Rules of the game

The Nobel Prize in Economic Sciences this year went to the American economists Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson for “having laid the foundations of mechanism design theory”.

Mechanism design theory provides a framework to design rules of a game to achieve specific outcomes, even though players may be self-interested. A simple example of such ‘rules’, provided by BBC’s Evan Davis at Evanomics, is how a mother lets one child divide a cake in two, and the other to choose first which half of the cake to have. Apart from dividing cakes, mechanism design theory allows for the analysis of allocation mechanisms such as regulations, market prices and management, focusing on problems associated with private information and incentives.

Tangent’s take:

• Keep a look out for Economic Society’s own (albeit amateur) experiments in this area—with pizzas!

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Lovely picture of pie taken from here. It's an Attrib-NonDeriv license, which means you would need a link to the pic if you use it. But the picture's not really necessary -- I'm hungry, that's all.

And the Oscar--er, Nobel goes to...

The Nobel Peace Prize was shared by Al Gore and the UN’s Intergovernmental Panel on Climate Change (IPCC) for their efforts to raise awareness on climate change.

The IPCC was established in 1988, by the World Meteorological Organization and the United Nations Environment Programme. It is tasked with evaluating the risk of climate change due to human activity. Mr Gore’s film on global warming, ‘An Inconvenient Truth’, won an Oscar earlier this year, and was a box-office hit. It had also seen the headlines recently when a British judge criticised it for being alarmist and containing errors.

In related news, Mr Gore’s fund management company set up with David Blood – Generation Investment Management – has agreed to cooperate with Kleiner Perkins Caufield & Byers, a venture capital firm, to invest in areas such as alternative energy companies. This is seen as a further attempt to combat climate change.

Tangent’s take:

• A Nobel for being famous for talking about climate change? Really?

• Although governments have been touting the importance of fighting climate change, much of the investments needed has been left to the private sector. Perhaps Blood and Gore (a much better name for a fund, in Tangent’s view) may start a new trend in directing private investments towards green industries?

• Even thought there is still debate on the exact scientific consequences of climate change, the economic effects are real – see Tayyibah Arif’s piece on pasta price fluctuations

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Picture of earth is in the public domain. Pictures of the Nobel Prize are NOT, hence, why the earth. And also because it's prettier.