Mechanism design tells us that Libin can get the happy employees he wants with the stick, rather than the carrot; he can get a better equilibrium without spending a dime. For instance, he could simply make a certain minimal amount of vacation compulsory. If he can’t change the race, he can still change the bottom. Mechanism design makes a powerful argument for the need for a designer—be it a CEO, a contract binding all parties, or a don who enforces omertà by garroted carotid.
