Rationality in economics : constructivist and ecological forms / Vernon L. Smith.

Format:

Book

Author/Creator:

Smith, Vernon L.

Language:

English

Subjects (All):

Economics--Methodology.

Economics.

Constructivism (Philosophy).

Ecology.

Physical Description:

xx, 364 pages : illustrations ; 24 cm

Place of Publication:

Cambridge ; New York : Cambridge University Press, 2008.

Contents:

Part I Rationality, Markets, and Institutions 13

1 Rediscovering the Scottish Philosophers 15

Exchange in Social and Economic Order 15

Lessons from Scotland 18

2 On Two Forms of Rationality 24

Constructivist Rationality 26

Limitations and Distractions of Constructivist Rationality 32

Ecological Rationality 36

Implications 41

Part II Impersonal Exchange: The Extended Order of the Market 43

3 Relating the Two Concepts of a Rational Order 45

Airline Route Deregulation 47

The California Energy Crisis 50

Economic Systems Design 53

Constructivism as Rational Reconstruction of Emergent Order 57

4 Market Institutions and Performance 61

Knowledge, Institutions, and Markets 61

The Iowa Electronic Market 68

Strategy Proof-ness: Theory and Behavior 70

Did Gresham Have a Law? 74

Market Power and the Efficacy of Markets 75

Equilibrium with a Dominant Firm? 75

The Ethyl Case and Antitrust Policy 77

Gasoline Market Behavior and Competition Policy 81

Predatory Pricing 83

Entry Cost and Competition: Contestable Markets Theory 86

5 Asymmetric Information and Equilibrium without Process 94

Rationality in Asymmetric Information Markets 94

The Neoclassical Synthesis 101

Hayek and the Hurwicz Program 104

Experimental Markets with Asymmetric Information 108

Markets for Quality 109

Labor Markets and Efficiency Wages 111

6 FCC Spectrum Auctions and Combinatorial Designs: Theory and Experiment 115

Auctions: Modeling Institutions 116

Economics of English Auctions 117

Independent Private Values 118

Common Values 121

Review of Relevant Experimental Results 125

Single Object Auctions 126

Common Value Auctions 126

A "Winner's Curse" in Private Value English Auctions for Gambles? 127

Jump Bidding and the Class of Badly Performing Multiple-Unit English Auctions 127

The English Clock Corrects Bad Performance 130

Combinatorial Auctions 131

Tests of SMR and a Proposed Alternative 133

The FCC Auction Design Process 137

Auction Design for Complex Environments 140

The Combo Clock: Simple Solutions for Complex Auctions 141

Implications for the Design of Spectrum Auctions 144

7 Psychology and Markets 149

Psychology's Challenge to Constructivist Rationality 149

Psychology, Economics, and the Two Forms of Rationality 156

What Is Fairness? 161

Examples of Fairness 163

Fairness: An Experimental Market Test 166

8 What Is Rationality? 168

Economic Survival versus Maximizing Utility 169

Maximizing the Probability of Survival 169

Maximizing Expected "Profit," or Discounted Withdrawals 172

Is It Rational to Be "Rational"? 173

Literature Background 176

Modeling Net Subjective Value 177

Examples from Experiments 179

Monetary Incentives: Further Discussion 180

Rationality in Collectives and the Sense of Number 182

Market Rationality: Capital versus Commodity and Service Flow Markets 186

Part III Personal Exchange: The External Order of Social Exchange 189

9 Emergent Order without the Law 192

Rules and Order 192

Ellickson Out-Coases Coase 196

10 The Effects of Context on Behavior 199

Introduction and Elementary Theoretical Background 199

Perspectives on Interpreting Results 200

How Does Context Matter? 202

Anonymity as a Treatment Procedure 204

Perception, Context, and the Internal Order of the Mind 206

The Significance of Experimental Procedures 209

Overview of Experimental Procedures 211

The Ultimatum Game Example 212

Dictator Games 220

Appendix Behavioral Deviation from Prediction: Error, Confusion, or Evidence of Brain Function? 227

11 Investment Trust Games: Effects of Gains from Exchange in Dictator Giving 234

A Celebrated Two-Stage Dictator Game 234

Reciprocity or Other-Regarding Preferences? 237

12 Reciprocity in Trust Games 245

Trust Games without a Punishment Option 250

Why So Much Cooperation? 253

Is It the Subjects? Undergraduates versus Graduates 253

Machiavelli, Trust, and Cooperation: Mandeville's Knaves? 254

Is It Utility for Other Payoff? 257

Reciprocity versus Preferences: Does Own Opportunity Cost Influence Other Choice? 260

Extensive versus Normal (Strategic) Form Games 264

Trust Games with Punishment Options 267

Self-Regarding Cooperation in Repeat Play? Protocols with and without Direct Punishment 272

Effect of Matching Protocol on Frequency of Cooperation in Trust Games with and without Punishment 274

Comparison of Behavior in the Repeated Play of Extensive and Normal Form Games 274

A Matching Protocol Based on Sorting for Cooperative Behavior 275

Part IV Order and Rationality in Method and Mind 281

13 Rationality in Science 283

Rational Constructivism in Method 285

Can We Derive Theory Directly from Observation? 285

Economics: Is It an Experimental Science? 290

What Is the Scientists' qua Experimentalists' Image of What They Do? 296

Auxiliaries and the Ambiguity of Rejecting the "Test" Hypothesis 297

A D-Q Example from Physics 298

A Proposition and Some Economics Examples 300

The Methodology of Positive Economics 304

In View of Proposition 2, What Are Experimentalists and Theorists to Do? 304

Experimental Knowledge Drives Experimental Method 305

The Machine Builders 308

Technology and Science 308

Technology and Experimental Economics 309

14 Neuroeconomics: The Internal Order of the Mind 312

Individual Decision Making 314

Rewards and the Brain 316

Strategic Interaction: Moves, Intentions, and Mind Reading 316

What Are the Neuroeconomic Questions? 317.

Notes:

Includes bibliographical references (pages 329-351) and index.

ISBN:

9780521871358

0521871352

OCLC:

80917199

Online:

Contributor biographical information

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