Stanford University professors Paul Milgrom and Robert Wilson have been awarded the 2020 Nobel Prize in economics for esoteric insights that have brought order to the power grid, mineral rights and other critical but complex parts of our economy.
Their discoveries pioneered a new approach to how auctions work – and now serve as the conceptual underpinning of bids for services that are difficult to sell in a traditional way, such as bands of radio spectrum and cell service licenses.
Their strategy can be used to improve the allocation of respirators and Personal Protective Equipment in future pandemics. In the early days of the COVID-19 crisis, states bid against each other for supplies, escalating prices and creating chaos.
When the Federal Communications Commission takes bids to allocate radio spectrum for fiercely competitive telecommunication licenses – cell phone rights in northern and southern California markets, for example – it enlists Milgrom’s and Wilson’s strategy. This approach has been adopted in countries around the world.
“This year’s Laureates in Economic Sciences started out with fundamental theory and later used their results in practical applications, which have spread globally. Their discoveries are of great benefit to society,” Peter Fredriksson, chair of the Nobel prize committee, said in a statement.
Neighbors on campus, the two long-time friends and collaborators were startled by Monday morning’s news. Wilson, professor emeritus at the Stanford Graduate School of Business, was Milgrom’s mentor. Milgrom is a professor in the university’s School of Humanities and Sciences.
Wilson’s phone ringer was on ‘silent’ mode, so the Nobel committee called his wife instead. Milgrom, sound asleep, was also incommunicado.
In the predawn darkness at 2:15 a.m., Wilson and his wife Mary crossed the street and repeatedly rang the video-activated doorbell to awaken Milgrom. The drama is recorded on Milgrom’s Nest home security