Charles R. Plott reviews markets as systems of efficient resource allocation. Economic efficiency, he says, is the source of any nation’s wealth. Can this asset distribution occur without the existence of a central control? The Law of Supply and Demand suggests that markets can do this on their own. Plott puts this theory to the test, through the use of laboratory economics and live experimental models. Exchange dynamics between bidding subjects produce supply and demand curves, leading to a progressive convergence to equilibrium. This convergence is universal, repeating itself in many different scenarios.

Plott makes an interesting exposition of Vernon Smith’s various experimental tests, which serve as proof for the accuracy of this very general theory. These models show and confirm the existence of market anomalies, bubbles and crashes, and the persistence of an ever unstable equilibrium that is only partially predictable. The basic principles of economics are extremely useful, especially in warning us of interventions that can cause problems.