Do people behave in experiments as in the field?—evidence from donations

Laboratory experiments are an important methodology in economics, especially in the field of behavioral economics. However, it is still debated to what extent results from laboratory experiments are informative about behavior in field settings. One highly important question about the external validity of experiments is whether the same individuals act in experiments as they would in the field. This paper presents evidence on how individuals behave in donation experiments and how the same individuals behave in a naturally occurring decision situation on charitable giving. While we find evidence that pro-social behavior is more accentuated in the lab, the data show that pro-social behavior in experiments is correlated with behavior in the field.      

Holding back from theory: limits and methodological alternatives of randomized field experiments in development economics

ABSTRACT

In this paper, we critically and constructively examine the methodology of evidence-based development economics, which deploys randomized field experiments (RFEs) as its main tool. We describe the context in which this movement started, and illustrate in detail how RFEs are designed and implemented in practice, drawing on a series of experiments by Pascaline Dupas and her colleagues on the use of bednets, saving and governance in Kenya. We show that this line of experiments have evolved to address the limitation of obtaining policy-relevant insights from RFEs alone, characterized as their lack of external validity in the literature. After examining the two prominent responses by leading figures of evidence-based development economics, namely machine learning and structured speculation, we propose an alternative methodological strategy that incorporates two sub-fields, namely experimental economics and behavioral economics, to complement RFEs in investigating the data-generating process underlying the treatment effects of RFEs. This strategy highlights promising methodological developments in RFEs neither captured by the two proposals nor recognized by methodologists, and also guides how to combine different sub-fields of economics.     

Political markets? Politics and economics in the emergence of markets for biodiversity offsets

This paper analyses the relationship between politics and performativity of economics in the emergence of markets for biodiversity offsets. While the role of economics in constructing markets has been demonstrated by sociology and social studies of science, it has also become apparent that politics plays an important role in the material outcome of economic experiments. Two case studies of the creation of markets for biodiversity offsets are analysed, in the United States and England. The findings suggest that the creation of both markets is rooted in the language, concepts and models of economics. Politics, on the other hand, functions as a mediator of the material expression of those models. Through this mediation effect, similar economic models are performed differently, resulting in a variety of markets. This suggests that the material outcomes of processes of market creation are not defined at the outset, but can be influenced by political processes.     

A dynamic semester-long social dilemma game for economic and interdisciplinary courses

The authors present a semester-long game to teach the role of economics in natural resources management. The game is framed within a fisheries context: multiple student fisheries harvest fish to maximize yield/profit, which is measured using a piecewise linear function. There are prizes for both the student and the group with the highest semester-long catch, which brings forth the social dilemma associated with dynamic stock externalities in fisheries. The game can be played in large classes, is robust to student attrition, and requires 5–10?minutes per class period. Given its features, it can be used to teach behavioral economic principles in resource management, incentives versus command-and-control regulations, role of cheap talk, social preferences, punishment, and community management as well as solutions such as aquaculture.     

Can Markets Learn to Avoid Bubbles?

One of the most striking results in experimental economics is the ease with which market bubbles form in a laboratory setting and the difficulty of preventing them. This article re-examines bubble experiments in light of the results of an earlier series of market experiments that show how learning occurs in markets characterized by an asymmetry of information between buyers and sellers, such as found in Akerlof's lemons model and Spence's signaling model. Markets with asymmetric information are incomplete because they lack markets for specific levels of product quality. Such markets either lump all qualities together (lemons) or using external indications of quality to separate them (signaling). Similarly, the markets used in bubble experiments are incomplete in that they are lacking a complete set of forward or futures markets, depriving traders of the information supplied by the prices in those markets. Preliminary experimental results suggest that the addition of a single forward market can sometimes mitigate bubble formation and this article suggests more extensive research in this direction is warranted. Market bubbles outside of the laboratory usually are found in markets in which forward and futures markets are either legally restricted or otherwise limited. Experimentation in markets with asymmetric information also indicates that the ability of subjects to learn how to send and receive signals can be enhanced by changing the way that market information is presented to them. We explore how this result might be used to help asset markets learn to avoid bubbles     

Pod learning: Student groups create podcasts to achieve economics learning goals

In this article, the authors examine two ways that they use music (i.e., popular song lyrics) as an active learning technique in an undergraduate history of economic thought course. First, they use music to help students grasp the ideas of the great thinkers in economics and see their relevance today. Second, because they require students to read original texts and write thesis-driven essays, they use music to teach essential skills related to such assignments. While the article focuses on how they use music as a pedagogical device to teach the history of economic thought, the use of music to teach essential skills could be applied to any economics course in which students engage in higher-level reading and writing.     

