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I'd just call it the Ipso Facto Fallacy.

This looks like a great article, Steve. Thanks for that. I share your enthusiasm for V. Smith. He's got Hayek, evolutionary psychology, and experimental methods all working together. What's not to love? :-)

List and Millimet cite Gode & Sunder as well as Becker's 1962 JPE paper to which Kirzner responded. But they don't cite Hirschman's "The Passions and the Interests." As Hirschman documents, one of the oldest arguments for the market is that it tames the passions. Hume made an argument along these lines in his History and, as you say, it's in A. Smith too. It's also in Max Weber and Hayek. It looks like L&M have an impressive innovation by testing the idea in the lab. Very nice.

Thanks for the post; I'd always assumed that markets were just better at selecting more-rational actors than the alternatives.

It would be interesting to repeat this sort of experiment in environments that some believe causes macro-irrationality: implicit "bailouts", credit expansion/contraction, uncertain "regulatory" environments, etc.

1) Great post on a very important topic. So what if people are loss averse, have intransitive preferences, etc.? How does that mean markets will necessarily fail, or that government intervention would improve things?

2) Why are you people acting like you haven't heard of John List? Bad, bad Austrians! He is to economic research as Albert Pujols is to hitting.

Great post on a very important topic. Why are you people acting like you haven't heard of John List?

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