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Markets as Economizers of Information: Field Experimental Examination of the "Hayek Hypothesis"

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  • Omar Al-Ubaydli

    ()
    (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)

  • Peter Boettke

    ()
    (Department of Economics, George Mason University)

Abstract

The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the "Hayek hypothesis:" equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in the absence of price-taking behavior and centralized market direction. Vernon Smith tested this by surveying data on laboratory experimental markets and found strong support. We repeat this exercise using field experimental market data. Using field experiments allows us to test several other predictions. Generally speaking, we find support for Hayek's theories.

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Bibliographic Info

Paper provided by George Mason University, Interdisciplinary Center for Economic Science in its series Working Papers with number 1025.

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Length: 14
Date of creation: May 2011
Date of revision:
Handle: RePEc:gms:wpaper:1025

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Keywords: price dynamics; entrepreneurs; field experiment; market process;

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