1 George Mason Law and Economics Center PPE Program, June 2006 MorningHour 2– Wealth Maximization Game June 15, 2006 Eric Rasmusen,

2 REVIEW Welath maximization

3 Trading Game Rules I I find acting out helps to learn. My own field of game theory. 1. The instructor will give each member of the class an item or items as a gift. You will get to keep these. 2. Write on your scoresheet your personal values, the amounts for which you would be willing to sell the items back to the instructor. Your value might be for your own consumption, or as a memento of this class, or the value to you for having the item to give as a gift to someone else after the class is over.

4 Trading Game Rules II 3. Everyone will freely trade items. One or more items can be traded for another, but no money or other goods may change hands, because we want the exchange of the gift items to be self-contained. Also for this reason, please do not consume (eat, use and throw away, etc.) the items before the end of the game. 4. Again write on your scoresheet your personal values, the amounts for which you would be willing to sell your current items back to the instructor. Your value might be for your own consumption, or as a memento of this class, or the value to you for having the item to give as a gift to someone else after the class is over. 5. Hand your list in to the instructor. 6. You get to keep the gift items you end up with.

5 IDEAS 1. The dollar value of wealth increases with trade. This is what ``wealth maximization'' means. 2. Trade is productive just like technology. 3. The total value is probably less than the cost at the store to the instructor. He does not know what the students like. 4. Trade is itself costly. It takes time and energy. 5. Retailing and wholesaling is an increasingly big part of GDP. In wholesaling was 6% and retailing was 8%, a total of 14%, compared to 13% for government and 13% for manufacturing (From the Statistical Abstract of the US).