9. Putting the "Design" in Mechanism Design - Berlin 2023

[Music] okay so thanks much um this is actually a perfect sequence because uh the origin of this talk is almost a year happened almost a year ago when Cham when you saw just on stage and I had coffee in Berlin had typical conversations we have and one of the things we started tinkering with ideas one of the ideas that we ING with was uh if the bow house had an economics class how would it have looked like uh just the stuff we talk about and it's like but do trigger like a yearlong investigation into this particular question like I don't know how many of you has ever taken economics classes if you did you realize it's very very far away from what you usually do in a in a design school so how can we bring those two things together so this is um basically uh not only putting design into mechanism design uh but also how to basify a conceptual understanding of Economics this is what I want to talk about today um but before that uh a little bit of a motivational background story the story about of Amanda Orga rard um Amanda was a graduate student at Stanford in the 1960s this is his dissertation in industrial engineering um he wrote about yeah mod competitive bidding under uncertainty the under uncertainty was his main contribution um Amando filed a citation did not publish it because he didn't have the fees ACC could couldn't pay the fees um went back to his his native Mexico became a civil servant had a distinguished career in the Mexican civil service retired a couple years ago is now in his 80s uh would have completely faded Into Obscurity if not for the little fact that uh these six guys uh cited his dissertation in their papers which got them eventually to the Nobel price uh some from Sanford some from El somewhere else two guys over here mechanism designers L Roth Market designers um Paul mgram Robert Wilson who was in his dissertation Committee in auction design now especially auction design has become a trillion dollar industry all of the things um all of these guys are very very wealthy designing auctions other economic mechanisms markets matching markets all these things uh so Stanford should at least uh name a building after Amando in my opinion so um but uh even if um design has become a professional success story for economics it never really translated into uh teaching economics it moved a little bit over from Old School tradition economics to Game Theory mechanism design causal inference all of this stuff is much more structured but there's still a massive gap between uh what we think about like design how do you do uh teach design versus how do you teach economics so we're trying trying to bridge that Gap from our own perspective um our problems always like if things go wrong in the in the economic space Also in the web 3 space some of the stuff is intentionally scammy some of the stuff is just poorly encoded that it gets scammed but the the massive Gap in between still is that uh a lot of stuff is poorly conceptualized uh poorly communicated so the promise uh it was started out with with never really delivered so this is this is really the problem we want to solve for ourselves we want to train our people our community in expressing economic ideas in a in a very intuitive and pratic practical uh conceptual fashion so this triggered uh a deep dive uh many Ro talk conversations too with Eric and and Jim and V and Beth too over over last year I'll present uh five plus one of those deep Dives very quickly uh just as a teaser because I think we're at the point where I can actually like uh take this out from the research phase over to the experimental phase the first one the obvious one is the bow house especially the the so-called bous four course the first preliminary course all of the bous students had to take before they moved on to their specializations what is it metal glass uh clay Uh Wood and so on and until they were allowed to build buildings uh the the Curious fact we learned about the the the B for course was that over time from the beginning the three main instructors they well known artists in their own right move from the spiritual and philos philosophical under johanes Enon towards the more material materialistic under yoseph Alber for the very simple reason that they in in order to survive the bous had to find ways to make money um so interesting thing another one uh I think that's the one that should be most familiar to all of you is um the Bloomington school with Elanor and Vincent Ostrom uh the people who really started the governing the commons movement um she's actually the the core noral laate of my own dissertation advisor all Williamson but the interesting thing here why we found this interesting and for our case is that um the whole uh all of her work was really really focused on actually creating practical design principles which is something you very very rarely ever find in any any economics curriculum so she was very far out from from uh mainstream economics at the time uh to the extent that almost nobody knew about her when she got the no price um the third one uh is like very close to my own heart this is Herbert Simon and the coni school at cone melan University in Pittsburgh uh this is really the epicenter of computational Economics lot of famous people I think eight noble orates five touring Awards six or seven John F Norman prices on so on this is very the Nexus especially herb Simon himself I think he found that the business school the economics Department uh the computer computer science school and the design school when he was there so like all of the thing all of the things we are interested uh combined in one person uh number four is the one I already mentioned this is uh the Sanford economic engineering apprach approach mentioned a couple names another one is K arrow that should be mentioned the interesting thing as a side note for us uh why why we find this interesting is almost nothing of this stuff I talked about came out of the economics Department it came from industry engineering it came from the economic engineering uh systems school and the uh the operations research group at the business school so number five is the one I want to do a little bit more of a deep dive here everything else is just sadly on the teaser level but um from Berkeley Christopher Alexander's pattern language which you might or might not know he's an architect so he originally started out as a way to