The Emergence of Economic Organization

Posted: 24 Dec 2000  

Peter Howitt

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Robert Clower

University of South Carolina - Darla Moore School of Business

Abstract

A model of decentralized markets is studied, in which transactors follow simple adaptive rules. Transactions are coordinated by specialist trading firms that bear the costs of market disequilibrium. Starting from an initially autarkic situation in which none of the institutions that support exchange exist, computer simulation shows that for a wide range of parameter values a fully developed market economy will emerge spontaneously. Moreover, in virtually every case where a market economy develops, one of the commodities traded will emerge as a universal medium of exchange, being traded by every firm and changing hands in every act of exchange.

Keywords: markets, money, transaction costs, organization, intermediation

JEL Classification: E00; P00

Suggested Citation

Howitt, Peter and Clower, Robert, The Emergence of Economic Organization. Journal of Economic Behavior & Organization, Vol. 41, No. 1, January 2000. Available at SSRN: https://ssrn.com/abstract=251291

Peter Howitt (Contact Author)

Brown University - Department of Economics ( email )

Box B
Providence, RI 02912
United States
401-863-2145 (Phone)
401-863-1970 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert W. Clower

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

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