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Junkie
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It is pretty ironic that today the winners of the Nobel Prize in economics won on the basis of thier work in Mechanism Design and Game Theory, given my comments on the complications within this Child Health Care issue along with how the program incentives may prove to keep poor people from getting ahead. It is very possible the work these men have done can quantify these concerns while some pretend these issues are not real and have a real impact on the efficiency of the system for the parties involved.
Quote:
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Mechanism design design is a sub-field of game theory. The general goal is to design the rules of a game in order to achieve a desirable outcome. This is done by setting up a game structure where each agent has an incentive to behave as the designer intends. Since agents are strategic and are equipped with own goals, resources and information, there are often bounds on what the designer can achieve. Numerous applications were made to areas such as non-linear pricing, optimal taxaomgtion, auction design, two-sided matching, the provision of public goods, the design of market places, contract design, voting schemes and constitutional design. James Mirlees and William Vickrey were awarded the Nobel Prize for their contributions to the area. There are still many open problems: a complete understanding of mechanism design with multidimensional type spaces (e.g., in non-linear pricing), the construction of a revenue maximizing auction for several heterogeomgneous goods, the construction of an unified model for public finance (taxation and provision of public goods). Due to the increased use of online trading tools, there is also an increased interest in the algorithmic and informational complexity of proposed mechanisms and outcomes.
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http://www.mathematics.uni-bonn.de/r...chanismDesign/
and another description:
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The three winners "laid the foundations of mechanism design theory," which plays a central role in contemporary economics and political science, the Royal Swedish Academy of Sciences said.
Essentially, the three men, starting in 1960 with Mr. Hurwicz, studied how game theory can help determine the best, most efficient method for allocating resources, the academy said.
Their research has helped explain decision-making procedures involved in economic transactions including, for example, what insurance polices will provide the best coverage without inviting misuse.
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http://online.wsj.com/article/SB1192..._us_whats_news
And the description from the Nobel Prize Comitte:
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Adam Smith’s classical metaphor of the invisible hand refers to how the market, under ideal conditions, ensures an efficient allocation of scarce resources. But in practice conditions are usually not ideal; for example, competition is not completely free, consumers are not perfectly informed and privately desirable production and consumption may generate social costs and benefits. Furthermore, many transactions do not take place in open markets but within firms, in bargaining between individuals or interest groups and under a host of other institutional arrangements. How well do different such institutions, or allocation mechanisms, perform? What is the optimal mechanism to reach a certain goal, such as social welfare or private profit? Is government regulation called for, and if so, how is it best designed?
These questions are difficult, particularly since information about individual preferences and available production technologies is usually dispersed among many actors who may use their private information to further their own interests. Mechanism design theory, initiated by Leonid Hurwicz and further developed by Eric Maskin and Roger Myerson, has greatly enhanced our understanding of the properties of optimal allocation mechanisms in such situations, accounting for individuals’ incentives and private information. The theory allows us to distinguish situations in which markets work well from those in which they do not. It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures. Today, mechanism design theory plays a central role in many areas of economics and parts of political science.
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http://blogs.wsj.com/economics/2007/...onomics-prize/
At the very least thought should be put into government programs regarding maximizing bottom line benefits to government and users of government programs and understanding the consequence of various incentives built into those programs.
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"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."
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