Competition, experiments and price theory. On a controversial return to the classical economists

The paper discusses the call by Sabiou Inoua and Nobel laureate Vernon Smith for a return to Adam Smith based on what “experimental economics” would have in common with the approach of the classical economists. The aim of the two authors is to provide an alternative to the neoclassical approach, both as a general theory of prices and, more specifically, as an account of the working of competition. Such an authoritative call for a theoretical breakthrough is undoubtedly welcome news to all advocates of a comparative approach among alternative research programmes in economic theory. We argue, however, that Inoua and Smith fail in their aim, showing in particular that the major shortcomings of their approach ultimately derive from the rejection of Adam Smith’s distinction between “market prices” and “natural prices.”