A tale of two auctions

Advocates for a ‘different and innovative approach’ to conceptualizing markets have argued that it is possible to reengineer markets to deliver any number of salutary public policy goals. These ‘consulting engineers for the market economy’ have supported their ambitions by referring to the participation of game theorists in the design and implementation of spectrum auctions. However, the variegated and inconsistent lessons drawn from their participation indicate that the role game theorists actually played in the auctions is not well understood. The confusion appears to stem from significant omissions in the available (mostly first-hand) accounts, which are boastful in taking credit for the performance of the auctions but strangely demure in recounting the precise measures undertaken to bring it about. In this paper, I provide an unexpurgated account of the circumstances surrounding the participation of game theorists in the most celebrated of spectrum auctions, those held under the auspices of the US Federal Communications Commission (FCC). Using the FCC's archival records, I recover the suppressed role of the commercial funding of economic research in determining both the extent and the nature of the economists' participation. This analysis emphasizes the crucial importance of the method of funding in determining how economic research is brought to bear on public policy.