Leonid Hurwicz

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Leo Hurwicz
Born	August 21, 1917 (age 90) Moscow, Russia
Residence	Minneapolis, Minnesota USA
Nationality	USA
Fields	Economist
Institutions	University of Minnesota
Alma mater	Warsaw University, London School of Economics
Doctoral advisor	Tjalling Koopmans, Jacob Marschak (at the Cowles Commission)
Doctoral students	Daniel McFadden
Known for	Mechanism design
Notable awards	National Medal of Science (1990) Nobel memorial Prize (2007)

Leonid "Leo" Hurwicz (born August 21, 1917) is an American economist and mathematician. He originated incentive compatibility and mechanism design, which show how desired outcomes are achieved in economics, social science and political science. Interactions of individuals and institutions, markets and trade are analyzed and understood today using the models Hurwicz developed.^[1]

Hurwicz is Regents’ Professor of Economics (Emeritus) at the University of Minnesota. He is among the first economists to recognize the value of game theory and is a pioneer in its application.^[2][3] Hurwicz shared the 2007 Nobel Memorial Prize in Economic Sciences with Eric Maskin and Roger Myerson for their work on mechanism design.^[4]

[edit] Personal life

Hurwicz was born in Moscow, Russia to a Jewish family a few months before the October Revolution. The family was Polish and had lived in Congress Kingdom (the part of Poland then within the Russian Empire) but had been displaced by World War I. Soon after Leonid's birth, the family returned to Warsaw, Poland.^[5] Hurwicz and his family experienced persecution by both the Bolsheviks and Nazism, ^[6] as he again became a refugee when Hitler invaded Poland in 1939. His parents and brother fled Warsaw, only to be arrested and sent to Soviet labor camps. Hurwicz was forced to move to Switzerland, to Portugal and finally in 1940 he emigrated to the United States. His family eventually joined him there.^[7][8]

Hurwicz hired Evelyn Jensen (born October 31, 1921), who grew up on a Wisconsin farm and was, at the time, an undergraduate in economics at the University of Chicago, as his teaching assistant during the 1940s. They married in 1944^[9] and later lived on the Mississippi River parkway in Minneapolis, Minnesota. They have four children: Sarah, Michael, Ruth and Maxim.^[7]

He has interests in linguistics, archaeology, biochemistry and music.^[5] His activities outside the field of economics have included research in meteorology and membership in the NSF Commission on Weather Modification. When Eugene McCarthy ran for president of the United States, Hurwicz served in 1968 as a McCarthy delegate from Minnesota to the Democratic Party Convention and a member of the Democratic Party Platform Committee. He helped design the 'walking subcaucus' method of allocating delegates among competing groups, which is still used today by political parties. He remains an active Democrat; most recently attending Precinct Caucus in Feb, 2008, at age 90.^[9]

[edit] Education and early career

Encouraged by his father to study law,^[5] in 1938 Hurwicz received his LL.M. degree from Warsaw University, where he discovered his future vocation in economics class. He then studied at the London School of Economics with Nicholas Kaldor and Friedrich Hayek.^[7] In 1939 he moved to Geneva where he studied at the Graduate Institute of International Studies^[5][10] and attended the seminar of Ludwig von Mises.^[11] After moving to the United States he continued his studies at Harvard University and the University of Chicago.^[5] Hurwicz has no degree in economics. In 2007 he said, "Whatever economics I learned I learned by listening and learning."^[12]

In 1941 Hurwicz was a research assistant to Paul Samuelson at the Massachusetts Institute of Technology and to Oskar Lange at the University of Chicago.^[9] At Illinois Institute of Technology during the war, Hurwicz taught electronics to the U.S. Army Signal Corps.^[13] From 1942 to 1944, at the University of Chicago, he was a member of the faculty of the Institute of Meteorology and taught statistics in the Department of Economics. About 1942 his advisors were Jacob Marschak and Tjalling Koopmans at the Cowles Commission for Research in Economics at the University of Chicago,^[14] now the Cowles Foundation at Yale University.

[edit] Teaching and research

In 1961 Hurwicz became chairman of the Statistics Department at the University of Minnesota which today is located on the East Bank in Ford Hall (center left).

Hurwicz received a Guggenheim Fellowship in 1945–1946.^[10] In 1946 he became an associate professor of economics at Iowa State College.^[9] From January 1942 until June 1946, he was a research associate for the Cowles Commission. Joining full time in October 1950 until January 1951, he was a visiting professor, assuming Koopman's classes in the Department of Economics, and led the commission's research on theory of resource allocation.^[10] He was also a research professor of economics and mathematical statistics at the University of Illinois, a consultant to the RAND Corporation through the University of Chicago and a consultant to the U.S. Bureau of the Budget.^[15] Hurwicz continued to be a consultant to the Cowles Commission until about 1961.^[16]

Hurwicz traveled the United States and Asia to teach and do research.

