Edward Nik-Khah wrote in The Closed Market: Platform Design and the Computerization of Economics:
In his book Who Gets What—And Why, the market designer Alvin Roth pronounced firms such as Google, Amazon, and Uber to be “markets,” proclaiming, “Successful designs depend greatly on the details of the market, including the culture and psychology of the participants” (Roth, 2015). One need not actually find an example of an economist counseling advisees to skip that additional course in game theory and take up cultural anthropology to arrive at the sense that matters had taken a surprising turn: only a decade before one regularly encountered brash claims that all social science worth its salt must be reducible to game theory, with market design cited as evidence for why this must be so (e.g., Binmore, 2004).
It took me a minute to really understand what he is saying - this subtly, yet surprisingly grumpy take on game theory, that it’s insufficient for fully understanding markets’ design, hence the need for cultural anthropology, history studying and more “social science” aspect to step in.
Really? It’s true that market designers, who mostly come from an interdisciplinary background of CS and mathematics, sometimes are incautious in selecting economic models for their work, and just dive in math too quickly. However, I do think that the issues in malfunctioning markets stem from economic models failing to accurately represent all incentives, rather than a fundamental shortcoming in game theory methodologies itself. The solution will never be to discard the mathematical framework game theory introduced, but to enhance our understanding of these issues from an economist’s perspective.
Indeed, game theorists need to be sensitive to cultural and psychological things precisely to better understand the incentives and constraints that people face. Yet reading Nik-Khah’s paper, I found his point of view biased and the paper itself it’s hard to understand from the first place. In terms of style, it’s very distinct from works of the econ-CS community, which natually make sense cause Nik-Khah stems from a econ-history background. In terms of tone, the paper is skeptical. For example,
“As we will see, these activities had little to do with harnessing incentives, often touted by tech economists as their specific expertise.”
“They (tech economists) drew upon earlier studies that viewed markets as solving problems in combinatorial optimization, and their “tests” were facilitated by the computer. Here and elsewhere, experimentalists would adopt a loose attitude toward modeling agency, often eschewing such game theory staples as “incentive compatibility.”
Ha, he did not even try to be closer, and, it seems that he failed to appreciate the fun and beauty of this field at all. What a pity.