Book contents
- Frontmatter
- Contents
- Introduction
- PART ONE CLASSIC DISCUSSIONS
- PART TWO POSITIVIST AND POPPERIAN VIEWS
- PART THREE IDEOLOGY AND NORMATIVE ECONOMICS
- PART FOUR BRANCHES AND SCHOOLS OF ECONOMICS AND THEIR METHODOLOGICAL PROBLEMS
- 16 Econometrics as Observation: The Lucas Critique and the Nature of Econometric Inference
- 17 Does Macroeconomics Need Microfoundations?
- 18 Economics in the Laboratory
- 19 Neuroeconomics: Using Neuroscience to Make Economic Predictions
- 20 The Market as a Creative Process
- 21 What Is the Essence of Institutional Economics?
- PART FIVE NEW DIRECTIONS IN ECONOMIC METHODOLOGY
- Selected Bibliography of Books on Economic Methodology
- Index
- References
18 - Economics in the Laboratory
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Introduction
- PART ONE CLASSIC DISCUSSIONS
- PART TWO POSITIVIST AND POPPERIAN VIEWS
- PART THREE IDEOLOGY AND NORMATIVE ECONOMICS
- PART FOUR BRANCHES AND SCHOOLS OF ECONOMICS AND THEIR METHODOLOGICAL PROBLEMS
- 16 Econometrics as Observation: The Lucas Critique and the Nature of Econometric Inference
- 17 Does Macroeconomics Need Microfoundations?
- 18 Economics in the Laboratory
- 19 Neuroeconomics: Using Neuroscience to Make Economic Predictions
- 20 The Market as a Creative Process
- 21 What Is the Essence of Institutional Economics?
- PART FIVE NEW DIRECTIONS IN ECONOMIC METHODOLOGY
- Selected Bibliography of Books on Economic Methodology
- Index
- References
Summary
Vernon Smith (1927–) received his Ph.D. in economics at Harvard. Although his more than two hundred books and articles address issues in many areas of economics, he is best known for his work on experimental economics, for which he received the Nobel Prize in 2002. After many years at the University of Arizona, Smith is now a professor of economics at George Mason University.
Why do economists conduct experiments? To answer that question, it is first necessary briefly to specify the ingredients of an experiment. Every laboratory experiment is defined by an environment, specifying the initial endowments, preferences and costs that motivate exchange. This environment is controlled using monetary rewards to induce the desired specific value/cost configuration (Smith, 1991, 6). An experiment also uses an institution defining the language (messages) of market communication (bids, offers, acceptances), the rules that govern the exchange of information, and the rules under which messages become binding contracts. This institution is defined by the experimental instructions which describe the messages and procedures of the market, which are most often computer controlled. Finally, there is the observed behavior of the participants in the experiments as a function of the environment and institution that constitute the controlled variables.
Using this framework of environment, institution, and behavior, I can think of at least seven prominent reasons in the literature as to why economists conduct experiments. Undoubtedly, there are more (Davis and Holt, 1992, Chapter 1 and passim).
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- The Philosophy of EconomicsAn Anthology, pp. 334 - 355Publisher: Cambridge University PressPrint publication year: 2007