On the Wisdom of Algorithmic Markets: Governance by Algorithmic Price

45 Pages Posted: 14 Jan 2019

See all articles by Pip Thornton

Pip Thornton

University of London, Royal Holloway College, Geopolitics & Cybersecurity

John Danaher

National University of Ireland, Galway (NUIG) - School of Law

Date Written: June 26, 2018

Abstract

Leading digital platform providers such as Google and Uber construct marketplaces in which algorithms set prices. The efficiency-maximising free market credentials of this approach are touted by the companies involved and by legislators, policy makers and marketers. They have also taken root in the public imagination. In this article we challenge this understanding of algorithmically constructed marketplaces. We do so by returning to Hayek’s (1945) classic defence of the price mechanism, and by arguing that algorithmically-mediated price mechanisms do not, and probably cannot, accumulate and signal that same kinds of knowledge that Hayek felt were essential to effective market governance. Indeed, we argue that algorithmically-constructed marketplaces are closer to, though distinct from, the central planning model that Hayek critiqued. Regardless of how you feel about Hayek’s argument, this has important consequences for how we respond to the rise of algorithmic governance tools in both markets and elsewhere.

Keywords: Algorithmic Governance, Hayek, Google, Adwords, Uber

Suggested Citation

Thornton, Pip and Danaher, John, On the Wisdom of Algorithmic Markets: Governance by Algorithmic Price (June 26, 2018). Available at SSRN: https://ssrn.com/abstract=3314078 or http://dx.doi.org/10.2139/ssrn.3314078

Pip Thornton (Contact Author)

University of London, Royal Holloway College, Geopolitics & Cybersecurity ( email )

London
United Kingdom

John Danaher

National University of Ireland, Galway (NUIG) - School of Law ( email )

Newcastle Road
Galway
Ireland

Register to save articles to
your library

Register

Paper statistics

Downloads
89
rank
277,880
Abstract Views
738
PlumX Metrics