The Experimental Economists


The orthodox economics is squarely based on the institutions of individualism, economic rationality, private property and exchange (market economy). It faces six fundamental questions: (i) will the society organized on the principles of exchange stay composed or will it fall apart (the question of existence of equilibrium)?, (ii) will such an equilibrium be unique (a multiplicity of equilibria poses difficult and embarrassing questions)?, (iii) will such an equilibrium be robust (the question of stability of equilibrium)?, (iv) will such an economy (society) be efficient?, (v) will it grow or expand forever?, and (vi) will it be just? The classical economists, Adam Smith in particular, answered all these questions affirmatively using a characteristic methodology. However, Karl Marx challenged the entire structure of faith in the merits of the exchange economy and shattered all optimism regarding the said order. Some economists, mostly using a complex of mathematical, marginalist, rationalistic, atomistic and hedonistic methodology set out to prove that answers to all those six questions were in the affirmative. They worked hard to restructure the faith in the said order centered around the market. This led to the development of what Thorstein Veblen called Neo-Classicism. In so doing, the Neo-Classicists had to distance themselves from the reality and they did not mind doing so. This endeavour made neoclassical economics dogmatic and religious in nature. Leijonhufvud (1973) characterized neoclassical economics in the most sarcastic manner.

Experimental economics (much like Behavioural Economics) is based on the deeper relationships between economics and psychology and emphatically retaliates the suggestion of the free market economist Lionel Robbins who held that psychology should not enter into economic analysis. Obviously, Robbins thought that with regard to the use of means to meet the ends man is just an optimizing automaton. The real issues are: do economic agents behave rationally; are they selfish; how do they make decisions in the real life when risks and uncertainties are there and are the given economic theories plausible in the real world situation? The Experimental economists used the experimental methods of psychology to investigate into these aspects. It may be viewed as the behavioural economics under experimental design and control rather than in the natural settings. Using cash-motivated subjects, economic experiments create real-world incentives to help us better understand why markets and other exchange systems work the way they do. Experiments may be conducted in laboratory settings or in the field. Economics experiments can be loosely classified into the topics such as Markets, Games, Decision making, Bargaining, Auctions, Coordination, Social Preferences, Learning, Matching, and Field Experiments. Experimental economists have found that many of the axioms of the orthodox (especially Neo-Classical) economics are not well-founded. Development of Neuroeconomics is also an attempt to extend the boundaries of experimental economics. The experimental economists also developed the Prospect Theory.

The Experimental Economists
Vernon L. Smith Charles Plott
Daniel Kahneman Alvin E. Roth
Colin Camerer Charles A. Holt

Experimental Economics is attracting many new authors. Most of their works may be free downloaded.


 

 

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Journal of Alternative Economic Analysis

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