The Technological Politics of Mechanism Design

Auctions occupy a peculiar role in economic theory and practice. In neoclassical economic theory, the Walrasian auction illustrates the immaculate efficiency of competitive decentralized markets.11

An imagined auctioneer logs the supply and demand of all market participants at all possible prices and determines the competitive price by equating supply anddemand. In practice, real-world auctions have no omniscient auctioneer. With all their strategic vulnerabilities and informational constraints, poorly designed auctions manifest the shortcomings of centralized economic processes.

William Vickrey found a way to preserve auctions’ theoretical virtues despite their practical shortcomings. His Nobel Prize-winning contributions to auction theory demonstrated how carefully designed auctions can overcome incentive and informational constraints to generate allocative efficiency.22

Auctions can thus mediate a compromise between a social planner’s goals and the efficiency of decentralized allocation. Vickrey’s ideas extended beyond typical auctions, underpinning foundational concepts in the field of economic theory known as mechanism design.

Eric Posner and Glen Weyl’s Radical Markets is dedicated to Vickrey and opens with a preface titled “The Auction Will Set You Free.” The authors thus lay their scene on a terrain of compromise between decentralized and centralized market organization. Posner and Weyl describe the core of Vickrey’s innovation: “The idea behind an auction is not allocating the good to the highest bidder. Instead it is that each individual must pay an amount equal to the cost that her actions impose on others.”33

Vickrey’s ideas thus offer a middle ground, according to Posner and Weyl, between the Right’s view that markets must be “strengthened, expanded and purified” and the Left’s conviction that “existing social arrangements generate unfair inequality and undermine collective action.”44 Vickrey’s spirit animates the five specific proposals in the book—designs for “Radical Markets.” Radical Markets aim to transcend politics and solve the most urgent social ills of the day: income inequality, economic stagnation, and political strife. Further, for Posner and Weyl, Vickrey-inspired mechanism design can achieve an even more ambitious task—that of (as their book’s subtitle suggests) “Uprooting Capitalism and Democracy for a Just Society.”

But what is it about the auction that “will set you free” and create a just society? How exactly does economic theory mediate a compromise between values of the Left and Right? Such questions get to the heart of what we call in this Review the technological politics of mechanism design:theimplicit political and ethical commitments of social institutions derived through the logic of mechanism design.55

As we see it, attending to the technological politics of a mechanism is prerequisite to understanding whether the mechanism in fact earns its claim to ethical or political virtue.

As a branch of microeconomic theory, mechanism design offers a consistent formal language for highlighting the normative properties of social institutions. When deployed in policy proposals, mechanism design maps formal properties onto political and ethical virtues. Such mappings require additional value-laden assumptions about what constitutes just arrangements. An investigation of the technological politics of mechanism design interrogates those value-laden assumptions and can reveal the ideologies underlying proposed reforms.

In order to understand the implications and limitations of Posner and Weyl’s capacious vision, we explore the unspoken ethics and politics of two of their proposals in detail. Omitting a discussion of the technological politics of “Quadratic Voting” leaves the proposal unable to address the ways in which pre-existing structural inequality could differentially affect different social populations. Meanwhile, the Authors’ inattentiveness to the technological politics of “Data as Labor” leads them to an overly narrow set of possible solutions to problematic data extraction. Our analysis demonstrates the value of articulating the relationship between mechanism design and claims about just social arrangements. As such, we suggest that Vickrey’s bold economic ideas need political and ethical reasoning in order to realize their radical potential.

Markets are reasonable candidates for the organizing institutions of a Radical society. As Posner and Weyl note, well-designed markets have unique epistemic virtues. A market pricing mechanism captures and renders knowable individuals’ various needs and desires, a notoriously difficult task for centralized systems to accomplish.66

Markets also embody important normative principles. Markets that are free respect personal liberty and bar third-party members from interfering in mutually consenting exchanges. Markets that are open demonstrate a commitment to principles of non-discrimination and social inclusion, key tenets of egalitarianism. Markets that are competitiveserve to prevent particular actors from amassing excessive—and potentially coercive—power. 

