This week, the Nobel Prize in economics was awarded to Leonid Hurwicz, Eric Maskin and Roger Myerson for their contributions to 'mechanism design theory'. This is a field that even for many trained economists is so esoteric that some are still surprised by the committee's decision. Mechanism design advances an important philosophical agenda, and a novel, yet seemingly obvious way of thinking about the world that may be relevant to the current crisis in Nepali politics.
In lay terms, mechanism is a set of rules that produce desirable outcomes. Auctions are mechanisms intended to allocate goods to those who value them most. Similarly, constitutions are mechanisms that produce outcomes in politics. The agenda of economic theory before the advent of mechanism design was to take the rules as given-for example, to take the constitution as unchangeable-and then to predict how people will behave within the framework of those rules, and what the outcomes will be.
Mechanism design asks the opposite question: Given a certain desirable outcome, what kinds of institutions would one develop-what kind of constitution or political apparatus would one create-in order to achieve that outcome?
To be more concrete, suppose we agreed that economic development, democracy and rule of law were all noble goals, but we also accepted that rulers and politicians are the usual self-interested thugs that we are now familiar with. Suppose we also knew that the public was largely uneducated, and the civil society was weak and ineffective (or partisan) so that holding these leaders accountable was difficult. And finally-and this is important-suppose we accepted that the behavior of the politicians, and the unawareness of the citizens was not something that we could change in the short term. Then what is the best constitution, the best political apparatus, and the best structure of the state acceptable to all parties that would come closest to implementing these goals?
This is an extremely difficult and frustrating question to which many may fear there is no answer. After all, if things are as dismal as we know them to be, it may seem that there is no hope unless we can change people's desires and beliefs. Can we, for now, convince ourselves that there is no use in searching for an answer when we are not sure that we have ruled out all the possibilities? Have we worked through all of the possible proposals (all of the possible mechanisms)?
We have not. A part of the reason is because we have focused too heavily on a dialogue that has taken a very different approach to dealing with these issues. Pick up any recent op-ed and, in all likelihood, its content will be primarily concerned with pouring grievances at the fact that things are so gloomy. In some instances, it may reflect the kind of activism needed to influence people's behavior, to either instill guilt in the leaders by holding them accountable, or to bring citizens to the streets to demand their rights.
But very rarely do we see interesting new proposals for how democratic stability and order can be restored. At best, we talk about things that should happen but fail to be self-critical as to whether our proposal is realistic and acceptable to the factions that must be satisfied for it to be adopted.
By no means does mechanism design theory have solutions to all of the complicated problems that we are dealing with today. But what we can gain from it is its very useful and interesting way of thinking about the world and its problems.
Avidit Acharya is a PhD student in political economy at Princeton University in the United States.