Market designers positioned themselves as correcting markets’ information-aggregation flaws for common-value assets.

Evidence

The basis for this claim was that the assets to be purchased were “common,” or objectively, valued. According to conventional theory, one should expect in such cases that purchasers of such assets should find themselves misjudging this objective value, resulting in a kind of undesirable behavior called the “winner’s curse.” Market designers believed they could mitigate such problems by designing markets that efficiently aggregate information, and thereby assist market participants to discover the true value of items being sold. … In circumstances like these, with the largest financial firms in the nation perched on the precipice of default, the stakes were dangerously high, making their participation all the more crucial. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 857

Categorization

• DEFINE: Explains the winner’s curse concept in context of auctioning common-value assets.
• XREF: Connects to the thought-collective theme: trained economists as ‘helping visible hand’ filling in where markets fail. — connects to: Market designers deliberately conflate actual markets with the abstract market — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 2275; Modern financial markets are deliberately designed entities — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1235; Markets are human creations amenable to redesign, not natural forces — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1237 (+1 more)

Broader Connections

• Markets are human creations amenable to redesign, not natural forces #expands (0.78) — Donald MacKenzie, An Engine, Not a Camera, 1237
• Market designers claimed better auctions alone could have prevented the 2008 crisis #expands (0.78) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 870
• Modern financial markets are deliberately designed entities #expands (0.75) — Donald MacKenzie, An Engine, Not a Camera, 1235