But the interests and rights that markets cansecure are by no means necessary or inevitable features of markets as such. That is, actualizing particular ideals of market exchange requires explicit attention to normative principles and goals, salient structural features of a system, and the interests of the public. Notably, because Posner and Weyl’s Radical Markets are designed in response to particular economic and political challenges of the day, they are explicitly intended to intervene in arenas that currently feature highly unequal distributions of power. Yet the proposed mechanisms do not directly address these prior structural arrangements, and as a result, they are blind to the potential adverse effects that may arise due to unequal distributions of social and economic power. If Radical Markets are to realize Posner and Weyl’s ambitions—to preserve liberal democratic principles, to contribute to human flourishing, and to ensure just social outcomes—they must address this omission. Attention to these political factors must be central in any radical re-envisioning of the future.

Posner and Weyl’s project is driven by a diagnosis that markets, as currently conceived, cannot function as intended. Today’s markets are undercut by increasing wealth inequality, high concentrations of market power, and rigid property rights. But unequal economic relations are not the only types of antecedent inequalities that can undermine the type of ideal market functioning that respects rights and liberties. Since inequitable distributions of social and political power are not always legible in terms of market language and logic—they do not necessarily manifest as differences in financial capacity or as barriers to market entry and participation—these inequities are challenging for mechanism design to address. Can we ensure that mechanisms do not reinstate—or worse, legitimize—existing societal inequalities without investigating the potential dynamics that may arise when markets are installed in situ? How can we make sure that markets actually fulfill the important liberal democratic principles that they are designed to embody? The rhetoric of the idealized market evokes procedural fairness or a historical entitlement approach to justice such as Robert Nozick’s, wherein holdings are justified so long as they are obtained in accordance with the rules of the market.77

But this rhetoric can often efface the background structural inequalities that might nevertheless define the terms of market interaction, and thus generate unjust outcomes.

As an example of the potential impact that background social inequalities can have on the dynamics of a market mechanism, consider Posner and Weyl’s Quadratic Voting (QV) proposal, which suggests replacing one person, one vote electoral systems with a system of fungible “voice credits” that citizens accumulate over time and across different elections. By encouraging individuals to spend different amounts of “voice credits” on particular elections or referenda, QV allows citizens to modulate their strength of preference in voting. Thus, QV addresses a limitation of most present-day systems—that they can only register three preferences: yes, no, and indifference.

QV is animated by several key rationales that work to further people’s democratic interests and capacities. It enacts a system of voice credits in political elections that highlights the importance of preference satisfaction in a democratic system; it works to forward a conception of citizen autonomy; and it attends to the importance of minority voices in our political institutions. But failing to adequately take into account the vast differences that exist in people’s social and political positions priorto their trips to the voting booth renders QV unable to ensure other critical interests of a flourishing liberal democracy such as commitments to impartiality, anti-caste principles, and freedom from coercion.

Though QV allocates to each person the same number of voice credits, thus establishing procedural fairness within the system, the new voting regime introduces a strategic element to elections that differentially impacts voters depending on their social and economic status. For those who are in positions of relative disadvantage or who are seen as social pariahs, the voice credits system encourages a defensive orientation to voting driven by fear of further marginalization. As a result, vulnerable people with much more to lose must always be highly attuned to the political mood of the electorate. Come each voting day, the most vulnerable citizens must be extremely judicious in deciding whether at this particular moment, they—and equally importantly, their citizen-opponents—will vote to defend their drug prices, or their abortion rights, or their minimum wage, or their family’s immigration status, or their children’s public school’s funding, and so on. Meanwhile, those in positions of relative privilege might see that the QV system is indeed liberalizing, awarding them greater flexibility in voting for those measures that most speak to their political interests. Relatively privileged voters can afford more lackadaisical civic engagement and even moral entrepreneurship, piling their votes in favor of pet causes on which their lives do not depend.