Using Psychology to Improve Economic Policy

In this Australian Treasury seminar, I discuss the contributions that psychology could make to public policy formation via a new field: public policy psychology. Behavioural economics provides a precedent for my new field of public policy psychology. Unlike economics, psychology provides a solid scientific model of how individuals make decisions. I discuss shortcomings of economics in policy formation: model blindness, the focus on evidence supporting theories, the focus on markets, plus the importance of elements left out of conventional economic models (for example, irrational decision‐makers). I end by discussing two Treasury case studies: the mining tax and government responses to the Global Financial Crisis.     

Reforming Undergraduate Instruction in Russia,Belarus, and Ukraine

The authors deal with the restructuring of undergraduate economics instruction at Moscow State University (MSU) since 1989. They examine how closely the reforms at MSU are mirrored by changes at Belarus State University in Minsk and at Kiev State University. They also consider, and often offer an “insider's” perspective on, several issues related to curriculum reform that go beyond what can be determined from published curriculum guides. Specifically, they consider such issues as the training and retraining of faculty members who teach courses in these departments, the use of translated Western textbooks versus locally developed textbooks, and problems that arise in departments where some faculty members teach Western economics but others continue to teach Soviet-style economics.     

Values and the Economics Principles Courses

Every economics teacher has probably wrestled with the problem of how to deal with values, and because of recent student demands for relevance this problem has become more troublesome. Professor Horton believes that economists should teach “only what we believe has been scientifically established” and “should not promote particular values or particular social decisions….” He asserts that values and goals should be considered in economic classes, however, and in this article he suggests a procedure for teaching a unit on values and goals.     

Bringing the patient back in: behavioral decision-making and choice in medical economics

We explore the behavioral methodology and “revolution” in economics through the lens of medical economics. We address two questions: (1) Are mainstream economic assumptions of utility-maximization realistic approximations of people’s actual behavior? (2) Do people maximize subjective expected utility, particularly in choosing from among the available options? In doing so, we illustrate–in terms of a hypothetical experimental sample of patients with dry eye diagnosis—why and how utility in pharmacoeconomic assessments might be valued differently by patients when subjective psychological, social, cognitive, and emotional factors are considered. While experimentally-observed or surveyed behavior yields stated (rather than revealed) preferences, behaviorism offers a robust toolset in understanding drug, medical device, and treatment-related decisions compared to the optimizing calculus assumed by mainstream economists. It might also do so more perilously than economists have previously understood, in light of the intractable uncertainties, information asymmetries, insulated third-party agents, entry barriers, and externalities that characterize healthcare. Behavioral work has been carried out in many sub-fields of economics. Only recently has it been extended to healthcare. This offers medical economists both the challenge and opportunity of balancing efficiency presumptions with relatively autonomous patient choices, notwithstanding their predictable, yet seemingly consistent, irrationality. Despite its comparative youth and limitations, the scientific contributions of behaviorism are secure and its future in medical economics appears to be promising.     

Why do scientists cheat? Insights from behavioral economics

Abstract

Based on a review of the books by Wible (2014), Stephan (2012), and Lanteri and Vromen (2014), I discuss three different ways in which behavioral economics can enrich the understanding of scientific misbehavior. First, behavioral economics suggests that economic theories of scientific misbehavior, such as the one by Wible (2014), should consider moral costs of cheating, i.e. costs that arise from an individual’s desire to do the “right thing.” Second, behavioral economics demonstrates several ways in which the features of the reward scheme in science,as described by Stephan (2012), can favor cheating. Her conclusion that shirking is rarely an issue in science seems optimistic. Third, behavioral economics indicates that individual characteristics matter for cheating. According to Lanteri and Vromen (2014), economists possess different characteristics than other researchers. Hence, the reaction to incentives may differ across disciplines. Considering these insights is important to assess how a goal such as the pursuit of truth can be achieved efficiently.     

