While the history and methodology of laboratory experiments in economics have been extensively studied by philosophers, those of field experiments have not attracted much attention until recently. What is the historical context in which field experiments have been advocated? And what are the methodological rationales for conducting experiments in the field as opposed to in the lab? This article addresses these questions by combining historical and methodological perspectives. In terms of history, we show that the movement toward field experiments in (...) economics has two distinct roots. One is the general orientation of medical and social sciences to evidence-based policy evaluation, which gave rise to randomized field experiments in economics (e.g., behavioral public policy, poverty alleviation policy). The other is an awareness of several methodological limitations of lab experiments in economics, which required practitioners to get out of the lab and into the field. In these senses, the movement is a consequence of influences from both outside and inside economics: the general evidence-based trend in policy science and an internal methodological development of experimental economics. In terms of methodology, we show that these two roots resulted in two somewhat different notions of “external validity” as methodological rationales of field experiment. Finally, we suggest that analysis of experiments as exhibits highlights a methodological strategy in which both strands complement each other. (shrink)

This article reports an experiment which tests the principle of separability, i.e. that behaviour in a dynamic choice problem is independent of history and of unreachable eventualities. Although this is a well-known principle of orthodox decision theory and central to conventional economic modelling, it has been questioned on grounds suggested by non-expected utility models of choice under risk and by the psychology of affective influences on risk-taking. Our experimental design, which provides between-subjects tests of separability using three treatments in which (...) the history preceding a decision is manipulated, is inspired by these concerns. We expose separability to a clean and harsh test, but find no evidence that it is violated. (shrink)

Prospect theory is increasingly used to explain deviations from the traditional paradigm of rational agents. Empirical support for prospect theory comes mainly from laboratory experiments using student samples. It is obviously important to know whether and to what extent this support generalizes to more naturally occurring circumstances. This article explores this question and measures prospect theory for a sample of private bankers and fund managers. We obtained clear support for prospect theory. Our financial professionals behaved according to prospect theory and (...) violated expected utility maximization. They were risk averse for gains and risk seeking for losses and their utility was concave for gains and convex for losses. They were also averse to losses, but less so than commonly observed in laboratory studies and assumed in behavioral finance. A substantial minority focused on gains and largely ignored losses, behavior reminiscent of what caused the current financial crisis. (shrink)

This paper discusses the development of the field of economic methodology during the last few decades emphasizing the early influence of the "shelf" of Popperian philosophy and the division between neoclassical and heterodox economics. It argues that the field of methodology has recently adopted a more naturalistic approach focusing primarily on the "new pluralist" subfields of experimental economics, behavioral economics, neuroeconomics, and related subjects.

Economists and biologists have proposed a distinction between two mechanisms – “strong” and “weak” reciprocity – that may explain the evolution of human sociality. Weak reciprocity theorists emphasize the benefits of long-term cooperation and the use of low-cost strategies to deter free-riders. Strong reciprocity theorists, in contrast, claim that cooperation in social dilemma games can be sustained by costly punishment mechanisms, even in one-shot and finitely repeated games. To support this claim, they have generated a large body of evidence concerning (...) the willingness of experimental subjects to punish uncooperative free-riders at a cost to themselves. In this article, I distinguish between a “narrow” and a “wide” reading of the experimental evidence. Under the narrow reading, punishment experiments are just useful devices to measure psychological propensities in controlled laboratory conditions. Under the wide reading, they replicate a mechanism that supports cooperation also in “real-world” situations outside the laboratory. I argue that the wide interpretation must be tested using a combination of laboratory data and evidence about cooperation “in the wild.” In spite of some often-repeated claims, there is no evidence that cooperation in the small egalitarian societies studied by anthropologists is enforced by means of costly punishment. Moreover, studies by economic and social historians show that social dilemmas in the wild are typically solved by institutions that coordinate punishment, reduce its cost, and extend the horizon of cooperation. The lack of field evidence for costly punishment suggests important constraints about what forms of cooperation can or cannot be sustained by means of decentralised policing. (shrink)

The standard theories of cooperation in humans, which depend on repeated interaction and reputation effects among self-regarding agents, are inadequate. Strong reciprocity, a predisposition to participate in costly cooperation and the punishment, fosters cooperation where self-regarding behaviors fail. The effectiveness of socially coordinated punishment depends on individual motivations to participate, which are based on strong reciprocity motives. The relative infrequency of high-cost punishment is a result of the ubiquity of strong reciprocity, not its absence.

I argue that the right choice of subject pool is intimately linked to the research question. At least within economics, students are often the perfect subject pool for answering some fundamental research questions. Student subject pools can provide an invaluable benchmark for investigating generalizability across different social groups or cultures.

Martin Jones has criticized my account of the methodology of experimental economics on three points: the impossibility of testing external validity claims in the laboratory, my reconstruction of external validity inferences as analogical arguments, and the distinction between laboratory and non-laboratory sciences. I defend my account here and try to eliminate some misunderstandings that may have prompted Jones’s criticism.

