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University of Michigan alum Paul Milgrom won the Nobel Prize in economic sciences along with colleague Robert Wilson last week for their work in improving auction formats to better market intangible goods.
Milgrom graduated from the University in 1970 with a bachelor’s degree in mathematics. He went on to achieve a master’s degree in statistics from Stanford University, where he is currently an economics professor.
Throughout his career, Milgrom has made numerous contributions to economic theory, most notably related to auction theory and resource allocation. In 1994, Milgrom was instrumental in the Federal Communications Commission’s decision to adopt a new format that would allow for the allocation of spectrum licenses, a permission from the government given to an organization allowing them rights to use a frequency band, through auctions, instead of using a lottery system. The Nobel committee called Milgrom and Wilson’s work “the quest for the perfect auction,” citing how the pair’s work has changed the way auctions run to benefit sellers, buyers and taxpayers.
“This year’s Laureates in Economic Sciences started out with fundamental theory and later used their results in practical applications, which have spread globally,” Peter Fredriksson, the chair of the Economic Sciences Prize Committee, said in a press release following the announcement of the recipients. “Their discoveries are of great benefit to society.”
Milgrom received the news that he had won the award from Wilson, his colleague and co-recipient. He said in an email to The Daily that he was woken up in the middle of the night to be told he had won.
“They woke me up,” Milgrom wrote. “I know that this is a very famous prize and pays a lot of money, but it doesn’t change my own view of my own work nor how I plan to live… I suspect that fame will mean that some of my bolder ideas get a more serious hearing, and that is great!”
The winner of the Nobel Prize in economics receives $1.1 million in prize money. In this case where there are two recipients, Milgrom and Wilson will split the reward evenly between them.
Milgrom said he does not think winning the award will have much of an impact on his approach to his career and research. Instead, Milgrom said the most rewarding part about winning has been the many messages of congratulations from family, friends and others from his past.
“Acquaintances from college, high school and even elementary school have reached out to me with warm congratulations,” Milgrom wrote. “Honestly, that has been the best part of the prize.”
Faculty members at the University told The Daily they were excited both because Milgrom is a former student and because he received this recognition after a lifetime of important contributions to the economics field.
Anthony Bloch, chair of the mathematics department at the University, said the department was excited for Milgrom, who was once a student in the mathematics honors program.
“This demonstrates how mathematics can have applications in all sorts of exciting areas with real world applications,” Bloch said.
Tilman Borgers, professor of economics of risk, was not surprised to hear that Milgrom had been awarded the prize when considering all of his important discoveries.
“Broadly speaking, in economic theory, Paul Milgrom and Robert Wilson were among the most frequently mentioned names,” Borgers said. “In a sense, it seemed somewhat obvious that they would get a Nobel Prize at some point.”
Borgers said it is difficult to measure the influence of their work since the subject of auctions is always under review and open to further research.
“Clearly they have had impact in the sense that they are listened to by politicians and people who have influence on these markets,” Borgers said. “I think that’s very impressive.”
David Miller, a professor of economics at the University, said he suspected that Milgrom would eventually win the prize. Miller said he was fortunate enough to take a class on auctions taught by Milgrom during his graduate studies, and Milgrom was also the advisor to Miller’s own academic advisor.
“He definitely had this, even more than 20 years ago, but this very kind kind of manner about him that you just used to feel like when he was there everything was going to go well,” Miller said.
When considering Milgrom’s many contributions related to auction theory, Miller said one of the most valuable lessons to glean is the difference between theory and practice. Miller said Milgrom always put in effort to ensure that his ideas were not just seen as economic theory, but that they could be used in a practical way too.
“Something about auctions, especially, is that the implementation details matter,” Miller said. “Sometimes something works really well in theory, but then doesn’t work well in practice. For these really important auctions with billions of dollars at stake in each auction, Paul really cared about getting the details right.”
Milgrom said this concept is something he teaches in his own classroom. He said his and Wilson’s work in auction theory aimed to improve the efficiency and simplicity of bidding. Milgrom hopes that from this work, his students can also pursue theories that have real world applications.
“I tell my own students to be ambitious and practical at the same time,” Milgrom wrote. “Pursue several lines of work so that some can be successful, but only work on problems that matter, either because they lie in the deep foundations or because their applications can improve the world.”
LSA junior Taanvi Singh, who studies economics, said she feels motivated by Milgrom’s discoveries in economic theory to make changes in the field herself. And for students at the University, Milgrom’s award represents how much they are able to achieve, Singh said.
“I think students should view his work as a goal to reach,” Singh said. “Paul really just found something he was passionate about and did everything he could to keep learning and learning about it. I think that’s something that all students here — especially in econ, since it’s such an amazing program here — should strive for.”
Daily Staff Reporter Lily Gooding can be reached at firstname.lastname@example.org.
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