Roger Myerson is responsible for laying the foundations of a significant intellectual enterprise, the so-called mechanism design theory. In this profound work, which was honored with the Nobel Prize in 2007, he and his co-laureates Leonard Hurwicz and Eric Maskin focused on how institutions perform within imperfect markets, and how to design mechanisms that help achieve goals like optimal social welfare.
Roger Myerson doesn’t just teach the theories that he’s established. He seeks progress. And so he deals with conflicts that, at first glance, seem to be beyond his grasp. Since a part of the question deals with trust and leadership, the game theorist is ambitious in his quest to establish principles of international relations that can lead to a more peaceful world.
Roger B. Myerson
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (shared), 2007
At a glance
Born: 1951, Boston, Massachusetts
Field: Game Theory
Prize-winning work: Foundations of mechanism design theory
Unknown achievements: Had a Nobel prize-winning idea in graduate school, but unfortunately Reinhard Selten had the same one
Biggest contradiction: Expert in auction theory, but fails at auctions. He went once, but the first offer was much higher than his own
Downgrade: Is probably the only professor who has a student as his classmate (in harmonica class)
A creature of habit
Every weekday he takes the number 2 bus line to get to the University of Chicago and back to his downtown apartment. Wearing his beige bucket hat, no one can see that his mind is an active battlefield; just looking out of the bus window, staring at the deep blue of Lake Michigan, might inspire him to come up with a new way of optimizing our economy. He’s done this for half his life, but Myerson likes his life to be as monotonous as possible, saying: "If I ate the same thing for dinner every night, that would be just fine with me." Would he call himself a geek? "Absolutely", he responds, admitting with a slightly mischievous smile that he read Paul Samuelson’s economics textbooks over his high school summer break, just for pleasure. For Myerson, working hard (what people like to call "nerdism") is the highest form of entertainment.
Can we use Game Theory to design a stable, peaceful, social system?
Despite this nerdism, it feels like the spirit of a wild child also burns within Roger Myerson. His speech is as fast as a high-speed pursuit, chasing down every new thought that comes in within seconds, which is probably why it’s hard to find a topic he isn’t curious about and won’t start reading up on. "Fundamental theoretical and empirical study of social phenomena will help us to manage the forces of destruction," he explains. But he also calls for more careful thinking. For him, Game Theory can help design a stable, peaceful social system because it provides a general framework, and reminds us that many different issues need to be taken into account. Experts in behavioral economics criticize game theorists for their assumption that humans are rational decision makers, and have doubts whether their scientific methods are adequate. Myerson agrees with these concerns, calling himself "full of folly"; but sometimes the real problem is not the human himself or his decisions, but the system that offers only certain options.
As an example, he highlights the process of government elections. In this case, people make decisions within a systemized framework. "It’s a distraction when you’re talking about reforming our institutions, changing the rules of our democratic governments, then to say: voters should stop being so foolish about the way they vote," Myerson asserts passionately, turning up the volume. "That’s a distraction from the question of whether we should change the rules of our electoral system. And for that it helps to assume that the individuals are doing the best they can to take care of themselves." He raps on the table for emphasis and leans back.
As a scientist - especially as a game theorist - he sees it as his responsibility to understand what’s important in social structures. And as a person who has always been interested in history, he bears the failures of the past in mind. "The great disastrous decisions throughout history have typically happened because people forgot about something," Myerson explains. "After World War II, everybody understood that the reparations scheme that was imposed after World War I was a disastrous mistake, so that mistake was not going to be repeated. But who’s to say that the victors establishing a new world order wouldn’t make yet another mistake." To advance humanity, Myerson knows that a general framework is needed, a way of systematically going through the issue.
Get new questions as they launch
How can we end terrorism?
Every conflict, whether international, financial, or to do with healthcare is, in his eyes, only solvable by asking the core questions. Watching the threat of terrorist organizations, such as ISIS, Myerson surprises us by saying: "If that’s the worst problem we have, then we might be living in a golden age." He doesn’t mean that we shouldn’t be afraid or horrified by the cruel attacks of ISIS, but that we should look at the root of the problem: decisions and behaviors that enable terrorism to thrive.
Pointing to the aftermath of the Iraq war in 2003, Myerson argues
In ISIS, we face a foe whose strategy, in part is that they’ve figured out that the US and its allies are pretty good at winning battles, but not much good at building anything better from the destruction of the battle.
He adds, "Our attempt to reconstruct Iraq as a sovereign democratic state was a complete disaster and I suppose that although at first it seems more successful in Afghanistan, any hope of calling it a success is extremely questionable."
Of course, the question of nation-building needs a solution that doesn’t just replace the cultural landscape of a devastated region with the systems of the more successful country. The question to ask is: how can we support greater prosperity from within the cultural conditions of a country? "Our diplomatic instinct when we’re establishing an independent regime, is that their internal constitutional questions are up to them!" He takes up a different position, saying: "No, our intervention is changing the way those leaders think about their ideal constitution, and is enabling them to design a constitution which is more convenient for them, but is, in the long-run, less sustainable."
Successful state building is one of the great questions of social science, but perhaps it needs to begin on a smaller scale. As Myerson suggests, continuing to support the democratically-elected provincial governments in the Sunni parts of Iraq can pay off in the long run. Assistance "needs to be channeled to the provincial political leaders, not just to the national leaders," he says.
How is information used to allocate resources in society?
Finding principles of international relations that will lead to a more peaceful world - this overwhelming issue occupies Myerson’s thoughts, as it does every day, while looking at the seemingly endless blue of Lake Michigan. Yet in the face of big issues, the theorist somehow becomes more optimistic and confident.
I do believe it’s well within our grasp to understand how to make a more stable macroeconomic system.
As the sun breaks into the window, distracting his thoughts, he pulls down his hat. To cross existing borders, to succeed on many levels, is a challenge he’s faced for a long time. And not only does he face the issue of solving problems of imperfect information every day as a professor, but as a Nobel Laureate he was honored for it.
With a self-possessed attitude beyond his years, Myerson locked himself up in Harvard’s library as an undergraduate and studied the foundations of the rather young field of Game Theory. It’s ironic that while working alone and in seclusion, accountability to others would have a significant impact on his breakthroughs. In Myerson’s established mechanism, one incentive is a trustworthy mediator, who reveals the information of both parties truthfully. "Getting people to share information honestly and to exert hidden efforts appropriately are constraints that are part of the economic problem, just as much as the limited resources," he notes. "Everybody in the world understood that trust was a problem in the past, but it wasn’t part of the tools of economic analysis."
His mechanism design has not only helped economists identify efficient trading mechanisms, but it has also affected regulation schemes, voting procedures, and financial systems. "It’s a huge list", says Phil Reny, Myerson’s friend and close colleague.
He had a profound impact on this entire field of information economics, mechanism design, auction theory, political economy and game theory. He is one of the giants.
As Myerson arrives at his apartment, the view of Lake Michigan is still present. It seems the whole city is a kind of work desk; one he never leaves, and probably never will. He picks up the harmonica to practice for his weekly class later that day. And it’s funny; the song the eternal Chicagoan will play is called "Runaway".
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