Born between two revolutions
Leonid Hurwicz was born in Moscow on August 21, 1917, after the February Revolution but before the Bolsheviks seized power in October. His family were Polish Jews from Congress Poland, the part of Poland then ruled by the Russian Empire, who had been displaced eastward by the First World War. In early 1919, after the Communists came to power, they returned to Warsaw, his father’s home. “My father was convinced, I think rightly, that if he stayed in Russia, he would have trouble with Lenin,” Hurwicz recalled; the family travelled in imperfect ways, including by horse-drawn wagon.
His father was a lawyer with a degree from the Sorbonne, who taught history while completing the five-year internship required to practise law in Poland. His mother, also a teacher, stayed home with Leonid and his younger brother and taught them reading, writing and arithmetic. Leonid did not start formal school until he was nine, at a private school attended and staffed mostly by Jews.
Antisemitism in Warsaw
Interwar Poland was not a safe place to be Jewish. Hurwicz remembered strange, random attacks, and at Warsaw University he lived through the campaign to force Jewish students into segregated seating in lecture halls. When the rector failed to intervene, the Jewish students, Leonid among them, stood at the back of the room for an entire year in protest, and the next year they were seated again. He experienced harassment, he said, but was never personally beaten, and he felt no discrimination from his professors.
He graduated in law in 1938, intending to follow his father, but compulsory economics courses had captured his interest. He believed that many of Europe’s troubles came from politicians who did not understand economic phenomena and lacked the skills to solve problems even when they meant well. Sensing the danger ahead, his father urged him to go to the London School of Economics rather than open a law practice at home.
A refugee’s journey
Hurwicz went to London in the autumn of 1938 and attended lectures by Nicholas Kaldor and Friedrich Hayek, but in the spring of 1939 Britain refused to extend his visa. He moved to Switzerland and arrived in Geneva in August 1939, less than a week before Germany invaded Poland. His parents and brother escaped Warsaw to Soviet-occupied eastern Poland, only to be arrested and sent to a labour camp in Arctic European Russia. Alone, he studied part time at the Graduate Institute of International Studies, where he attended the seminar of Ludwig von Mises, and waited for news.
Cousins in Chicago wired money. He booked passage on an Italian ship, but when Mussolini joined Hitler the ticket became worthless. He flew to Barcelona, went on by train to Madrid and Lisbon, tutored the children of wealthy families in the resort of Estoril, talked a harbourmaster into helping him recover his fare, and in 1940 sailed for New Jersey on the Greek ship Nea Hellas. His family eventually joined him in the United States.
An economist without an economics degree
Hurwicz never earned a degree in economics. “Whatever economics I learned I learned by listening and learning,” he said in 2007. In Chicago he slept on his cousins’ couch and audited classes; in 1941 Paul Samuelson hired him for one semester as a research assistant at MIT, and he then worked with Oskar Lange in Chicago. After Pearl Harbor he joined wartime radar research and taught statistics and the mathematics of weather analysis to Army and Navy trainees at the University of Chicago’s Institute of Meteorology. He hired a young assistant from a Wisconsin farm, Evelyn Jensen; they married in July 1944 and had four children, Sarah, Michael, Ruth and Maxim.
From 1942 he was a research associate at the Cowles Commission, the centre of mathematical economics, working with Jacob Marschak and Tjalling Koopmans. After posts at Iowa State and the University of Illinois, where in 1951 he resigned in protest when politically liberal colleagues were targeted in the McCarthy era, he was recruited by Walter Heller to the University of Minnesota, where he spent the rest of his career.
Designing the rules of the game
Economics had long assumed an idealised market of perfect competition and asked when it would allocate resources well. Hurwicz asked a broader question: of all the rules a society might use to decide who gets what, which work best, given that information is scattered among many people who may use it for their own advantage? In a 1960 paper he defined a “mechanism” as a set of rules in which participants send messages, such as bids, reports or votes, and a pre-set rule turns those messages into an outcome. That let economists compare markets with any other conceivable institution on equal terms.
