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 Research Projects at the MPIfG

Market Design as Centralized Planning? Prospects and Limits of Economic Engineering

Georg Rilinger


 
Market designers act as social engineers. They observe that real markets rarely meet the assumptions of economic theories and fail to produce the benefits of perfectly competitive markets. To remedy this problem, they set out to create institutional frameworks that produce market processes with desirable attributes. This project asks under what conditions economic engineers fail or succeed in realizing their intellectual vision. It focuses on two questions. First, what determines how much control is necessary to create a match between a theoretical framework and market reality – and is there a point at which market design collapses into centralized planning? Second, how do the conditions of design work in political, regulatory, and technical contexts influence designers’ ability to recognize and implement the requirements of their blueprints? The project explores these questions by engaging with an early case of market design failure: the creation and collapse of California’s electricity markets between 1993 and 2001. Based on extensive archival material from three different archives and 75 in-depth interviews, and shadow comparisons, it asks why these markets failed and what prompted the fateful design decisions. Project duration: October 2020 to October 2022.
 

 
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