Hurwicz was recruited by Walter Heller^[6] to the University of Minnesota in 1951, where he became a professor of economics and mathematics in the School of Business Administration.^[10] He spent most of the rest of his career there, but it was interspersed with studies and teaching elsewhere in the United States and Asia. In 1955 and again in 1958 Hurwicz was a visiting professor, and a fellow on the second visit, at Stanford University and there in 1959 published "Optimality and Informational Efficiency in Resource Allocation Processes" on mechanism design.^[9] He taught at Bangalore University in 1965 and, during the 1980s, at Tokyo University, People's University (now Renmin University of China) and the University of Indonesia. In the United States he was a visiting professor at Harvard in 1969, at the University of California, Berkeley in 1976, at Northwestern University twice in 1988 and 1989, at the University of California, Santa Barbara in 1998, the California Institute of Technology in 1999 and the University of Michigan in 2002. He was a visiting Distinguished Professor at the University of Illinois in 2001.^[9]

Twin of Heller Hall, named for Walter Heller, Department of Economics, University of Minnesota, West Bank

Back at Minnesota, Hurwicz became chairman of the Statistics Department in 1961, Regents Professor of Economics in 1969, and Curtis L. Carlson Regents Professor of Economics in 1989.^[9] He taught subjects ranging from theory to welfare economics, public economics, mechanisms and institutions and mathematical economics.^[6] Although he retired from full time teaching in 1988,^[8] Hurwicz taught graduate school as professor emeritus most recently in the fall of 2006.^[8] In 2007 his ongoing research was described by the University of Minnesota as "comparison and analysis of systems and techniques of economic organization, welfare economics, game-theoretic implementation of social choice goals, and modeling economic institutions."^[17]

Hurwicz's interests include mathematical economics and modeling and the theory of the firm.^[3] His published works in these fields date back to 1944.^[18] He is internationally renowned for his pioneering research on economic theory, particularly in the areas of mechanism and institutional design and mathematical economics. In the 1950s, he worked with Kenneth Arrow on non-linear programming;^[3] in 1972 Arrow became the youngest person to receive the Nobel Economics prize.^[19] Hurwicz was the graduate advisor to Daniel McFadden,^[20] who received the prize in 2000.^[21]

Earlier economists often avoided analytic modeling of economic institutions. Hurwicz's work was instrumental in showing how economic models can provide a framework for the analysis of systems, such as capitalism and socialism, and how the incentives in such systems affect members of society.^[22] The theory of incentive compatibility that Hurwicz developed changed the way many economists thought about outcomes, explaining why centrally planned economies may fail and how incentives for individuals make a difference in decision making.^[20]

Hurwicz serves on the editorial board of several journals. He co-edited and contributed to two collections for Cambridge University Press: Studies in Resource Allocation Processes (1978, with Kenneth Arrow) and Social Goals and Social Organization (1987, with David Schmeidler and Hugo Sonnenschein). His most recent articles were published in the journals "Economic Theory" (2003, with Thomas Marschak), "Review of Economic Design" (2001, with Stanley Reiter) and "Advances in Mathematical Economics" (2003, with Marcel K. Richter).^[23] Hurwicz has presented the Fisher-Schultz (1963), Richard T. Ely (1972), David Kinley (1989) and Colin Clark (1997) lectures.^{[citation needed]}

[edit] Awards and honors

[edit] Memberships and honorary degrees

Hurwicz was elected a fellow of the Econometric Society in 1947 and in 1969 was the society's president. Hurwicz was inducted into the American Academy of Arts and Sciences in 1965. In 1974 he was inducted into the National Academy of Sciences and in 1977 was named a Distinguished Fellow of the American Economic Association.^[7] Hurwicz received the National Medal of Science in 1990 in Behavorial and Social Science, presented to him by President of the United States George H. W. Bush, "for his pioneering work on the theory of modern decentralized allocation mechanisms".^[3][9]

He served on the United Nations Economic Commission in 1948 and the United States National Research Council in 1954. In 1964 he was a member of the National Science Foundation Commission on Weather Modification. He is a member of the American Academy of Independent Scholars (1979) and a Distinguished Scholar of the California Institute of Technology (1984).^[9]

Hurwicz has received six honorary doctorates, from Northwestern University (1980), the University of Chicago (1993), Universitat Autònoma de Barcelona (1989), Keio University (1993), Warsaw School of Economics (1994) and Universität Bielefeld (2004).^[7] He is an honorary visiting professor of the Huazhong University of Science and Technology School of Economics (1984).^[24]

