We investigate experimentally the economic effects of wage taxation to finance unemployment benefits for a closed economy and an international economy. The main findings are the following. (i) There is clear evidence of a vicious circle in the dynamic interaction between the wage tax and...

The work of Friedrich Von Hayek contains several testable predictions about the nature of market processes. Vernon Smith termed the most important one the 'Hayek Hypothesis': equilibrium prices and the gains from trade can be achieved in the presence of diffuse, decentralized information, and in...

How can we maximize the common good? This is a central organizing question of public policy design, across political parties and ideologies. The answer typically involves the provisioning of public goods such as fresh air, national defense, and knowledge. Public goods are costly to produce but...