Experimental Markets: Introduction

This semester I teach a class consisting of 220 students. The class earns the students 4 hours of credit, and to earn one of those hours they must participate in a weekly laboratory where they act as buyers and sellers. Buyers work off demand curves and sellers work off marginal cost curves, both attempting to make profits and will be graded based off their profits. There are two sessions in each lab, and each student acts as both a buyer and a seller during each lab.

In a series of postings I will document various experiments conducted with the students to illustrate the intersection of government and markets. This posting is an introduction.

After two weeks of learning how to trade and calculate profits, last week the teams played for real for the first time. There were a total of 102 buyers and 102 sellers, and while trading was dispersed across four labs, I will treat them as if they all traded in one single market.

Sellers - Their marginal cost curves were MC = 3 + 1.1(q).

Buyers - Their demand curves were 17 - 1.1(q)

Supply and demand theory predicts that the equilibrium price will be 10 exactly and the equilibrum quantity will be 649. What actually happened? The weighted average price was 10.38 and the total bought/sold was 567. As far as price is considered, it would be hard for supply and demand to predict their behavior any better.

Simon Newcomb on Educating the Public

The Problem of Economic Education by Simon Newcomb in 1893 is one of the best articles I have read in some time, and provided me with greater enthusiasm for teaching economics. At the end of the article is a list of economic findings which we should champion, despite the public's resistance, and that list is perfectly relevant today.

HT: EconLog

Jan Helfeld Interviews

Since the beginning of economics we have tried to inject reason into public policy, but we all know that politicians often do not understand economics well or don't like what economics has to say.

To demonstrate this clearly to students, especially to demonstrate politician hypocracy, see the many Jan Helfeld interviews. I especially enjoy the interview with Pelosi on minimum wages.

Milton Friedman, Minimum Wage

Carpe Diem is awesome for teaching today...here is Milton Friedman on the minimum wage...

The Government Can

Funny video on role of government in society...

HT: Carpe Diem

Top Ten Teaching Mistakes

Good list, found here.

HT: Carpe Diem

Economic Tenets

Those teaching introductory economics courses should always try to focus on the most important tenets of economics. At Cafe Hayek they do a good job of citing Arthur Sheldon's list of these tenets...

I might add the finding that two people, two groups, or two countries can never be made worse off from trade. I guess the cite for that would be Marshall.