Self-interest, Social Wealth, and Competition as a Discovery Procedure
In 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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| Handle: | RePEc:bep:dewple:2004-1-1083 |
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| Contact details of provider: | Web page: http://www.bepress.com/gwp/default/
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References listed on IDEAS
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.:
- Smith,Vernon L., 2005.
"Bargaining and Market Behavior,"
Cambridge Books,
Cambridge University Press, number 9780521021487, February.
- Smith,Vernon L., 2000. "Bargaining and Market Behavior," Cambridge Books, Cambridge University Press, number 9780521584500, February.
- Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
- Smith, Vernon L, 1982. "Markets as Economizers of Information: Experimental Examination of the "Hayek Hypothesis"," Economic Inquiry, Western Economic Association International, vol. 20(2), pages 165-179, April.
- Israel M. Kirzner, 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 60-85, March.
- 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.
- Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 111-111.
- Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322-322.
- John C. Eckalbar, 2002. "An Extended Duopoly Game," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(1), pages 41-52, 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.
- Plott, Charles R., "undated". "Industrial Organization Theory and Experimental Economics," Working Papers 405, California Institute of Technology, Division of the Humanities and Social Sciences.
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