Market design

Only recently weaknesses in design education are discussed with particular interest to economics, business and the rapid development of the technology environment where we work and live in. In academia, there are already started discussions on modern theories that overlap economics and psychology, behavioural economics and design thinking. They may offer meaningful insights and possibilities of a new collaborative approach and defining the economic contribution of design.

A clear example of the interconnection of all these disciplines is the market design. It helps solve problems that existing marketplaces haven’t been able to solve naturally. Markets are the result of human intervention, not a natural phenomenon. According to Alvin E. Roth, Professor of Economics and Business Administration in the Department of Economics at Harvard University, the market design gives us a chance to improve and maintain profound human desires and needs. Markets are part of an ecosystem that reflects the complex interaction of evolution, coevolution, and human designs. 

“Design is a noun as well as a verb; even markets whose rules have evolved slowly have a design, although no one may have consciously designed them.” – Alvin E. Roth “Who Gets What – and Why?” (2016)

One of the crucial facts about market design; successful designs depend greatly on the details of the market, including the culture and psychology of the participants. Thinking about the design of markets gives us a new way of looking at them, and understanding them. As we start to know the markets and marketplaces, economists realised that they can intervene in them, redesign them, fix them when they are broken and create new ones when it would be useful.

Traditional economics depicts markets as simply the confluence of supply and demand. The market design recognizes that performing markets depend on comprehensive rules. “For example, supply and demand drive both stock markets and labour markets, but someone who wants to buy or sell shares in a company goes through very different procedures from those followed by a job seeker or an employer. Moreover, labour markets work differently from one another: Doctors haven’t hired the way lawyers, professional baseball players, or new MBAs are”. Market designers try to understand these differences, the guidelines and procedures that make various kinds of markets work well or badly. As a consequence, it is evident like other elements of design, including rules made for individual markets, laws and regulations intended to manage multiple environments and marketplaces can have both bad and negative consequences. Bad design decisions can persist for a longer period, in particular, because there may be different market stakeholders with an interest in the status quo, and many parts are involved in coordinating any market-wide change. 

Looking at economics from the viewpoint of design is difficult. Traditional economic theories attend to production, distribution and consumption, with a particular focus on the profits. From this perspective, economics sees the contribution of design as a way to understand user needs and preferences, while economists give little attention to the tacit knowledge designers demonstrate. Design can handle ambiguity and uncertainty, key for survival in our multilateral environment. Humans are innately innovative figures and if design businesses can adapt to embrace innovation and critical thinking, who knows how healthy our societies, economies, and even governments could thrive?

Market designers have already had an impact on various kind of markets and activities of a larger spectrum. Specifically, designers need to pay attention among the many other areas in which market malfunctions are likely and consequently adjustments informed by the insights of this new discipline will be called for. The disconnect between design and economics is the representation of a larger problem: both these disciplines are two ways to represent forms of knowledge. Two approaches that are difficult to control completely and thay have rules that help them to work properly or badly, different form of languages that influence the same users.