Markets, market algorithms, and algorithmic bias

Philippe van Basshuysen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: markets; algorithms; market design; bias; transparency; Markets (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2023
New Economics Papers: this item is included in nep-hme, nep-hpe and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Economic Methodology, 2023, 30(4), pp. 310 – 321. ISSN: 1469-9427

Downloads: (external link)
http://eprints.lse.ac.uk/115694/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:115694

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().