Markets, market algorithms, and algorithmic bias

van Basshuysen, Philippe (2023) Markets, market algorithms, and algorithmic bias. Journal of Economic Methodology, 30 (4). 310 – 321. ISSN 1469-9427

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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.

Item Type:	Article
Official URL:	https://www.tandfonline.com/journals/rjec20
Additional Information:	© 2022 The Author
Divisions:	Philosophy, Logic and Scientific Method
Subjects:	H Social Sciences > HB Economic Theory
Date Deposited:	28 Jul 2022 11:03
Last Modified:	12 Dec 2024 03:09
URI:	http://eprints.lse.ac.uk/id/eprint/115694

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