express architectural ideas succinctly and intuitively um it's become much more successful in in software development as software design patterns so might be some of people that know about this so like this is has already been impr proven and we have find it very interesting but before I go a deep dive the last one the bonus uh inspiration is Brian en know and Peter Schmid's oblique strategies for a very very simple reason I love the format having having succinct creativity Triggers on a set of cards which I think we will will uh employ for our things too so this is overall the span of of inspirations antiscience uh we want to bring together from one end to the other from the oblique strategies over to the Sanford approach to actually put together into into one curriculum that actually teaches economic ideas economic Concepts in a in a more designed rigorous design fashion um go back to Christopher Alexander his definition of a pattern a careful description of perennial solution to recuring problem um the interesting stuff here here is in my opinion the last sentence that brings life to a building I think one of our big goals is always to create economic spaces are inhabitable that people like to to to inhabit and and and dwell in and uh live in and Vol voluntarily not being forced uh which a lot of Economics is about being forcing people into lock in or lock out uh this is stuff we want to avoid and very clearly and and the in in the fine print down here uh you you can use the solution a million times over without ever doing it uh at the same way twice uh so we we condense it to a little bit more shorter definition ourselves the pattern is a succinct atic nearly self-explanatory memorable instraction of a best design practice thank you um so this is deliberately moves away from the formalistic way of teaching economics going away from the mathematical but it should ultimately connect with the ma mathematical part of of economic construction but ideally uh like the B for course before you take a formal economic class you get a very clear conceptual understanding of what Eon what you can do with with economic ideas um so this started a year ago a couple of conversations lot of lot of research couple hundred uh papers and books uh I think we have roughly one semester worth of design patterns identified usually pattern should have a succinct explanation should not be the explanation itself we'll see it in a second should not be self-explanatory but should be able to convey the idea uh and the intuition with within 20 minutes this is also uh Christopher Alexander's idea uh we have a t tentative structure of how we those patterns relate to each other how they relate to more traditional economic ideas and I think we're at the point where we can publish them in serial form and uh just uh registered the domain econ patterns.com yesterday so this is probably going to be the uh the starting point um in terms of trying to come up with a structure we try to do it in in two layers the first layer is what we call the engine room this is economic engines this is allocation mechanisms this is govern mechanism the famous ones of course Market auctions votes elections matching mechanism action algorithm scheduling algorithms uh most of this comes from uh industry engineering not really from economics but other things like filter selection filters tournaments um load balancing Network flow all of these things really belong on this layer uh but we want to go and one of the things is called you want to be able to put certain governance structures together from these constituents Parts but we also want to go one layer down we want to understand the actions the motivations the conflicts between uh options the orders confluences uh um structures habitats economic architectures and try to find out like how we actually uh put things together in order to create such a such a soall economic engine so um so far for this um I through some of the teasers um on this oblique strategy level so I'll just give you uh the headline um so see see if it's intuitive by itself or if then if it requires more of an explanation uh the first one is really the fundamental uh pattern of a decentralized system which is basically the opposite of a single source of truth it's a single truth gaining a single truth Within a community without having a single source of Truth um this would be a type of an order a um a process a step of actions I've done many many many times with the startups I work with is a map rued sword and filter which you probably know out of computer science not really out of Economics but always you start with a a a big number of things and you want to filter them down to a small number of things this is usually the steps you go through this is very much simply structur structuring your own workflow in that way another one would be a an economic habitat the the obvious economic habitat is of course a market and that's here uh a market is just an intersection with a lot and a fence and an intersection itself a lot fence they're all in individual structures and if you look at like an ancient Greek agura if you look at a supermarket or if you look at a a an online Market platform they all have this very abstract structure so you will find these things in all of these this is an idea getting getting down to abstract constituents to to bigger things and then we we we collect a lot of lot of really meaningful quotes I offer you two of those uh one of them her Simon was asked what are his two most important things in his work you set the system and the tree structure tree structure to to find a way through the overall system another one um this would be here this is would be a structure uh another one is uh another famous quote from Joseph shter Sher the uh the forefather of of entrepreneurial economics he said like the the the fundamental problem of an entrepreneur is he has to do two things two diverence things one of them is carry out new combinations be creative and get things done be organized so um as I said we're ready to to to bring this uh to the public uh we'll be announcement we'll be have going to have a an event at curv Labs probably next month um econ patterns is already online there not not much on it yet but we'll bring all of more information about all of these Inspirations or first all the pattern and more explanations out there uh please uh reach out to us and I hope you found this interesting thank you