Saul Lach, Zvika Neeman, Mark Schankerman, 03 November 2017

Understanding how the design of policy to support R&D influences its effectiveness, and how loan programmes should be optimally designed to maximise welfare, is critical to formulating effective, cost-efficient policies. This column uses mechanism design to analyse the optimal structure of R&D loan programmes. The results suggest that optimal policies should ‘target the middle’, as low-risk projects will be funded by the market and high-risk projects are not likely to generate sufficient social payoff to justify support. Moreover, the optimal policy is likely to differ across technology areas, and between industrialised and emerging economies.

Caterina Calsamiglia, Maia Güell, 07 October 2014

The Boston mechanism for school assignment is well studied and widely used. This column shows two crucial failings of the variation that gives priority based on neighbourhood, using an exogenous policy change in Barcelona. Since assignment to any school not picked first is unlikely, most parents make the ‘safe’ pick and rank the local school first. Moreover, the ability to deviate from the ‘safe’ ranking is greater for richer families, for whom private education is a viable outside option.

Sendhil Mullainathan, Jens Ludwig, 01 November 2011

According to the famous White House saying, policymakers should never let a crisis go to waste. This column argues that economists shouldn’t do so either. Instead of cursing about cuts in research funding, they should look at cheaper ways to evaluate policy – perhaps through mechanism experiments.

Patrick Legros, Estelle Cantillon, 18 October 2007

Mechanism design theory is a major breakthrough in the modern economic analysis of institutions and markets. It revolutionalised the way economists think about optimal institutions and regulation when governments don't “know it all.” It has had a major impact on current policy-making and will continue to do so in the future.

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