In 1972 he introduced the key idea of incentive compatibility: a mechanism works only if people find it in their own interest to follow its rules honestly. “There is the true game, the one like real life, where the strategies and moves people make, some of them contain illegal gains,” he explained. “So you take into account when you write the rules of the game that the players will try to cheat.” Eric Maskin and Roger Myerson, with whom he shared the 2007 prize, built on these foundations to create modern mechanism design theory.
Where mechanism design is used
Mechanism design is now one of the central tools of economics. According to the Nobel committee, it shows why auctions are often the most efficient way to allocate goods among potential buyers and which auction formats raise the most revenue, why markets often fail to provide public goods, and how to design regulation, taxation and voting procedures. Its applications have led to breakthroughs in regulation, corporate finance, taxation and voting.
In practice its ideas run through the design of the auctions governments use to sell radio spectrum and bonds, the systems some cities use to assign school places and the programmes that match kidney donors with patients, all developed by later economists on the foundations he laid. Hurwicz himself liked to illustrate the theory with pollution: rather than simply ordering a power plant to cut emissions, a regulator can design a cap-and-trade system that gives firms a financial incentive to reduce pollution where it is cheapest to do so. His work also explained why centrally planned economies, which ignored people’s incentives to hide information, may fail.
Teacher, citizen and polymath
At Minnesota Hurwicz became Regents’ Professor of Economics in 1969 and Curtis L. Carlson Regents Professor in 1989. He kept teaching graduate students into his late eighties, most recently in 2006, and supervised the doctoral work of Daniel McFadden, who won the Nobel Prize in 2000. He taught in India, Japan, China and Indonesia and visited many American universities.
His research ranged widely. In the 1950s he worked with Kenneth Arrow on methods for solving non-linear optimisation problems, he consulted for the RAND Corporation and the US Bureau of the Budget, and he received a Guggenheim Fellowship in 1945–46. He co-edited two influential collections for Cambridge University Press, Studies in Resource Allocation Processes (1978) with Arrow and Social Goals and Social Organization (1987) with David Schmeidler and Hugo Sonnenschein, and he gave the Econometric Society’s Fisher-Schultz lecture in 1963 and the American Economic Association’s Richard T. Ely lecture in 1972.
His curiosity was boundless: he was interested in linguistics, archaeology, biochemistry and music, did research in meteorology and served on a National Science Foundation commission on weather modification. He was also an active Democrat. In 1968 he was a Minnesota delegate for Eugene McCarthy at the Democratic National Convention and a member of the platform committee, and he helped design the “walking subcaucus” method of allocating delegates among competing groups, still used by parties today. He attended his precinct caucus in February 2008, at ninety.
A Jewish refugee’s story
Hurwicz’s life was shaped by being a Polish Jew in the twentieth century: born in revolution, educated amid antisemitic harassment, made a refugee twice, by the Bolsheviks and then by the Nazis, while his parents and brother were sent to a Soviet labour camp. The Jewish Virtual Library records that the family experienced persecution under both regimes.
When he won the Nobel Prize in 2007, the Jewish community of Stockholm counted him among that year’s three Jewish economics laureates and invited him to its traditional Nobel Shabbat. Too frail to travel, he wrote to the community’s emeritus chief rabbi, Morton Narrowe, that he would have liked to come.
The oldest laureate and his legacy
At ninety, Hurwicz was one of the oldest people ever to receive a Nobel Prize. Unable to travel to Sweden, he received the award from the Swedish ambassador at the University of Minnesota’s Ted Mann Concert Hall on December 10, 2007. He died in Minneapolis on June 24, 2008, of kidney failure, a week after entering hospital.
His legacy is a question every designer of institutions now asks: will these rules still work when people pursue their own interests and keep their own secrets? He showed that this question could be studied with mathematical rigour. Auction designers, regulators and school-choice planners all work within the framework that a refugee who never studied for an economics degree first set out.
Sources & further reading
Leonid Hurwicz, Biographical, NobelPrize.org · Information for the Public: The Prize in Economic Sciences 2007, NobelPrize.org · Leonid Hurwicz, Jewish Virtual Library · Preisgabe (Nobel-Schabbat 2007), Jüdische Allgemeine · Leonid Hurwicz, Wikipedia · Researched from the sources above and checked against them. Spotted an error? Tell us.
A life of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.