I'm a little slow in posting this while I'm in magnificent Singapore this week. I'm moderating a panel tomorrow at the annual International Bar Association conference here. I'll blog on Singapore later, but have to say that my initial impressions of the city are very good.
The latest Nobel Prize was announced yesterday and - surprise, surprise - another American immigrant won. This time it was Russian-born Leonid Hurwicz and the award was for economics. America has a wonderful history of attracting not only bright immigrants, but immigrants who are off the scales smart. Surely those anti-skilled worker immigration folks will wake up and see that immigrants bring an energy to the country that is remarkable and many come as unknowns who only achieve success becuase America provides an environment that allows people to reach their potential.
And Professor Hurwicz did not enter the US in any lofty status based on his accomplishments. He entered in refugee status since he is Jewish and was escaping the Nazis. Several of my immigrants of the day have been refugees of the Holocaust and are testament to the need for humane and generous political asylum policies.
The Nobel folks describe Professor Hurwicz's work:
Adam Smith's classical metaphor of the invisible hand refers to how the market, under ideal conditions, ensures an efficient allocation of scarce resources. But in practice conditions are usually not ideal; for example, competition is not completely free, consumers are not perfectly informed and privately desirable production and consumption may generate social costs and benefits. Furthermore, many transactions do not take place in open markets but within firms, in bargaining between individuals or interest groups and under a host of other institutional arrangements. How well do different such institutions, or allocation mechanisms, perform? What is the optimal mechanism to reach a certain goal, such as social welfare or private profit? Is government regulation called for, and if so, how is it best designed?
These questions are difficult, particularly since information about individual preferences and available production technologies is usually dispersed among many actors who may use their private information to further their own interests. Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of the properties of optimal allocation mechanisms in such situations, accounting for individuals' incentives and private information. The theory allows us to distinguish situations in which markets work well from those in which they do not. 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.