As such, the implementation of this mechanism in electoral politics may not enact the liberal democratic principles that Posner and Weyl claim to favor. While increasing choice for some, installing QV in our elections might endanger the liberty and autonomy of others and might do so in a manner that exacerbates existing inequalities rather than mitigates them. As political philosophers have long recognized, standing as equals in a society committed to democratic self-governance requires special attention to ensuring equal political rights in our institutions.88

Crucial to theories of democratic or relational equality is the view that notions of merit, desert, and luck ought to bear little to no significance to our existences and capacities as political citizens. Thus, a market-like mechanism that allows social and economic inequalities to translate into political ones may undermine the very goals of its design, hindering democratic participation and civic engagement.

Imagining how QV might take shape in our current social and political landscape is a revealing exercise. Thinking through the ramifications of this new electoral system, we see QV beyond its functioning as a voting mechanism. We understand Posner and Weyl to be putting forth a diagnosis of what our current elections system has gotten wrong. We see a claim about the purposes and principles of voting, and we see an alternative that uproots democracy in their name. But when QV is situated in context, we are also drawn by what we don’t see. To uncover the technological politics of Radical Markets is to scrutinize these gaps and omissions—to heed not only what QV does not address but what QV is not designed to address.

The Data as Labor proposal (DL) provides an example of a second critical omission stemming from Radical Markets’s inadequate attention to the conditions structuring terms of market exchange. Posner and Weyl fail to consider how implementing a formal mechanism can serve to obscure some of the normative claims that initially motivated intervention. This oversight may lead their solutions to misinterpret the nature of the original problems. It also makes clear articulations of other types of solutions more difficult. Radical Markets are left with blind spots where market legibility breaks down.99

As mechanisms designed around only those signals of inequality that manifest themselves in the market—for example,differences in wage-earning capacity—Radical Markets may obscure other kinds of inequality and their consequences. By relying only on these mechanisms, we may be deprived of the epistemic tools needed to incorporate such obscured inequalities into the appropriate realms of political and normative consideration. The conceptual limits of market legibility thus become the political boundaries of mechanism design.

Like the other formal mechanisms proposed in the book, DL works toward social reform by mapping normative claims onto an actionable, decentralized piece of information. Specifically, DL transposes two related normative claims (the data you generate should be considered yours, and thus you should be paid for it) onto a single piece of information (the wage price you command in the data-labor market). In doing so, DL conceives of the problem of “technofeudalism”1010

as primarily one of economic redistribution: none of the monetary value generated from data is going back to the original “creators” of that data. Thus, this diagnosis of the problem of the data economy leads Posner and Weyl to seek a market solution: by commanding a wage for this data-labor, data-workers can reclaim some of that value.

Commanding a wage for data-labor achieves several important normative and conceptual goals in the data economy. Conceiving of data as the product of labor gives individuals a stake in the data economy, redistributing some of the gains of that economy to the data-workers. We agree with Posner and Weyl that thinking of data as labor may help to demystify the human role in the development of artificial intelligence and secure a type of work for a future where the role of human labor is unclear.1111

By casting technofeudalism as a redistributive problem, DL responds to one particular injustice of technofeudalism—that individuals are not currently paid for their data. It articulates the normative claim that we shouldbe paying individuals more than $0 for their data. The solution—a better-functioning labor market—naturally follows.

This conceptualization of technofeudalism presents three problems. First, even if we accept DL to be its solution, a market for data-labor remains compatible with significant amounts of inequality. Though Posner and Weyl express their hopes that data-laborers will unite and bargain for good wages, the creation of a labor market alone does not secure the conditions that make such labor non-extractive and uncoerced. Indeed, the present landscapes of both data extraction and labor markets should make us skeptical about the claim that data-labor will generate substantial redistributive gains for data-workers. Consider the significant disparities in financial resources and informational power between typical data-laborer and technology companies. As a fragmented, widely dispersed workforce with low barriers to entry, data-laborers would face several practical challenges in attempting to organize for better wages or working conditions. Such workers would also be participating in an economy-wide labor market currently characterized by weak, under-enforced labor laws1212

and the prevalence of jobs that do not pay enough to live on.1313

Once we consider such onerous conditions, it becomes clear that DL provides a rather modest promise of economic redistribution. This might lead one to consider why Posner and Weyl propose this mechanism over others. After all, redistributive goals may be achieved via any number of reforms—including taxation of the “siren servers,”1414

regulation to curb the worst excesses of data collection, and comprehensive class-action or state litigation. Posner and Weyl’s proposal of installing a better functioning wage-market ahead of these potential alternatives lends insight into the technological politics at work in DL.

