1YAT: Lottery Technology

One year ago, I wrote possibly my best post ever. It was certainly different. It combined some genuine economic theory with a little drama and even some humor.

Lottery Techonology:

During the 1990’s in Minnesota, the Deparment of Economics was dominated by the theories of Prof. Edward Prescott, who won the Nobel Prize in economics just last year. Prof. Prescott was famous for real business cycles, and for furthering the theory on rational expectations and dynamic general equilibrium. But he had other pet ideas as well. One of them was the lottery technology. Like many ideas of brilliant academics, it was an idea that was both brilliant and daft at the same time. It was brilliant because it nicely transformed a nasty economic model into a nice one in which a bunch of theorems would apply. It was daft because a lottery in the way that Prof. Prescott envisioned it would be nothing you would ever see in a real marketplace (a small detail in the world of economic theory). I'm not saying that Prof. Prescott is daft; I'm saying that the idea of a lottery technology is academic. But I always wondered if someone could find a practical application for this idea. [Link]

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