I have been looking for a command to produce dummy variables or fixed effects to describe a data set.
Is wolfram capable of doing this?
Lots of ways. Some functions have built-in options for that. GeneralLinearModelFit and LinearModelFit both have the option NominalVariables Also consider DiscreteIndicator if you want to roll your own. Is there something more specific that you had in mind?
GeneralLinearModelFit
LinearModelFit
NominalVariables
DiscreteIndicator