Peter Bottke traces the roots of Mechanism Design

back to the classical school of economics:

Yesterday Leonid Hurwicz, Eric Maskin and Roger Myerson won the Nobel Prize in Economic Science for their pioneering work in the field of "mechanism design." Strangely, some have used this occasion to disparage free-market economics. But the truth is the deserving recipients owe a direct debt to free-market thinkers who came before them.

Mechanism design is an area of economic research that focuses on how institutional structures can be manipulated by changing the rules of the game in order to produce socially optimal results. The best intentions for the public good will go astray if the institutional arrangements are not consistent with the self-interest of decision makers.

While we celebrate the brilliance of Messrs. Hurwicz, Maskin and Myerson, we should also remember that Hayek's challenge provided their inspiration. Hayek concluded that the private-property rights that come with the rule of law, freedom of contract, and freedom of association is still the one mechanism design that mobilizes and utilizes the dispersed information in an economy. Furthermore, it does so in a way that tends to capture the gains from trade and innovation so that wealth is continually created and humanity is made better off.