Economics Dictionary of ArgumentsHome
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| Markets: A market in economics is a physical or virtual place where buyers and sellers come together to exchange goods and services. Markets allow people to specialize in different areas of production, they provide competition, and promote innovation. See also Competition, Progress, Economy, Goods, Exchange, Trade, Innovation._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Vernon L. Smith on Markets - Dictionary of Arguments
Surowiecki I 144 Markets/Prices/Information/Smith, Vernon L./Surowiecki: Problem: How do markets work without information being available to everyone? How does it turn out that goods go from the people who produce them cheapest to the people... Surowiecki I 145 ...that need them most urgently? Smith: investigated this question empirically in a laboratory in 1956 (which was unusual at the time). A group of 22 students were divided into buyers and sellers. Each seller received a card stating the lowest price at which he was selling, each buyer received a card with the highest price at which he should be willing to buy. Surowiecki I 146 In the laboratory situation, this resulted in a "market" that followed the model of the so-called reciprocal auction, which is similar to the usual stock exchange. Offers and acceptances were announced by acclamation. Conclusions were noted on a blackboard. Smith wanted to find out whether there would be a price in line with the market in theory. Surowiecki I 147 In fact, prices quickly converged to a price, even though none of the participants wanted such a result, as buyers wanted lower prices and sellers wanted higher prices. The participants did not have any more information than the prices noted on the cards. Further result: the Group's total profit was boosted by the market. The group could not have done better if it had had more information. (1) Vernon L SmithVsArrow, Kenneth J./Surowiecki: Kenneth Arrow and Bernard Debreu had shown in the 1950s that markets are efficient and mistakes are impossible here: However, this so-called "balance weight hypothesis" was only shown with a theoretical model and not in a practical experiment. Arrow/Surowiecki: in his theoretical model, buyers and sellers have extensive knowledge. >Markets/Surowiecki. Vernon L. Smith's study of his first classroom experiment is "An Experimental Study of Competitive Behavior", Journal of Political Economy 70/1962, pp. 111-137, and many of the articles he has published on this subject over the years are collected in two volumes: Smith, Papers in Experimental Economics (Cambridge University Press, Cambridge 1991); and Smith, Bargaining and Market Behavior (Cambridge University Press, Cambridge 2000)._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
EconSmith I Adam Smith The Theory of Moral Sentiments London 2010 EconSmithV I Vernon L. Smith Rationality in Economics: Constructivist and Ecological Forms Cambridge 2009 Surowi I James Surowiecki Die Weisheit der Vielen: Warum Gruppen klüger sind als Einzelne und wie wir das kollektive Wissen für unser wirtschaftliches, soziales und politisches Handeln nutzen können München 2005 |
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