The Ecological Economic Model Based on Bounded Rational Agents

I. Introduction Ecology is a newly emergent subject. Stemming from natural history and evolutionary biology, ecology came into being at the beginning of the 20th century. Ecology has been strug- gling for its existence as a science, which has involved a s…     

Organizational versus Market Knowledge: From Concrete Embodiment to Abstract Representation

Synopsis In contrast to the neoclassical economic presumption in favor of markets, we argue that organizations, not markets should be taken as our default assumption. We do so on information processing grounds. We distinguish between Zen and market Knowledge. The first is embodied and hard to articulate and the second abstract-symbolic. In human evolution, the first type of knowledge came first, and, on any pragmatic definition of knowledge, it still incorporates most of what we mean by the term. We take codification and abstraction as the two data processing activities that lead to the articulation of knowledge into an abstract-symbolic form. We develop a conceptual framework, the Information-Space (I-Space) to show how far the articulation of knowledge leads to its being shared. Whereas an unlimited sharing of information and knowledge leads to market-oriented outcomes, a more limited sharing leads to organizational outcomes. A market-oriented economics has tended to look to physics for its models; the field of organization theory has tended to look to biology. A more organization-oriented economics would thus look more to biology for its models.     

基于有限理性智能体的生态经济模型

From the view of hominine bounded rationalities, this paper analyzes the important relationships between ecology and economics with behavioral finance. With a different focus, this paper adopts a new conceptualization of stock to show how this conceptualization leads to a new measure of the interaction between ecology and economics, based on bounded rational agents. The hierarchical structure of ecological economic system is described with a multi-agent simulation program. This paper also develops an ecological economic model, in which behavioral finance theories are applied to simulating the dynamics system. With the model, this paper confirms that macro-level indicators of sustainability are predictably influenced by behaviors of bounded rational agents at the micro-level. We discuss the significance of these findings in order to better understand the ecological-economic system based on behavioral finance.     

Towards a Theory of Revealed Economic Behavior: The Economic-Neurosciences Interface

Based on recent findings from economics and the neurosciences, we present a conceptual decision-making model that provides insight into human decision-making and illustrates how behavioral outcomes are transformed into phenomena. The model may be viewed as a bridge between the seemingly disparate disciplines of neuroscience and economics that may facilitate more integrative research efforts and provide a framework for developing research agendas for scientists interested in human behavior and economic phenomena.     

ON THE RELEVANCE AND COMPOSITION OF GIFTS WITHIN THE FIRM: EVIDENCE FROM FIELD EXPERIMENTS*

We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural behavioral model that identifies workers’ optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments conducted within a tree‐planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labor market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers’ outside alternatives deteriorate. Profit‐maximizing gifts would increase profits within slack labor markets by up to 10% on average and by up to 17% for certain types of workers.     

Between a rock and a soft place: Ecological and feminist economics in policy debates

The field of ecological economics includes both economic analysis on the one hand, and discussions of normative values and visions for society, on the other. Using feminist insights into cultural beliefs about the relative “hardness” and “softness” of these two sides, this essay discusses how ecological economists can use this unique “between” space in order to better inform policy. The current crisis of global climate change, it is argued, requires that economists move beyond modeling and measurement, while ecological thinkers need to re-examine beliefs about markets and profit.     

Banerjee,Duflo, Kremer,and the Rise of Modern Development Economics*

In 2019, Abhijit Banerjee, Esther Duflo, and Michael Kremer received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. These three scholars were recognized “for their experimental approach to alleviating global poverty”. This paper reviews the contributions of these three scholars in the field of development economics, to put this contribution in perspective. I highlight how the experimental approach helped to break down the challenges of understanding economic development into a number of component pieces, and I contrast this to understanding development using macroeconomic aggregates. I discuss pioneering contributions in understanding the challenges of education, service delivery, and credit markets in developing countries, as well as how the experimental approach has spread to virtually all aspects of development economics.