Vernon Smith, Rationality in economics: constructivist and ecological forms

Excerpt

Vernon Smith’s Rationality in Economics: Constructivist and Ecological Forms is divided into four parts: (1) rationality, markets and institutions, (2) impersonal exchange, (3) personal exchange, and (4) order and rationality in method and mind. The topics covered include, but are not limited to: the rediscovery of the Scottish philosophers and their ideas of social and economic order and exchange—two types of the same genus; the analysis of the differences and interactions between constructivist rationality and ecological rationality, and analysis of how the two concepts of rationality play out in concrete examples such as airline route deregulation, the California energy crisis, and the field of economic system design. Rationality in Economics also addresses the problems of knowledge, institutions, and markets by analyzing the Iowa Electronic Market, the results of experiments on predatory pricing, contestable markets, and a variety of auctions including the FCC Spectrum Auctions. Smith challenges standard economics’ conceptions of rationality, rejects fairness as other-regarding preferences, explores order without law, and considers the relevance of context to individual decision making. Results from ultimatum games, dictator games and trust games under a variety of different contexts testify to the relevance of context in understanding reciprocity. The effects of introducing new technology, from computerized experiments to f-MRI scanners as well as the Duhem-Quine problem of method in scientific research are also dealt with extensively. …