• 00:01    |    
    Initial credits
  • 00:06    |    
  • 00:21    |    
    Laboratory economics: Methods and substance
    • Testing general theories
    • Markets as systems of efficient resource allocation
    • Efficiency and wealth
    • Increasing wealth in societies
    • The central problem of resource allocation
    • Resource allocation without central control
  • 12:36    |    
    The Law of Supply and Demand
    • Demand and supply equations
    • Equation solution and equilibrium
    • Asset distribution
    • Does the Law of Supply and Demand work?
    • Experimental study of competitive market behavior, Vernon Smith (1962)
  • 22:23    |    
    Market jaws
    • Exchange dynamics
    • Disequilibrium and order flow prediction
    • Order flow prediction through derivatives
    • Market as a spontaneous order
  • 32:15    |    
    Experimental tests by Vernon L. Smith
    • Experiment replication
    • Systematic application of expectations and beliefs
    • Characteristics of a general theory
  • 38:11    |    
    Market interventions and quantity controls
    • Consequences of market interventions
    • Anomalies in markets
    • Market bubble and crash
    • Unstable equilibrium dynamics
  • 46:35    |    
    Final words
  • 47:00    |    
    Questions and comments section
    • When conducting experiments, did Vernon Smith create his graphs previously? How did he develop these experiments?
    • What is the role of experimental economics in political decision-making?
    • Sound representation of market dynamics
    • What happens when experimentalists are the subjects of the experiments?
  • 55:18    |    
    Final credits

Behind the Scenes of Supply and Demand

New Media  | 28 de febrero de 2014  | Vistas: 1302

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.


Charles R. Plott is William D. Hacker Professor of Economics and…