Hurwicz and the Judge of the Last Instance
Revista de Economía Institucional, Vol. 10, No. 19, Second Semester 2008
15 Pages Posted: 18 Dec 2008
Date Written: December 16, 2008
When receiving the Nobel Prize, Hurwicz took up the question "who is watching the guards?" and considered two approaches. One pessimistic, inspired by Juvenal, which leads to an infinite sequence of guards, and one idealistic, derived from the Platonic dialogues. The guard cannot get drunk, and if he does, he should resign. Although this closure of first instance does not happen in the real world, neither does Juvenal's pessimism make sense. Society always finds a reasonable closure instance, but this solution is suboptimal and is plagued with impurities and illegalities. The leading strategy may be part of a set of illegal alternatives. Implementation is successful if the equilibrium corresponds to the legislator's purposes. Every implementation can be improved and it is never entirely successful. Implementation mechanisms determine how the social welfare function is reached, which affects at the same time the private property prices and the consumption structure, so the market configuration depends on the kind of implementation and how the close of the last instance is made.
Note: Downloadable Document is in Spanish.
Keywords: social welfare function, human relations, suboptimal equilibrium
JEL Classification: D03, D50, D60
Suggested Citation: Suggested Citation