Exchange and Specialization as a Discovery Process

The Economic Journal, Vol. 119, pp. 1162-1188, 2009

34 Pages Posted: 14 Sep 2006 Last revised: 20 Mar 2019

See all articles by Sean Crockett

Sean Crockett

Chapman University

Vernon L. Smith

Chapman University - Economic Science Institute; Chapman University School of Law

Bart J. Wilson

Chapman University - Smith Institute for Political Economy and Philosophy; Chapman University - Economic Science Institute (ESI); Chapman University, The Dale E. Fowler School of Law

Date Written: May 1, 2006

Abstract

In this paper we study the performance of an economic environment that can support specialization if the participants implement and develop some system of exchange. We define a closed economy in which the participants must discover the ability to exchange, implement it, and ascertain what they are comparatively advantaged in producing. Many people demonstrate the ability to find comparative advantage, capture gains from trade, and effectively choose production that is consistent with the choices of others. However, many do not become specialists, even though full efficiency can only be achieved if everyone does so. Near-full efficiency does occur bilaterally in these economies, typically because some individuals have entered a stable trading relationship with a specialist in the other good. Such pairing does not necessarily give impetus to the formation of other pairs, nor are pairs open to the inclusion of a third party. We explore various treatments to provide insight into the conditions that might foster the growth of specialization and exchange within this austere institutional framework. We find one treatment that achieves high levels of efficiency in half of the sessions.

Keywords: specialization, exchange and production economies, experimental economics

JEL Classification: C92, D51, F10

Suggested Citation

Crockett, Sean and Smith, Vernon L. and Wilson, Bart J., Exchange and Specialization as a Discovery Process (May 1, 2006). The Economic Journal, Vol. 119, pp. 1162-1188, 2009, Available at SSRN: https://ssrn.com/abstract=930078 or http://dx.doi.org/10.2139/ssrn.930078

Sean Crockett

Chapman University ( email )

Orange, CA 92866
United States

Vernon L. Smith

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States
714-628-2830 (Phone)

Chapman University School of Law ( email )

One University Drive
Orange, CA 92866-1099
United States

Bart J. Wilson (Contact Author)

Chapman University - Smith Institute for Political Economy and Philosophy ( email )

One University Drive
Orange, CA 92866
United States
(714) 628-7306 (Phone)

HOME PAGE: http://www.bartjwilson.com

Chapman University - Economic Science Institute (ESI) ( email )

One University Drive
Orange, CA 92866
United States
(714) 628-7306 (Phone)

Chapman University, The Dale E. Fowler School of Law ( email )

One University Drive
Orange, CA 92866-1099
United States
(714) 628-7306 (Phone)

HOME PAGE: http://www.bartjwilson.com

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
195
Abstract Views
1,985
rank
216,556
PlumX Metrics