Table of Contents
Table of Contents 2
Introduction 3
1. The Beginning of Experiments in Economics 3
2. Why and When Experiments in Economics Became Interesting 4
3. Different kinds of Experiments in Economics 5
4. Usefulness of Experimental Economics 6
Conclusion 8
References 9
Grade: 11
Introduction
Experimental economics has been the protagonist of one of the most stunning
methodological revolutions in the history of science. In recent years the pace of economic
experimentation has greatly accelerated. “€From the early 1970s the number of papers has
grown from two or three per year to numbers approximating 100 per year. The number of
researchers has grown from a small handful in the early 1970s to hundreds”€™ (Plott,
1991: 901 and Guala, 2005: 2-3). Economists use experiments, by themselves or in
combination with field observation, to test existing theories, investigate puzzling
phenomena – sometimes unguided by theory – and to evaluate policies, private or public
(See Roth, 1987: 2 and Roth, 1986).
However, because, nowadays, the body of experimental economics is too vast for a short
review (McAdams, 1999), the main focus of this essay will be on finding an answer to the
question: “if experiments in economics are useful?”€
1. The Beginning of Experiments in Economics
It has been part of the folklore of economics that it is a non-experimental science.
Economists have been employing experimental methods for at least 60 years. However,
some would say that experiments in economics date back much further than this. For
instance, Roth (1988) cites Bernoulli (1738) as an early example of “€informal”€™
experimentation in economics. Even so, Starmer (1997) argues that, when looking to the
first half of these, approximately, 60 years, the experimental method played a very
peripheral role in empirical economics. Experiments were quite rare, often conducted in a
rather informal manner (relative to contemporary standards), and most likely regarded as
something of a curiosity by the majority of academic economists. However, according to,
inter alia, authors like Roth (1986, 1987 and 1988), Plott (1991), Thaler (1992), Davis and
Holt (1993), Kagel and Roth (1995), Starmer (1997), Guala (2005) and Sugden (2005), the
picture has changed markedly during the last 25 years or so. For the reason that the use of
experimental methods to address economic questions has grown rapidly and there are clear
signs, in at least some quarters, that experimentation has acquired a significant degree of
recognition as a legitimate branch of empirical enquiry, relevant to economic discourse.
There are numerous of indicators, which prove this change, like articles reporting
