American trio wins 2007 Nobel for economics

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STOCKHOLM, Oct 15 (Reuters) A Russian-born academic who escaped both the Communist revolution and the horrors of World War Two became the oldest person to win a Nobel Prize today, garnering a joint award for a pioneering market theory.

Leonid Hurwicz, 90, and fellow Americans Eric Maskin and Roger Myerson, won the 2007 Nobel in economics for laying the foundations of a theory that determines which market-based systems work best.

A bemused-sounding Hurwicz, who has taught at the University of Minnesota since 1951 after moving to the United States to escape World War Two, said he had not expected to win.

''On the contrary, I thought that my time perhaps had passed already,'' the American citizen said in a telephone interview.

The Royal Swedish Academy of Sciences said the award honoured the trio's work on ''mechanism design theory'', which assesses how well different institutions fare in allocating resources and the need for government intervention.

The theory was the brainchild of Hurwicz, who was born in Moscow the year of the Russian revolution. Maskin of the Institute for Advanced Study at Princeton and Myerson of the University of Chicago refined and tested his ideas.

Maskin was born in 1950 and Myerson in 1951, the same year Hurwicz joined the faculty of Minnesota, a school less-noted than ''Ivy League'' institutions for innovative research.

Maskin, who has an applied mathematics doctorate from Harvard, said he was relieved to find all three of them had won.

''I guess my first thought when I heard Hurwicz was one of the winners was a sense of relief. Hurwicz has been a candidate for many years and he's now 90 years old and time was running out,'' Maskin said in a telephone conference with journalists.

''It was a tremendous thrill to hear that he won and to share the prize with him and with Myerson. Our friendship goes back to university time.'' SOCIAL COSTS The academy said mechanism design theory now plays a central role in many areas of economics and parts of political science.

''Adam Smith's classical metaphor of the invisible hand refers to how the market, under ideal conditions, ensures an efficient allocation of scarce resources,'' the academy said.

''But in practice conditions are usually not ideal.

Competition is not completely free, consumers are not perfectly informed and privately desirable production and consumption may generate social costs and benefits.'' Hurwicz, whose Jewish family fled Russia for Poland before he could walk, earned a law degree from the University of Warsaw. He was in Switzerland when World War Two broke out and from there he moved to the United States. Hurwicz said if he had been in Poland at the time he could have ended up at Auchwitz, the Nazi concentration camp.

Hurwicz settled in Minnesota and it was there he developed the game that gave rise to his Nobel-winning theory.

In the game, players sent messages to each other and to a message centre. The rules assigned outcomes to each collection of messages and allowed Hurwicz to compare those outcomes with the predicted results from an array of other trading mechanisms.

Economics was the last of the 2007 Nobels to be announced.

While not part of the original prizes set out in Alfred Nobel's will, it brings all the prestige and prize money of the others.

It does, however, have a much longer name -- The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.

Hurwicz said he hasn't decided what to do with his share of the 10 million Swedish crowns (1.57 million dollar) prize money.

Maskin said he would make a donation to the Camphill Foundation, which works with disabled people. ''My wife and I have thought in the past about what would happen if we won the lottery,'' said Maskin, whose son is disabled.

''But it hasn't really registered yet. I'm still so befuddled by the news,'' he told Reuters from his home in New Jersey.

Maskin is the Albert O. Hirschman Professor of Social Science at the Institute for Advanced Study in Princeton, New Jersey. Like Maskin, Myerson finished a PhD in applied mathematics at Harvard in 1976. Myerson is the Glen A. Lloyd Distinguished Service Professor at the University of Chicago.


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