Self-interest, Social Wealth, and Competition as a Discovery Procedure
AbstractIn Economics, as in any social science, empirical tests of theoretical results face a problem: researchers are unable to reproduce the whole economy (or at least its relevant parts) in their laboratories. Nowadays, Experimental Economics uses stylized experiments, drawing on the experience of Psychology, to test at least the basic assumptions of the economic theory of human behavior. Even classroom experiments may serve this purpose. This paper describes a simple classroom experiment that serves as an empirical test of Adam Smith's invisible- hand hypothesis. Furthermore, it demonstrates to the students that competition acts as a discovery procedure. The experiment is of high didactical value, since the students gain insights into empirical research and experience how markets work.
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Bibliographic InfoPaper provided by Berkeley Electronic Press in its series German Working Papers in Law and Economics with number 2004-1-1083.
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Hayek-Hypothesis; Efficiency; Double Oral Auctions;
Find related papers by JEL classification:
- A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
- D40 - Microeconomics - - Market Structure and Pricing - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-01 (All new papers)
- NEP-EXP-2004-02-01 (Experimental Economics)
- NEP-HPE-2004-02-01 (History & Philosophy of Economics)
- NEP-LAW-2004-02-01 (Law & Economics)
- NEP-MIC-2004-02-01 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vernon L. Smith, 1962.
"An Experimental Study of Competitive Market Behavior,"
Journal of Political Economy,
University of Chicago Press, vol. 70, pages 111.
- Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322.
- John C. Eckalbar, 2002. "An Extended Duopoly Game," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(1), pages 41-52, January.
- Bradley J. Ruffle, 2003. "Competitive Equilibrium and Classroom Pit Markets," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(2), pages 123-137, January.
- Plott, Charles R, 1982. "Industrial Organization Theory and Experimental Economics," Journal of Economic Literature, American Economic Association, vol. 20(4), pages 1485-1527, December.
- Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
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