2/ Lucas (1986) praises classic market experiments by V Smith (
@Caltech
'56) and animal exp's by Kagel and Battalio. At the end Bob introduces a question about monetary economics: What is the equilibrium in an exchange economy where young sell goods to the old for fiat money? 3/ the price is q_t in period t. Eq (8) specifies a stable price (q_{t+1}=q_t)=15/16). It can be arrived at by a sequence of adaptive expectations. But there are a continuum of equilibrium prices. Lucas wonders how to learn about what will happen and proposes *an experiment*...