Design Economics: Past and Future

Design economics seeks to create or transform institutions in ways that bring about desirable social outcomes. I review the history of this research programme and I venture a guess about its future. Two paradigms withing design economics are identified: large-scale design of economic systems, prevalent in particular in the early days of mechanism design (e.g. Hurwicz, 1972); and later economic engineering (e.g. Roth, 2002). It is shown that, while the contributions of the former were predominantly theoretical and led to few if any real-world reforms, the latter has come to assist policy-making, but this practical advantage came at the cost of losing touch with debates about economic systems. I argue that economic engineering is a precondition for successful large-scale design. Recent progress in engineering suggests that large-scale design might resurrect in a form that will allow reformers to rely on it.