Saturday, August 6, 2022

Market design in an historical perspective, by Basshuysen in J. Economic Methodology

 I pay some attention to how market design is discussed in the history/sociology of science and methodology/history of thought literatures (even though I know how Feynman thought they are related to ornithology).

 Here's a pretty sympathetic, modern view.

Philippe van Basshuysen (2022) Markets, market algorithms, and algorithmic bias, Journal of Economic Methodology, DOI: 10.1080/1350178X.2022.2100919

ABSTRACT: "Where economists previously viewed the market as arising from a ‘spontaneous order’, antithetical to design, they now design markets to achieve specific purposes. This paper reconstructs how this change in what markets are and can do came about and considers some consequences. Two decisive developments in economic theory are identified: first, Hurwicz’s view of institutions as mechanisms, which should be designed to align incentives with social goals; and second, the notion of marketplaces – consisting of infrastructure and algorithms – which should be designed to exhibit stable properties. These developments have empowered economists to create marketplaces for specific purposes, by designing appropriate algorithms. I argue that this power to create marketplaces requires a shift in ethical reasoning, from whether markets should reach into certain spheres of life, to how market algorithms should be designed. I exemplify this shift, focusing on bias, and arguing that transparency should become a goal of market design"

I have to admit, I found this section heading charming (and not as funny as everyone else should:)

"2. What are markets, what can they do? From Hayek to Hurwicz to Roth"

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