Second, articulating claims over data as claims to fair wages may limit our ability to express and achieve the other normative goals we may have, particularly those that are illegible in the market for data-labor. By expressing the problem of technofeudalismand its solution only in terms amenable to labor market analysis, Posner and Weyl make the implicit claim that “the data problem” is for the most part aredistribution problem. The injustice that must therefore be amended is the simple failure of fair payment for the gains of the data economy. Like other market solutions, DL gives data-workers a right to some of the fruits of exchange but doesn’t give them (or us) the tools they need to interrogate the political conditions structuring the exchange itself. Why is it that Facebook, Google, and Amazon buy all this data, while individuals are forced to sell their data-labor? By focusing its intervention on redistributive claims alone, DL provides a solution to the problems of technofeudalism that says nothing about other essential features of the data market, and further, about whether this market should exist at all. These questions lie outside the channels of potential moral consideration once technofeudalismis rendered a redistributive problem alone.

Finally, certain kinds of injustice may be exacerbated by DL. Under DL, many personal choices regarding data collection become even more expensive and difficult than they already are. For example, preserving one’s privacy or spending more time offline effectively become decisions to forego a wage. Keeping relationships—friendships, families, romances—untracked become group decisions to forego a wage. Such tradeoffs will disproportionately affect the poor, who are also disproportionately at risk of having their data used against them.1515

Consider the overharvesting of data, or the reduction of self and social relations to transactions mined for value. Such issues are poorly mapped into the logic of markets; they are not challenges that DL can articulate, let alone resolve. DL precludes precisely the choices, norms and behaviors that proposals centered on different conceptualizations of the problem of data extraction may encourage.

The wage right expresses and structures the scope and terms of the claims that can be made within DL. Ethically, a wage for data-labor defines which choices regarding personal data are acceptable and legitimate. Epistemically, the data-wage renders certain choices regarding data-labor visible. DL thus marks off both an ethical and epistemic boundary. But what kinds of claims lie beyond the boundaries of market legibility? While DL may promise data-laborers some financial compensation, DL does not provide the epistemic tools necessary to examine the political conditions structuring their consent. As a result, DL is at best a modest solution to the many problems of data extraction.

This Radical intervention lends insight into the political ambitions of Radical Markets. The political vision that emerges is one that sees certain substantial reorientations as within the bounds of the politically possible, and others as beyond them. The technological politics of DL orients the problem of data extraction around the issue of a wage. This orientation closes down other types of moral consideration and limits our ability to address different kinds of inequality.

As with QV, considering the ramifications of DL reveals far more than just the gaps between a proposal put forth under idealized assumptions and the messiness that may arise as such assumptions are relaxed. In exploring the epistemic consequences of DL, we see beyond DL’s function as a proposed solution to data extraction. This solution rests upon a particular conceptualization of what kind of a problem data extraction is. DL presents a claim about the essential features of the data economy and of labor, and in doing so, reveals the aspirations we must abandon in order to secure them. By exploring the limits of this vision, we see clearly what kind of problem Posner and Weyl believe data extraction is not—the political alternatives that lie outside the boundaries of what DL can articulate, let alone address. It is this kind of exploration, of what lies beyond the guardrails of market legibility, that throw into relief the technological politics of Radical Markets.

