Designing "hidden markets"--Sven Seuken

Yesterday Sven Seuken defended his dissertation, which is on the interface of CS and Economics. In particular, he is interested in designing both computerized marketplaces and the user interfaces through which participants will interact.

The essay that was his job market paper concerns a practical business idea for a centrally administered marketplace for peer-to-peer computer backup services that have to be consumed in bundles (e.g. bandwidth and memory are complements), but may be offered in different proportions by different users, at market prices that are posted through a user interface that makes it easy for a consumer to see what backup he requires, and what combinations of resources he can offer to the system to pay for his own services. A customer for the backup service must offer backup services to other customers, and the  centralized server keeps track of what resources are being used, and sets relative prices for different resources that are “hidden” in that they are revealed not as numerical prices, but as tradeoffs between backup capacity a consumer demands and various ways that he can supply the system with resources from his own computer (upload and download bandwidth and memory, and hours a day connected to the web).

That is, this is a market with complements, in which both bids and asks must be for packages of services, but in which customers can participate using a simple interface.

Market design itself is becoming a market with complementarities between economists and computer scientists. Sven may join his main advisor, David Parkes, in internalizing many of these complementarities himself. (The other members of his committee were Eric Horvitz, Yiling Chen, and me.) Since he is going to Zurich, he may also have the opportunity to join forces with Jacob Goeree and solidify a real center of market design there.


Welcome to the club, Sven.

The computer revolution recapitulates the sexual revolution

When I was young, computers could only be accessed within well defined institutions (like university computer centers), with approved software. But then personal computers became available, and pretty soon we were all computing promiscuously, at home and in the office, with third party software (unless we were Apple users, in which case we still used approved software).  And computing wasn't just for data and work anymore, it was also for fun, something you could do spontaneously.

The internet only accelerated things. Old barriers broke down.

Then came viruses. Strange software wasn't safe anymore, you could catch something that could really harm you. And you could pass it on to your correspondents and collaborators if you were infected. You had to be careful with whom you traded bits and bytes.

Today Apple is back in vogue; iPhone apps are approved software. We all have virus scanners, and our IT checkups may now include routine tests for infection. Our junk mail filters try to protect us from inappropriate contact. We practice safe computing.

Ken Rogoff on grandmasters and growth

My colleague Ken Rogoff writes about two subjects he knows as well as anyone: Grandmasters and Global Growth.

Drawing analogies from the great progress in chess playing computer programs, he conjectures that artificial intelligence will power a lot of economic growth in the coming decade. I'm a bit skeptical, if only because AI has been the coming thing for at least a few decades now (remember expert systems?).

Of course, this may be a quibble about the "I" in AI. Herb Simon used to complain that the goal posts were constantly being moved; whenever computers became good at something that used to be thought to require intelligence, then "intelligence" would just be redefined. In this regard, I've been impressed at the big strides that have recently been taken in cheap, fast computerized translation: it's still a long way from passing the Turing test, but you can now tell at least what a web page is about in a lot of languages.

We're already seeing a lot of growth of computer assisted markets of all sorts, including many clearinghouses of the kind I often write about when I write about market design generally, including some of the developments in this past year. So maybe Ken is right, and after we enjoy the economic growth, we can quibble about whether these computerized markets and products are really smart...

Update: the February 11, 2010 New York Review of Books has an article by Gary Kasparov, The Chess Master and the Computer that includes a discussion of human-computer teams, i.e. of computer-assisted chess.

Computer assisted markets: infrastructure

Some time ago the NY Times ran a story on "smart infrastructure:" Bringing Efficiency to the Infrastructure

The story was mostly how better metering and communication can lead to increased efficiencies. Some of these efficiencies come from making new markets possible; e.g. if your electric meter were smarter, it could allow more complicated contracts, in which you could have interruptible service when demand was high (e.g. you could have an electricity contract that would turn off your washing machine when demand was high, but allow you to turn it on again and be billed at a higher rate if you needed it even so.)

The story touches on this when it discusses congestion pricing in Stockholm:
"In 2006, Stockholm experimented with congestion pricing, charging cars up to $4 to enter the downtown area, depending on the time of day. The cars were monitored with RFID cards and webcams that photographed license plate numbers. Drivers had to pay within two weeks or faced penalties, but I.B.M. linked the driver data to 400 convenience stores in the city to make payment easier.
Within a few weeks, the impact in Stockholm was evident, and it has proved permanent. Car traffic in downtown Stockholm has been reduced by 20 percent, carbon dioxide emissions have dropped 12 percent, and the city’s public transport system has added 40,000 daily riders, I.B.M. said. The webcams accurately read license plates, even on snowy days, more than 95 percent of the time. So the RFID tags are no longer in use. After expenses, the smart traffic system generates $80 million a year for the city.
Stockholm is a city in a Scandinavian country with a long environmental tradition, in a socially democratic nation. Yet even in Stockholm, there were complaints initially. The city also took the risk of installing the entire system, calling it a trial, and then having residents vote on it seven months later, after the benefits were apparent. "