While direct mechanisms are not intended as descriptions of real-world institutions, their mathematical structure makes them amenable to analysis. Finding the best of all direct mechanisms for a given problem is often straightforward, and once the best direct mechanism has been found, the researcher can “translate back” that mechanism into a more realistic mechanism. By this seemingly roundabout method, researchers have been able to solve problems of institutional design that would otherwise have been effectively intractable.
This line of work is not to my taste at all. It is highly mathematical and inward-looking. It looks at conditions for static efficiency (allocating a given set of resources) and ignores dynamic efficiency (how well institutions adapt over time). I regard the "mechanism design" literature as representing a lot of effort expended on papers that only interest the expenders.
Tyler Cowen writes, "this is precisely the kind of work which is going out of style in the broader profession."