NEW YORK — Three U.S. economists, one of them a 90-year-old professor emeritus from Minnesota, will share this year’s Nobel prize in economics for their work on how people’s knowledge and self-interest affect their behavior in the market or in social situations such as voting and labor negotiations.
Leonid Hurwicz, who lives in south Minneapolis, is the oldest winner ever of the Nobel, the Royal Swedish Academy of Sciences said in their announcement Monday.
His work — along with that of Eric Maskin and Roger Myerson, who both are 56 — led to a theory that plays a wide-ranging role in contemporary economics and political science, touching on areas as diverse as labor contract negotiations, auctions of government bonds, voting procedures and the structuring of insurance policies.
“I really didn’t expect it,” Hurwicz, an emeritus economics professor at the University of Minnesota in Minneapolis, said of the Nobel announcement.
Hurwicz, who is hard of hearing, said he initially thought the call from Sweden about the prize was a hoax.
“There were times when other people said I was on the short list, but as time passed and nothing happened I didn’t expect the recognition would come because people who were familiar with my work were slowly dying off,” he said.
Maskin is a professor at the Institute for Advanced Study at Princeton, N.J., and Myerson is a professor at the University of Chicago in Illinois. Maskin and Myerson both finished their Ph.D.s at Harvard University in 1976.
In its citation, the academy said that their work on “mechanism design theory” has made it possible to “distinguish situations in which markets work well from those in which they do not.” This, it added, helped economists identify efficient trading mechanisms, regulatory schemes and voting procedures.
Essentially, the three men studied how game theory can help determine the best, most efficient method for decision-making.
Game theory was advanced by John Nash, the subject of the film “A Beautiful Mind” and who received the prize in 1994.
Stephen Morris, an economics professor at Princeton University, said a big part of why the winners were chosen was their proof of how people deciding as a group can lead to a best outcome for many transactions, whether it’s in a marketplace or in the political arena.
Much like game theory, mechanism design is applied to situations where perfect markets cannot be found. The trio’s work showed how to reach a desired outcome, such as improvements in social welfare or fatter profits, and what sort of government regulation should be put into place.
They will share a $1.5 million prize, to be awarded in December.
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