Much of the Decentralization Conference Series has focussed on questions of
design of various systems for production and allocation of goods, services,
and information. These range from understanding voting systems to markets to
the organization of the internal lines of communication and the assignment
of tasks within a firm. A partial list of topics covered
at past conferences includes: mechanism and
market design, resource allocation, matching, team theory, contracting,
organization of the firm, communication, computation, and processing of
information.
Roy Radner was likely the source of the name for the conference series, in
addition to being its first coordinator. My impression is that the word
decentralization reflects the fact that the starting
point in many of the problems addressed by the series is that the necessary
information starts
in a decentralized state - for example: peoples' preferences in a voting
setting,
who has what goods and wants to buy what in a market, and who knows what
about demand, costs, etc., in a firm.
In some cases, the term decentralization is partly a misnomer, since some of
the mechanisms or institutions used to solve these problems
(e.g., an auction) bring the critical actors together in some way or at
least some of the calculations are centralized; while other applications
really
are completely decentralized.
But I think that perhaps
the history of the conference reflects the fact that these
systems were viewed as alternatives to centralized or planned economies
when the conference series was first funded, during the cold
war.
Those boundaries and distinctions have faded over the years, but the name has
remained.
A first explicit and careful definition of the term ``decentralization'' with
respect to processes for aggregating information for the allocation of resources
appears in Tom Marschak's dissertation (1959 - Econometrica) ``Centralization
and Decentralization in Economic Organization.'' This, along with
the Leo Hurwicz article (1994 - Economic Design) ``Economic Design, Adjustment
processes, mechanisms, and institutions,'' provide a nice view of how this
decentralization literature grew out of the Barone, Mises, von Hayek, Lange and
Lerner debates over the feasibility of a centralized socialist economy. The
roots of the question of how to collect decentralized information and allocate
resources can be traced to the early Walrasian tatonnement processes, and the
later Tjalling Koopmans' (1951) formalization of adjustment processes
as well as Arrow-Hurwicz gradient process.
Early uses of the term ``decentralization'' can also be found in
Hurwicz's '59 paper, "Optimality and Informational
Efficiency in Resource Allocation Processes", as well as the late fifties work
of Arrow and Hurwicz (see the Marschak paper for references). These set the
stage for the conference series with a set of important issues.
Much of the early work on decentralization concerned the
convergence properties and complexity of the systems involved. The Marschak
Festschrift "Decisions and Organization",
edited by Roy Radner and Bart McGuire (another early participant in the
conference series)
dates from the founding days of the conference, and gives a good view of some of
this early work on decentralization. One of the classic references eventually
coming out of this literature is Ken Mount and Stan Reiter's (1974-JET) paper
``The informational size of message spaces.''
While the work continued (and continues) on purely informational questions, the
issue of incentives began to creep in as well, as it became clear that any
system for making decisions or allocation resources might be open to some
manipulation by its participants. Early mention of incentive issues,
and perhaps the first coining of the term ``incentive compatibility'' come from
Hurwicz's 1959 article. The fuller treatment of incentives then came into its
own in the classic papers of Hurwicz's (1972) ``Decision and
Organization,'' (which circulated in various incarnations before the
conference series started) and Groves (1970) dissertation (which also circulated
as a working paper before the conference series got underway, and was
later partly published as the (1973-Econometrica) article ``Incentives in
Teams,''), and eventually grew into the more modern theories of mechanism design
and implementation.
In fact, at the first decentralization conference Radner made a point of
inviting two papers addressing incentives, presented by Groves and Hurwicz, and
so incentive issues were on the table from the beginning of the conference
series.
Early discussion of information and incentives also came from the public goods
literature, e.g. Samuelson (1954 - Review of Economics and Statistics) and
Clarke (1971 - Public Choice), as well as the early auctions work of Vickrey
(1961 - Journal of Finance). These eventually came under the umbrella of the
mechanism design literature that stemmed from the decentralization series.
In its current incarnation, the decentralization series now covers pretty much
the design of any institutions, contracts, organizations, or relationships in
which information and/or incentives play a role.