Thursday, April 11, 2013

The economics of designing markets, and the sociology of "civilizing" them

Jose Ossandon emailed me to alert me about his thoughtful blog post comparing some developments in market design and in the sociology of markets. In particular, he draws connections between market design and some of the work of Michel Callon.

Ossandon's blog post is called Are markets matching Callon and Roth?

He begins:
"The last meeting of our “Copenhagen market group”[i] was devoted to an increasingly influential stream within current economics, namely “market design”. The discussion left me with the somehow perplexing puzzle I am trying to unfold in this post: isn’t this type of economics almost too close to the ‘markets as calculative collective devices’[ii] approach developed by Michel Callon and colleagues so influential among us -non-economists market researchers- in the last years?
During the meeting we discussed two articles (here and here) written by the 2012 Nobel Prize winner Alvin Roth. As Roth explains, see also his very clear Nobel Prize speech, his and his colleagues’ work has been dedicated to very practical problems."

And after come comments on my earlier posts on performativity, Ossandon concludes:

"Are the new2 economic sociology and market design the same? Avoiding the obvious methodological splits that separate a highly formalized and a rather descriptive-reflexive ethnographic approach, there are still important conceptual differences. The ideal situation for Roth’s designers seems to be “give me some choosing things[iii] to match and I will rise a technologically equipped market”, while for Callon - especially in his work connecting his thoughts on technical democracy, hybrid forums and markets- the ideal situation is where what is traded, who can participate in the exchange, and who and what is equipping the market encounter are collectively and heterogeneously defined. Civilizing (Callon) and engineering (Roth) markets are therefore two different programs of market design. More practically, for instance, in school choice, for Roth et al. what a good school is or who can choose or what is chosen while matching school places is defined before the market. In Callon et al.’s view such an arrangement would not only match pre-calculating families and schools but it would include the consequence of making the involved agents calculative, changing accordingly the way they understand and deal with education. In other words, in Callon’s view markets are never only about matching, or matching would need to beunderstood also as a mode of per-formatting new agencies and things.
But, despite these differences, it seems like finally engineer economists and engineer sociologists are finding a common starting point. Isn’t that scary? I don’t think so. This is a much better place to start and try a dialogue that is not so limited by pre-existing disciplinary boundaries (see also Callon here). Let’s agree: markets are not pre-social metaphysical forces that need to be left alone, but they are practical arrangements that can be more or less, better or worse, designed[iv]. In those cases where there is an already functioning market or quasi-market mechanisms (for instance: school choice or carbon trade) let’s try to make them work the best we can. In other words, social researchers should not only criticize marketization but also spend time, energy and knowledge onengineering and/or civilizing these complex arrangements. This is, I think, a nice pragmatic starting point for market researchers at large.
But is this just good?  No it isn’t, there is also a serious flaw. These two streams of market research seem to share a somewhat excessive optimism about markets as devices that can solve social and environmental issues. As a product of neoliberal Chile, I would happily pay for not having to make choices in areas like health insurance, pension funds, schools or long distance phone carriers. And certainly many people have argued that these and other sectors (have you heard about trains in the UK?) are not necessarily working better years after features such as competition, choice and providers able to select or exclude their potential users have been introduced. Market design risks becoming the face of the latest round of social and environmental reforms (for instance: emissions trading or the announced Job Match interface in the UK). And the new reformers seem to believe something like: it is not that markets were necessarily a bad social policy but that they were not properly designed. But, shouldn’t we also be experimenting with other ways of doing things? I am not saying that markets are always bad, but that the same brilliant ideas currently oriented at designing better markets could also be spent devising other forms of solving our common problems. In my opinion market civilizers and engineers will become fully respectable technicians the day they are also able to advise something like: “thank you for contacting me, but here you don’t need a market”."

I haven't yet had a chance to do more than glance at the links he provides: it's clear that some translation will be needed between econ and soc, in order for me to try to understand all the connections that he sees.

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