On going the market one better: economic market design and the contradictions of building markets for public purposes

Abstract

Before the 1970s, no economists claimed an ability to fix markets; now economists make markets in a smorgasbord of shapes and flavours. Secondary commentary on market design fails to appreciate how momentous this change was. We summarize the development of market design through its first attempted application—auctions for airport slots. Economists reconceptualized markets from generic allocation processes to boutique information processors. The new view entailed that economists would skew markets towards the outcomes favoured for a client. Yet they continued appealing to a unified theory of markets and the associated remit to act as neutral arbiters for everyone’s welfare. Inbuilt political bias contradicts the older claims of economists to stand outside the economic process. This contradictory stance has direct implications for the ‘performativity’ literature.