(Bloomberg Opinion) — Quite literally since the days of Adam Smith, economists have been great believers in the invisible hand that guides markets. But sometimes, we give the invisible hand a little help.
When coordination problems or other complexities stop the market from finding the right price on its own, we often bring people together and discover prices through auctions. That’s the specialty of Paul Milgrom and Robert B. Wilson, two Stanford economists — and it’s the reason they received the Nobel Memorial Prize in Economic Sciences on Monday.
Auctions are everywhere, of course. People use them to sell art, antiques and houses; to find the right price for fresh fish and used cars; and to raise money for nonprofits. Auctions also hide in the backdrop of daily life, controlling the advertisements we see on the internet — and maybe even the page you’re looking at right now.