American trio wins 2007 Nobel for economics

By Adam Cox

STOCKHOLM (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 on Monday, 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 honored 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.