A Nobel Prize for Economic Nonsense

Among the first principles of economics are the notions that benefits and costs are subjective, and that human beings tend to place different subjective values on goods and services. The latter notion is why trade takes place. If you value your used car at $5000 and I (subjectively)value it at say, $6000, then gains from trade are possible. If we strike a bargain at $5500, it creates a mutually beneficial gain. This is what makes the economic world go around.
This year’s Nobel Prize in economics was awared to three mathematicians (Leonid Hurwicz, Roger Myerson, and Eric Maskin)who clearly do not understand this freshman-level idea. They are “game theorists,” and like many game theorists they seem mostly interested in mathematical games, not economic theory or economic reality.

The award was for “mechanism design theory,” which purports to “correct” such alleged “failures” of markets as when “people hold back private information” or “when people refuse to divulge how much they are willing to pay for a good.” As the Nobel committee said in its announcement, markets supposedly “fail” when “buyers and sellers privately know their evaluations” of goods and use this personal information to “gain personal advantage.”

What a shocker. Everyone tries to get the best deal possible.

Naturally, this calls for more government regulation which, according to the Nobel committe’s smarmy announcement, may not suffer from any information problems like the ones that supposedly plague private markets. Perfect politicians, imperfect markets.

What else should we expect from Swedish sociaists whose comrades believe Al Gore is the new Prince of Peace.

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5:27 pm on October 15, 2007