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Self-interest, Social Wealth, and Competition as a Discovery Procedure : A classroom experiment that makes the "invisible hand" visible

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  • Kirstein, Roland
  • Schmidtchen, Dieter

Abstract

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.

Suggested Citation

  • Kirstein, Roland & Schmidtchen, Dieter, 2003. "Self-interest, Social Wealth, and Competition as a Discovery Procedure : A classroom experiment that makes the "invisible hand" visible," CSLE Discussion Paper Series 2003-08, Saarland University, CSLE - Center for the Study of Law and Economics.
    • Handle: RePEc:zbw:csledp:200308
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Hayek-Hypothesis; Efficiency; Double Oral Auctions;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General

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