There is, inevitably, a gap between the normative principles that animate a market mechanism’s design and the normative character of the outcomes produced by the rules of that mechanism. This gap points to the necessity of subjecting the rules of ideal market exchange to the stresses of non-ideal political, social, and economic conditions.1616

Once they are set in motion, markets are directed only by the specifications of their design, however orthogonally to intended ethical principles that direction may be.1717 This tendency toward amorality gives one reason why mechanism designas an avenue toward great societal change should be a site of contest. As Posner and Weyl write in the Epilogue, “[T]here is nothing natural about market institutions. Human beings create markets.”1818 As with any human-designed institutions, we cannot assess and understand their potential for radical social change without probing their technological politics. The values and commitments that mechanism designers bring to the drafting table must be articulated beyond the blueprints of their designs. Our Review highlights the limits of formulating problems within the confines of market rationality. We thus demonstrate how these mechanisms may fail to mitigate the sources of social unrest that motivate Posner and Weyl’s proposals.

But of course a Book Review should seek to understand its subject in the context of its release into the public sphere. While written by two scholars and published by a university press (Princeton), Radical Markets does not read like an academic text, nor is it intended to. As a polemical work intended to spark wider discussion, the book has been met with great excitement in the fast-moving worlds of business and technology. Its bold proposals, though not fully fleshed-out and leaving much to the reader’s imagination, are compact and approachable. The urgency with which Posner and Weyl address the 21st century’s stagnant politics and volatile economic policies resonates. Writing a book for audiences beyond Washington policy circles and the academy is to be commended. Books like Radical Markets remind us that political engagement in a healthy democracy requires a public forum that is open, inclusive, and accessible. We need more of them.

We would therefore be remiss to end this Review without acknowledging the benefits of Posner and Weyl’s occasional heedlessness. We are reminded of Kenneth Arrow’s review of Richard Titmuss’s pathbreaking The Gift Relationship. Arrow criticizes Titmuss’s confused methodology and yet acknowledges that “his blithe disregard of the usual epistemological strictures against confusion of fact and value permits him to raise the largest descriptive and normative questions about the social order.”1919

Indeed, Posner and Weyl’s “blithe disregard” of the technological politics of mechanism design is at the heart of Radical Markets’s success in asking weighty questions about our present social order in a way that appeals to thinkers and decision-makers in a range of practical domains.

Even so, the technological politics of mechanism design warrant attention in particular domains of application. The widespread adoption of Radical Markets’s ideas raises the stakes of ignoring the technological politics of mechanism design.2020

In particular, we worry that without attending to the normative and political commitments that are obscured by technical framing, ideas inspired by Radical Markets may all too easily rally around institutions that preserve, rather than uproot, unfair distributions of resources and power. It is notable that Posner and Weyl draw a self-conscious lineage with several Austrian School economists, in particular Friedrich Hayek and Ludwig von Mises, whose academic works and political activism were also greatly influenced by the crises of their own time: the apparent economic failure of laissez-faire markets that triggered the Great Depression and the political calamities of authoritarianism and later, communism. In the wake of such upheaval, these economists too rejected both the self-regulating market of the Right and the strong welfare state of the Left and were consequently deeply concerned with the design of the political aroundthe economic.

With this intellectual history in mind, and without proper   examination of Posner and Weyl’s normative methodology, we worry that the movement forming around Radical Markets may collapse into a reiteration of an old idea: that markets can never be truly freedfrom the state but rather their preservation must be assuredby the state.In the past, such political ideologies seeking “institutional arrangements that allow the fundamental principles of market allocation . . . to play out fully” have been unfriendly to radical social causes.2121

Their historical record serves as a cautionary tale of the power of economic ideas to bolster the dominion of the market at the expense of true democratic governance.

It is rare to find economic reforms so highly attuned to matters of social and distributive justice as those proposed in Radical Markets. Indeed, the proposals in Radical Markets are explicitly aimed at ameliorating inequality, spurring democratic collective action, and transferring power from capital to labor. Nonetheless, the proposals contained in and inspired by Radical Markets risk subsumption into dominant economic ideology precisely because they lack explicit articulations of what we have called the technological politics of mechanism design. If our collective life is to be structured in part by Radical Markets, we must better understand the political assumptions, commitments, and implications of this substantial reorientation. In this Review, we have attempted to explore and grapple with some of the shortcomings that arise in this political lacuna. In looking toward the book’s technological politics, we hope to strengthen its project, and, in turn, the radical political imagination our shared future requires.