[edit] Named for Hurwicz

First presented in 1950, the Hurwicz criterion is thought about to this day in the area of decision making called "under uncertainty."^[25][26][27] Abraham Wald published decision functions that year.^[28] Hurwicz combined Wald's ideas with work done in 1812 by Pierre-Simon Laplace.^[29] Hurwicz's criterion gives each decision a value which is "a weighted sum of its worst and best possible outcomes" represented as α and known as an index of pessimism or optimism.^[26] Variations have been proposed ever since and some corrections came very soon from Leonard Jimmie Savage in 1954.^[25] These four approaches — Laplace, Wald, Hurwicz and Savage — have been studied, corrected and applied for over fifty years by many different people including John Milnor, G. L. S. Shackle,^[25] Daniel Ellsberg,^[30] R. Duncan Luce and Howard Raiffa, in a field some date back to Jacob Bernoulli.^[31]

The Leonid Hurwicz Distinguished Lecture is given to the Minnesota Economic Association (as is the Heller lecture). John Ledyard (2007), Robert Lucas, Roger Myerson, Edward C. Prescott, James Quirk, Nancy Stokey and Neil Wallace are among those who have delivered the lecture since it was inaugurated in 1992.^{[citation needed]}

[edit] Nobel Economics Prize

In October 2007, Hurwicz shared The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel with Eric Maskin of the Institute for Advanced Study and Roger Myerson of the University of Chicago "for having laid the foundations of mechanism design theory."^[32] During a telephone interview, a representative of the Nobel Foundation told Hurwicz and his wife that Hurwicz is the oldest person to win the Nobel Prize. Hurwicz said, "I hope that others who deserve it also got it." When asked which of all the applications of mechanism design he was most pleased to see he said welfare economics.^[33] The winners applied game theory, a field advanced by mathematician John Forbes Nash, to discover the best and most efficient means to reach a desired outcome, taking into account individuals' knowledge and self-interest, which may be hidden or private.^[34] Mechanism design has been used to model negotiations and taxation, voting and elections,^[4] to design auctions such as those for communications bandwidth,^[20] elections and labor talks^[34] and for pricing stock options.^[35]

Unable to attend the Nobel Prize ceremony in Stockholm because of his age,^[36][37] Hurwicz received the prize in Minneapolis. Accompanied by Evelyn, his spouse of six decades, and his family, he was the guest of honor at a convocation held on the campus of the University of Minnesota presided over by university president Robert Bruininks. Immediately following a live broadcast of the Nobel Prize awards ceremony, Jonas Hafstrom, Swedish ambassador to the United States, personally awarded the Economics Prize to Professor Hurwicz.^[38]

[edit] Important works

• Hurwicz, Leonid and Reiter, Stanley (22 May 2006). Designing Economic Mechanisms. Cambridge University Press, Frontmatter (PDF) via Cambridge University Press. ISBN 0-5218-3641-7. Retrieved on 2007-10-16. 
• Hurwicz, Leonid (1995). "What is the Coase Theorem?," Japan and the World Economy, 7(1), pp. 49–74. Abstract.
• _____ (1973). The design of mechanisms for resource allocation, Amer. Econ. Rev., 63, pp. 1–30.
• _____ (1969). "On the Concept and Possibility of Informational Decentralization," American Economic Review, 59(2), p. 513–524.
• _____ (1945). "The Theory of Economic Behavior" American Economic Review, 35(5), pp. 909–925. Exposition on game theory classic.

[edit] Notes

[edit] Further reading

Biography Portal

Minnesota Portal

Business and economics Portal

• Perspectives on Leo Hurwicz (conference program and photos). University of Minnesota (econ.umn.edu) (14 April 2007). Retrieved on 2007-10-16.
• Clement, Douglas (Fall 2006). "Intelligent Designer (cover story)" (PDF). Minnesota Economics: 6–9. Department of Economics, University of Minnesota College of Liberal Arts. 
• "Intelligent design", The Economist, The Economist Group, 18 October 2007. Retrieved on 2007-10-18. 
• Cho, Adrian. "The Economics Nobel: Giving Adam Smith a Helping Hand", ScienceNOW Daily News, American Association for the Advancement of Science, 15 October 2007. Retrieved on 2007-10-19. 
• Fonseca, Gonçalo L. (author and maintainer). Major Works of Leonid Hurwicz, in Leonid Hurwicz, 1917-. History of Economic Thought Website, The New School (newschool.edu). Retrieved on 2007-10-16.
• Tabarrok, Alex (2007-10-16). What is Mechanism Design? Explaining the research that won the 2007 Nobel Prize in Economics.. Reasononline news. Reason Magazine. Retrieved on 2007-12-11.