Latest Golden Goose Awardee Recognized For Auction Savvy

The 2014 Golden Goose Awards Ceremony will be held On September 18th in Washington, D.C.  Science journalist Miles O’Brien will host.

The Golden Goose Awards group recently announced the second award for 2014.  It recognizes the work of Preston McAfee, Paul Milgrom, and Robert Wilson in auction theory.  While marketplaces like eBay have made online auctions a common occurrence, the work of McAfee, Milgrom and Wilson was connected to a much more complicated kind of auction.

Their work was integral to the success of the first spectrum auctions organized by the Federal Communications Commission (FCC).  Starting in 1993 the FCC had the authority to auction rights to part of the electromagnetic spectrum (in the U.S.) in which sound, video and data are transmitted.  If done properly, the auctions had the potential to raise revenue for the government and prompt the expansion of commercial activity that needed spectrum to operate.  Unlike most auctions we are familiar with, the spectrum auction had to be a simultaneous auction of multiple items.

Milgrom, working with Wilson, and McAfee, independently proposed similar models for the auction, and the FCC asked the three to work together on the first spectrum auction.  Thanks to existing academic work (done by Milgrom, Wilson, McAfee and many others over the preceding years), the three were able to develop a model that was used effectively in the 1994 auction.  It was the first of 87 such auctions by the FCC, which have raised over $60 billion in government revenue.  The economic activity enabled by these auctions is much larger.

As connections go between initial research and application, this is arguably the most straightforward link in a Golden Goose award to date.  After all, relying on auction research to develop a complex auction mechanism for a government purpose doesn’t require the kind of imaginative thinking other Golden Goose Awards have shown.  But the application of the auction – to enable commercial activity in telecommunications – certainly might have.

The complexity of determining the value of research highlighted in this case serves as a reminder (at least to me) that linear models in this area are still incomplete descriptions of how science and technology activity contribute to the public good.