Experimental economics vs. field economics

by on March 9, 2006 at 8:01 am in Economics | Permalink

Uri Gneezy and John List write:

Recent discoveries in behavioral economics have led scholars to question the underpinnings of neoclassical economics. We use insights gained from one of the most influential lines of behavioral research — gift exchange — in an attempt to maximize worker effort in two quite distinct tasks: data entry for a university library and door-to-door fundraising for a research center. In support of the received literature, our field evidence suggests that worker effort in the first few hours on the job is considerably higher in the "gift" treatment than in the "non-gift treatment." After the initial few hours, however, no difference in outcomes is observed, and overall the gift treatment yielded inferior aggregate outcomes for the employer: with the same budget we would have logged more data for our library and raised more money for our research center by using the market-clearing wage rather than by trying to induce greater effort with a gift of higher wages.

In other words, people in the real world show behavior much like that of traditional economic agents.  Here is the paper.  Have I mentioned that John List is one of the most important young economists?  He has jumped from a U. Wyoming Ph.d. to a U. Maryland job to the notoriously-stingy-to-tenure Department of Economics at the University of Chicago.  If you want to see a tough skeptic about many commonly accepted research results, especially in the realm of economic experiments, read some of John’s other papers.  John is developing more finely grained methods of discovering when we should believe laboratory experiments.  Are you surprised he puts greater trust in market data?

Devin McCullen March 9, 2006 at 9:00 am

Since I have no reason to doubt you, I will agree that John List is one of the most important young economists. I will add, however, that he has to be among the most, if not the most unfortunately named young economists.

Barkley Rosser March 9, 2006 at 10:01 am

John List is one of those rare cases of someone who has moved up
from a fairly “low” initial set of positions by publishing a lot.

As one who is often on here beating the drum of behavioral econ
against more standard views, clearly the standard views are
correct a lot of the time. Vernon Smith, the father of experimental
econ (and a George Mason Nobelist whom Tyler got there), regularly
defends free markets and has done many experiments showing all kinds
of situations where they work fine, even in situations where many
garden variety economists think that they would not.

However, Vernon and John List are fully aware of situations where
the standard stories do not hold. Figuring out which is what and
where is when in all this is clearly one of the leading current
research agendas in economics.

Noah Yetter March 9, 2006 at 1:54 pm

“A view of utility that assumes a desire for profit-maximization clearly cannot explain this kind of behavior.”

Why not? Profit != Money.

Kyle N March 9, 2006 at 7:11 pm

ECONGEEK, thanks for the info I was also at a loss concerning what was meant by a Gift in this case. I never thought of any bonus I was being paid as a gift, but then again, I never thought I was being paid enough in the first place, HA!

Barkley Rosser March 13, 2006 at 3:16 pm

Aaron,

This is an ongoing complaint by many. I would note that most experiments
are done on general undergrads, not econ majors. Indeed, studies have
shown that we have successfully brainwashed (or they have self selected)
those majors into being “more rational”/selfish than the average bloke.

There are many studies now that try to use non-students. Some of these
do show differences with students. Of course the most interesting are
studies that use people from different countries. The ones done on
the ultimatum game show big differences and have been highly cited.

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