The Invisible Hand of the Market: Algorithmic Ratification and the Digital Economy
| Speaker: | Vijay Vazirani |
|---|---|
| Affiliation: | Georgia Institue of Technology |
| Room: | Mathematics & Computer Building (MC) 5158 |
Abstract:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own interest. Each participant in a competitive economy is led by an invisible hand to promote an end which was no part of his intention.
Adam Smith, 1776.
With
his
treatise,
The
Wealth
of
Nations,
1776,
Adam
Smith
initiated
the
field
of
economics,
and
his
famous
quote
provided
this
field
with
its
central
guiding
principle.
The
pioneering
work
of
Walras
(1874)
gave
a
mathematical
formulation
for
this
statement,
using
his
notion
of
market
equilibrium,
and
opened
up
the
possibility
of
a
formal
ratification.
Mathematical
ratification
came
with
the
celebrated
Arrow-Debreu
Theorem
(1954),
which
established
existence
of
equilibrium
in
a
very
general
model
of
the
economy;
however,
an
efficient
mechanism
for
finding
an
equilibrium
has
remained
elusive.
The
latter
question
can
clearly
benefit
from
the
powerful
tools
of
modern
complexity
theory
and
algorithms,
and
was
taken
up
in
the
earnest
within
theoretical
computer
sciencea
decade
ago.
In
this
talk,
we
will
provide
a
summary
of
key
developments.
We
will
also
describe
a
fascinating
new
direction,
for
the
theory
of
algorithms,
that
has
emerged
from
this
work.
A
compelling
new
issue
is
extending
this
deep
understanding
of
markets
to
the
digital
economy
--
because
of
some
fundamental
reasons, the
methodology
outlined
above
does
not
carry
over
to
the
digital
realm.
We
will
outline
recent
progress
on
this
issue.
Based
in
part
on:
The
Notion
of
a
Rational
Convex
Program,
and
an
Algorithm
for
the
Arrow-Debreu
Nash
Bargaining
Game
(PDF)
and
Equilibrium
Pricing
of
Semantically
Substitutable
Digital
Goods.