Paul Robert Milgrom: Practical applications more important than prices

--

“When I worked as an insurance consultant (actuary) at Metropolitan Insurance Company in San Francisco for five years after school and then at Nelson and Warren Consulting in Columbus, Ohio, I first discovered my love for doing theoretical research on practical problems,” he remembers Paul Robert Milgrom. For improvement auction theory and the invention of new auction formats received in 2020 together with By Robert B. Wilsonhis former teacher and later colleague, the Nobel Prize in Economics.

PR Milgrom, who currently works at Stanford University, is one of the founders of modern economics. He helped apply game theory and information economics to a wide range of economic problems, including price policy, auctions, financial markets, and industrial organization. He is also a co-founder of several companies such as Auctionomicswhich provides software and services for commercial auctions and exchanges.

You can learn more about game theory in the popularization video of the Academy of Sciences Undistorted Science.

“I’ve always had a certain business mindset, but as is often the case with budding scientists, my research was initially purely theoretical. I read the existing literature, looking for gaps in knowledge, which I then tried to fill,” Milgrom recalls. The change came in 1993, when the United States decided to hold a radio spectrum auction. “No one had a clue how to design such an auction, so they were referring to the academic literature, and I was a major contributor on the subject, so they started quoting me and then they started calling me,” describes Milgrom, for whom the transition from theoretical to applied research was difficult. “It was really a very complicated environment that I didn’t know how to deal with. In the end, they wanted me to tell them what I thought about the government’s proposal so far – I didn’t know the ideal solution, but I advised them how to do it better. And while doing so, I realized that in the applied world there is no need to find the most perfect solution and prove the most general theorem. It is enough if you manage to improve the current state. And so I started making a career that way, and it changed my whole life.” the award-winning economist told Forum magazine.

“There is a saying in the business world that perfect is not the enemy of good. And academics don’t like to hear that. When they write academic papers, they want to have a small area in which they excel. But in practice, you have a much bigger area that you need to be good at – you want to cover everything that’s important and make sure you haven’t forgotten anything and done everything as best as you can. The theory may not be 100 percent valid in such a case, but it works in the given situation.” describes his rich experience.

PR Milgrom’s research has fundamentally influenced many areas of modern economics and related sciences, including game theory, comparative statics, market design, organizational and information economics, industrial organization, law, institutions and economic history, finance and macroeconomics.

How do you see the further development of your field? For example, how will artificial intelligence transform the world of auctions?

“Artificial intelligence has been impacting auctions in many ways for many years. It’s not just the big language models that are the main trend now. Companies have been using machine learning for nearly a decade to estimate the optimal bidding strategy or to simulate what would happen if they changed the auction rules. The importance of AI will continue to grow.” says Milgom.

“The entire economy will probably change as well. But we still don’t know much about large language models. I am an optimist and a skeptic at the same time. On the one hand, there are some very difficult problems that we may soon solve thanks to artificial intelligence. AI will also most likely help with the dissemination and availability of information about, for example, auction theories. However, machines are not enough for certain aspects. At auctions, personal preferences play a big role – how much value is the given object to you, what are your preferences, what are your abilities, values, but also your plans for the weekend. All of this significantly affects your decision-making and market behavior. And I can’t even guess the machine, so we’ll still need market design.” Milgrom means.

Milgrom3

Economics helps solve societal problems

“I believe that people do not measure my success by the amount of awards. For me, practical applications are much more important,” says Milgrom, who also uses his theories and tools to solve various practical problems. His most recent activities are aimed at creating new markets for water rights, with a particular emphasis on surface water in California. “In the western United States, where I live, water is becoming a critical resource and is being really mismanaged. At the same time, there is a solution to use water efficiently and fairly, we just need to convince many actors and change our behavior and the way we manage water.” says the economist, who has recently also focused more on teaching and training students.

What advice would you give to today’s young people on how to prepare for the future?

“It’s hard to predict, but I advise all my students to learn to use artificial intelligence. Obviously, it will have a big impact,” Milgrom means. He also considers data analysis important: “We have more and more information and data about the world around us. For example, empirical analysis has advanced significantly in economics. We no longer have to rely only on correlations, but we can ask ourselves what would happen if I changed this parameter or that.”

