’s economics faculty after spending the majority of his academic career at Northwestern University’s Kellogg School of Management, with two stints as a visiting professor at Chicago—beamed. “It’s first and foremost about ideas,” he said of winning the prize. “I’m excited that ideas I thought were important, that I wanted to devote my life to,” have been thrust into the limelight.

Mechanism design theory, he said, recognizes that “the economy needs to be understood as a communications system” as well as a market system. With its emphasis on incentives, information, and communication, the theory also has applications in political science, and Myerson has studied voting systems, including work on how to structure elections in Iraq to promote democracy.

“Now that you’ve won,” a reporter asked, “what is the most important thing you’re going to do next?”
“I’ve got a seminar on Tuesday I’ve gotta give,” Myerson deadpanned, to applause. On his longer-term agenda, he said, is research aimed at “trying to understand the fundamental social institutions—political and economic—that make such a fundamental difference between the richest and poorest countries.”