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Exchange, Specialization, and Property as a Discovery Process

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  • Vernon L. Smith

Abstract

This report summarizes some of the findings of an experimental investigation motivated by the question, How might exchange, specialization, and property--rules governing actions--emerge jointly in human economic betterment? Sparse experimental instructions in a virtual village environment serve to inform individual subjects how to produce items and the payoffs earned by items moved into their homes. Unknown to the subjects, but discoverable through repeat trials and discussion (via a “chat” space), are the possibilities for wealth creation through production, specialization, and exchange. There is no external enforcement of contracts and (in one series) no rules preventing “theft.” Group performance--either in success or in failure--well illustrates Hume's notion of rules as conventions that arise, or not, through common experience and by consent. In shaming or praising each other's actions, we rediscover the wisdom of Adam Smith.

Suggested Citation

  • Vernon L. Smith, 2011. "Exchange, Specialization, and Property as a Discovery Process," History of Political Economy, Duke University Press, vol. 43(2), pages 317-337, Summer.
  • Handle: RePEc:hop:hopeec:v:43:y:2011:i:2:p:317-337
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    Cited by:

    1. Williams, Stephen F., 2016. "Words, words, words: The remarkable perseverance of Magna Carta," International Review of Law and Economics, Elsevier, vol. 47(S), pages 67-71.

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    Keywords

    private property; experimental economics;

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