Leonid Hurwicz's Game

Mechanism design is commonly used now to set up transactional strategies. For individual consumers, one of the most familiar and recognizable examples is the open auction, where potential buyers and sellers determine how valuable an item is and set the best price based on all of the players knowing what’s being bid. But the same principles are at work in other situations—the federal government’s auction approach to selling cell phone bandwidth, for instance.

The basic premise underlying Hurwicz’s theory may seem obvious now. But when he began working on it in the 1960s, the idea of factoring in the self-interest of players in business transactions was considered cutting edge. He and his colleagues believed that incentives could encourage players to arrive at the best possible outcome not only for themselves but for the other players in the game.

Hurwicz says that he is simply a product of his history. He knows from experience how circumstances change when people don’t abide by the rules of the game.

“I cannot tell you my life story and what I did without telling you about politics as well,” Hurwicz says.

Leonid Hurwicz was born in Moscow in 1917. In early 1919, he and his family returned to Warsaw—his father’s home; his mother was also Polish—after the Communists came to power in Russia. “My father was convinced, I think rightly, that if he stayed in Russia, he would have trouble with Lenin,” Hurwicz says. “Of course, that’s not my memory; I was 14 months old. But I know we traveled in various imperfect ways, such as horse-drawn wagon, to arrive in Poland.”

His father was a lawyer, with a degree from the Sorbonne in Paris. The Polish bar wouldn’t accept the French credentials, so he taught history instead. Hurwicz’s mother was a teacher as well, but after the move she stayed home with him and his younger brother, giving them lessons in reading, writing, and arithmetic. Hurwicz didn’t begin formal schooling until the age of nine, when he started at a private institution attended and staffed mostly by Jews.

It was a time of pogroms throughout Europe. Though he and his family were not swept up in anything so frightening, Hurwicz does recall strange, random attacks. One year, the university in Warsaw decided the Jewish community had not contributed its share of corpses to the medical school. When a group blocked Jewish students from entering their classrooms, the university president failed to intervene.