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Illustration: Sarah Grillo/Axios

Economics is disparaged as "the dismal science" for good reason. And governments are rarely upheld as paragons of efficiency. But Paul Milgrom and Robert Wilson, the winners of this year's Nobel Prize in economics, have helped governments around the world create hundreds of billions of dollars of value with an astonishing level of sophistication and efficiency.

Why it matters: The auctions designed by the winners of this year's prize were initially used to allocate electromagnetic spectrum for cellphone communication. Since then, they've been used to price everything from airport landing slots to carbon-emission credits, in a manner that is fair, efficient, and effective.

The big picture: While auctions have been around for millennia, the two standard mechanisms — English auctions, where the price rises until there's only one bidder left, and Dutch auctions, where the price falls until a bidder emerges — can sometimes be unfair or inadequate.

  • For example: If two identical items are auctioned successively, they can often sell for very different prices. Or if a certain bidder values a certain combination of items while not particularly wanting any one on its own, it's hard to put together a good bidding strategy.

Between the lines: While nearly all auctions attempt to create as much value as possible by assigning an object to the buyer who can make the best use of it, government auctions also have to ensure they don't create monopolies or other market distortions.

  • The laureates' inventions, including the Simultaneous Multiple Round Auction, helped solve all of these problems — and also raised hundreds of billions of dollars that would otherwise have to have been levied in taxes.

Be smart: You trigger state-of-the-art auctions almost every time you visit a website. Most online advertising these days is sold via real-time bidding, which means that the ad is sold after you navigate to the page in question. Advertisers bid on reaching your particular eyeballs, reading your particular device.

  • Milgrom is involved in those auctions, too, theorizing how best to structure them and proposing a “modified second bid” design as the best way to maximize efficiency.

The bottom line: For most of the Cold War, governments would use game theory mainly for national defense. Auction design and strategy, which is a subset of game theory, is not only more socially useful than mutual assured destruction, it's also more socially useful than nearly everything else in economics.

Go deeper

Former Georgetown tennis coach pleads guilty to accepting admissions bribes

Gordon Ernst (left) former head tennis coach at Georgetown, is pictured outside the John Joseph Moakley United State Courthouse in Boston on March 25, 2019. Photo: Jessica Rinaldi/The Boston Globe via Getty Images

A former Georgetown University head tennis coach has pleaded guilty Tuesday to bribery charges related to facilitating the admission of prospective applicants.

Why it matters: Gordon Ernst solicited and accepted bribes from William Singer, ringleader of the cheating scheme uncovered by Operation Varsity Blues, and families in exchange for helping prospective applicants get into Georgetown as student athletes, according to the Justice Department.

3 hours ago - Health

CDC says some immunocompromised people can get fourth COVID shot

Photo: Noriko Hayashi/Bloomberg via Getty Images

The Centers for Disease Control and Prevention said in updated guidelines Tuesday that some immunocompromised people who have received either Pfizer or Moderna's COVID-19 vaccines will be able to get a fourth shot.

Details: People over 18 who are "moderately to severely immunocompromised" and have received three doses of an mRNA vaccine may get a fourth shot (of either the Pfizer, Moderna, or Johnson & Johnson vaccines) at least six months after getting their third Pfizer or Moderna dose, per the CDC.

4 hours ago - Politics & Policy

Scoop: Biden plan expected to include at least $500B for climate

Photo: Stephanie Keith/Bloomberg via Getty Images

The White House is privately telling lawmakers the climate portion of President Biden's roughly $2 trillion social spending plan is "mostly settled" and will likely cost more than $500 billion, two sources familiar with the talks tell Axios.

Why it matters: A price tag of $500 billion to $555 billion is a huge number and, if it holds, would likely be the single biggest component of the sweeping package. It also isn't far off from the roughly $600 billion proposed when the bill was expected to cost $3.5 trillion.