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Machine economies

Author

Listed:
  • Eduard Hartwich

    (University of Luxembourg)

  • Alexander Rieger

    (University of Luxembourg)

  • Johannes Sedlmeir

    (University of Luxembourg)

  • Dominik Jurek

    (University of California)

  • Gilbert Fridgen

    (University of Luxembourg)

Abstract

This fundamentals article discusses efficient machine economies in which non-human agents can autonomously exchange information and value. We first identify criteria for achieving Pareto efficiency in such economies by drawing on the Coase Theorem. We then translate these economic criteria to technical requirements before developing a framework that characterizes four types of machine economies. We discuss real-life examples for each type to highlight key challenges in achieving Pareto efficiency. In particular, we highlight that machine economies with human involvement in economic interactions and governance face significant challenges regarding perfect information, rationality, and transaction costs. Machine economies without human involvement, in turn, promise a high degree of Pareto efficiency, but there are still many open questions, particularly regarding machine-enforced governance. We conclude with opportunities for future research on the interactions and governance in machine economies.

Suggested Citation

  • Eduard Hartwich & Alexander Rieger & Johannes Sedlmeir & Dominik Jurek & Gilbert Fridgen, 2023. "Machine economies," Electronic Markets, Springer;IIM University of St. Gallen, vol. 33(1), pages 1-13, December.
    • Handle: RePEc:spr:elmark:v:33:y:2023:i:1:d:10.1007_s12525-023-00649-0
    DOI: 10.1007/s12525-023-00649-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Algorithmic governance; Autonomous agents; Digital platform; Economic efficiency; Machine economy; Transaction costs;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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