TY - JOUR

T1 - Markets, market algorithms, and algorithmic bias

AU - van Basshuysen, Philippe

N1 - Funding Information: This work was supported by Volkswagen Foundation. The author thanks Luc Bovens, Elinor Clark, Enno Fischer, Jurgis Karpus, Donal Khosrowi, Sebastian Krug, Chrys Mantzavinos, Luis Enrique Segoviano Contreras, Lucie White, and Jannik Zeiser for helpful comments and discussions at various stages of this research. The author also thanks the audiences at the following events: the Soul of Economics conference, University of Zurich, 2019; the International Research Network Kick-Off Meeting ‘Justice and Interest’, Aix-Marseille School of Economics, 2019; the Philosophy of Economics Research Seminar, UNAM, Mexico City, 2020; the Philosophy of Social Science Roundtable, Emory University, Atlanta, 2020; and the 15th Biennial Meeting of the International Network of Economic Method (INEM 2021) in Tempe, Arizona. Financial support from the VolkswagenStiftung within the project ‘Bias and Discrimination in Big Data and Algorithmic Processing: Philosophical Assessments, Legal Dimensions, and Technical Solutions’ is gratefully acknowledged.

PY - 2023

Y1 - 2023

N2 - 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.

AB - 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.

KW - algorithms

KW - bias

KW - market design

KW - Markets

KW - transparency

UR - http://www.scopus.com/inward/record.url?scp=85176082970&partnerID=8YFLogxK

U2 - 10.1080/1350178X.2022.2100919

DO - 10.1080/1350178X.2022.2100919

M3 - Article

AN - SCOPUS:85176082970

VL - 30

SP - 310

EP - 321

JO - Journal of Economic Methodology

JF - Journal of Economic Methodology

SN - 1350-178X

IS - 4

ER -