His third recommendation is that we all need to prepare ourselves for lifelong learning. “Today’s world is changing rapidly. And the things and skills that will be important tomorrow, we may not even be able to imagine yet. We should prepare ourselves to be constantly learning. You will need to keep a broad perspective and keep your eyes open for new methods that are being developed, for things that are happening in the world.” adds Milgrom, who also hopes that students will retain empathy and a desire to improve the world around them.

Milgrom4

They didn’t tell us that half of us would win a Nobel Prize

Throughout my career, I have always been very fortunate in the environment in which I have worked. My early research career is with the Kellogg School of Management at Northwestern University in Chicago, where they told us that about half of us would get a professorship. But what they didn’t tell us was that half of us would also win the Nobel Prize,” recounts with a smile Paul Robert Milgrom, who also worked here with three other future Nobel Prize winners – By Roger Myerson, Robert B. Wilson, and Bengt Holmstrom. “It was a very stimulating and at the same time friendly environment, we actually competed with each other a bit and that drove us on, we helped and motivated each other,” it recalls the mutual cooperation, but also the intellectual debates and polemics that shaped the economy for the following decades.

“For me the Nobel Prize was not a goal, I didn’t think about it, I ignored it. That night too, I turned off my phone and went to sleep like everyone else… Since then, of course, it’s hard to ignore her because winning the Nobel Prize affects your life – it affects the way people communicate with me, how much they’re willing to pay me for work on commissions , it really affects a lot of things. But I don’t think you can ‘strive’ for the Nobel Prize. I think you’re just doing the best job you can. And if this beginning is right, it will happen.” says economist Milgrom.

Milgrom and Lpschits

Professor Milgrom received an honorary doctorate along with Professor Lipschits.

To Prague for science and family

If Professor Milgrom was lucky with the environment, CERGE-EI, the joint workplace of Charles University and the Institute of National Economy of the Academy of Sciences was lucky with Professor Milgrom. In the years 2015–2020, he was an active member of the international Executive and Supervisory Committee of CERGE-EI. During his regular visits to Prague, Milgrom always engaged in consultations and discussions with students and academics, thereby significantly contributing to the development of their research to a world-class level. A concrete example can be Filip Matějka and Jakub Steinerkey researchers of CERGE-EI, who managed to publish articles in the world’s most prestigious scientific journals in the field of economics and also to obtain the first ERC grants in the Czech Republic in the field of economics and social sciences in general.

“I always liked going to Prague – I have part of my family here. Unfortunately, my brother passed away last year, but I still love coming here to see my daughter-in-law and niece Mia.” says the Nobel laureate, who received the honorary scientific title of doctor honoris causa from Charles University on March 19.

Author: Pavla Hubálkováuk forum

Photo: Michal Novotný

Source: Charles University

The article was published in the Charles University Forum online magazine.


Paul Robert Milgrom currently at Stanford University, he is one of the founders of modern economics, having helped apply game theory and information economics to a wide range of economic problems, including pricing policy, auctions, financial markets, and industrial organization. In 1970, he graduated from the University of Michigan with a degree in mathematics. He worked as an actuary (actuary) for several years. In 1975, he began graduate studies at Stanford University, where he received a master’s degree in statistics in 1978 and a doctorate in business in 1979. He began his academic career at the Kellogg School of Management at Northwestern University in Chicago, where he first served as an assistant professor and from 1979 to 1983 as an associate professor. From 1982 to 1987, he was a professor of economics and management at Yale University. In 1987, he returned to his alma mater, Stanford University, as a professor of economics. He is the holder of many important awards, the most famous being the Nobel Prize for Economic Sciences, which he won together with Robert B. Wilson in 2020. He also contributed significantly to the development of the Czech academic environment, in the years 2015-2020 he was a member of the international Executive and Supervisory Committee of CERGE-EI .


The article is in Czech

Tags: Paul Robert Milgrom Practical applications important prices

-

PREV Are the 76ers favored vs. the Thunder on April 2? Game odds, spread, over/under
NEXT Three people died during municipal elections in Turkey. Istanbul is in the hands of the opposition