Eric S. Maskin’s speech at the Nobel Banquet in the Stockholm City Hall, 10 December 2007.
Your Majesties, Your Royal Highnesses, Ladies and Gentlemen:
Robert Kennedy once said, “Some men see things as they are and ask why. I dream of things that never were and ask why not.”
Those words reveal a deep truth about Kennedy: he was an economist at heart – startling though that may seem. In effect, the first line – seeing things as they are and asking why – perfectly describes positive economics, which explains economic events that have happened, or, better yet, forecasts what will happen. Economic forecasting has actually got pretty good over the years, though admittedly we don’t always get it right. As one cynic noted, economists have predicted 9 out of the last 5 recessions. So, we take consolation from another great statesman, Yogi Berra, who observed that prediction is really hard – especially about the future.
Still, it is Kennedy’s second line – dreaming of things that never were – that I want to stress, because it captures the part of economics dearest to me: normative economics, the study of the things that never were but ought to be. In particular, it describes the subject of this year’s Economics Prize, mechanism design. Leo Hurwicz pioneered this subject nearly 50 years ago, and it has played a role in some of the most important economic policies of our time.
But two months ago scarcely anyone but economists had even heard of mechanism design. Suddenly, it has notoriety worthy of an Elvis Presley. Now, I have nothing against Elvis. But somehow he manages to attract a huge public following without even trying. Indeed, he can’t very well try since he’s been dead for 30 years. Yet, isn’t it remarkable that, for one week a year, that kind of attention is focused not just on economics, but on physics, chemistry, medicine, and literature. And for that astounding accomplishment, I’d like to express my warmest appreciation to the Nobel Foundation and the Nobel awarding bodies.