This paper presents results from a modified dictator experiment aimed at distinguishing and quantifying intrinsic motivations for giving. We employ an experimental design with three treatments that vary the recipient and amount passed. We find giving to the experimenter not to be significantly different from giving to a charity, when the amount the subject donates crowds out the amount donated by the experimenter such that the charity always receives a fixed amount. This result suggests that the latter treatment, first used (...) by Crumpler and Grossman :1011–1021, 2008), does not provide a clean test of warm glow motivation. We then propose a new method of detecting warm glow motivation based on the idea that in a random-lottery incentive scheme, such as the one we employ, warm glow accumulates and this may lead to satiation, whereas purely altruistic motivation does not. We also provide bounds on the magnitudes of warm glow and pure altruism as motives that drive giving in our experiment. (shrink)

It is sometimes argued that experimental economists do not have to worry about external validity so long as the design sticks closely to a theoretical model. This position mistakes the model for the theory. As a result, applied economics designs often study phenomena distinct from their stated objects of inquiry. Because the implemented models are abstract, they may provide improbable analogues to their stated subject matter. This problem is exacerbated by the relational character of the social world, which also sets (...) epistemic limits for the social science laboratory more generally. (shrink)

In recent years, several authors have reconstructed the relationship between 20th-century economic theory and neuro-psychological research in terms of a three-stage narrative of initial unity, increasing separation, and ongoing reunification. In this article, I draw on major developments in economic theory and neuro-psychological research to provide a descriptive and normative critique of this reconstruction. Moreover, I put forward a reconstruction of the relationship between economics and neuro-psychology that, I claim, better fits both the available empirical evidence and the methodological foundations (...) of these disciplines. In doing so, I argue that recent calls to develop a unified interdisciplinary framework for modeling choice are premised on disputable presuppositions concerning both the domain of economic theory and the relationship between this theory’s axiomatic foundations and empirical findings about the neuro-psychological substrates of choice. (shrink)

The aim of this study is to analyze investor behavior towards socially responsible mutual funds. The analysis is based on an experimental study where a sample of individuals takes investment decisions under different parameters of information about the investment alternatives and expected returns. In the experiment, each participant decides how to distribute an investment budget between two funds, returns on which are uncertain and change over time. Two treatments are conducted, each providing a different degree of information on the socially (...) responsible (SR) character of one of the two investment alternatives. The results obtained suggest that although individuals’ criteria for investment are essentially guided by returns and diversification, participants invest significantly more in a fund when they are explicitly informed about its SR nature. In particular, participants who declare being concerned about SR actually invest significantly more in the SR alternative. Furthermore, the level of SR faithfulness among a small group of investors is such that they invest the main share of their budget in the SR fund, even when the return differential is highly unfavorable. Providing clear information about the SR characteristics of an investment is crucial to help investors express their preferences. (shrink)

Self-control failure occurs when an individual experiences a conflict between immediate desires and longer-term goals, recognises psychological forces that hinder goal-directed action, tries to resist them but fails in the attempt. Behavioural economists often invoke assumptions about self-control failure to justify proposals for policy interventions. These arguments require workable methods for eliciting individuals’ goals and for verifying occurrences of self-control failure, but developing such methods confronts two problems. First, it is not clear that individuals’ goals are context-independent. Second, facing an (...) actual conflict between a desire and a self-acknowledged goal, a person may consciously choose not to resist the desire, thinking that spontaneity is more important than self-control. We address these issues through an online survey that elicited individuals’ self-reported judgements about the relative importance of self-control and spontaneity in conflicts between enjoyment and health-related goals. To test for context-sensitivity, the judgement-elicitation questions were preceded by a memory recall task which directed participants’ attention either to the enjoyment of acting on desires or to the satisfaction of achieving goals. We found little evidence of context-sensitivity. In both treatments, however, judgements that favoured spontaneity were expressed with roughly the same frequency and strength as judgments that favoured self-control. (shrink)

A series of recent debates in experimental economics have associated demand effects with the artificiality of the experimental setting and have linked it to the problem of external validity. In this paper, we argue that these associations can be misleading, partly because of the ambiguity with which “artificiality” has been defined, but also because demand effects and external validity are related in complex ways. We argue that artificiality may be directly as well as inversely correlated with demand effects. We also (...) distinguish between the demand effects of experimentation and the reactions that they may trigger and that might endanger experimental validity. We conclude that economists should pay more attention to the way in which subjects construe the experimental task and learn to exploit subjects’ reactivity to expectations in their experiments. (shrink)

This paper presents a critical reflection on dynamic consistency as commonly used in economics and decision theory, and on the difficulty to test it experimentally. It distinguishes between the uses of the term dynamic consistency in order to characterize two different properties: the first accounts for the neutrality of individual preferences towards the timing of resolution of uncertainty whereas the second guarantees that a strategy chosen at the beginning of a sequential decision problem is immune to any reevaluation and will (...) effectively be implemented from then on in the decision problem. Although these two properties are equivalent under expected utility, this is not the case under non-EU. Building on the possible characteristics of individual dynamic preferences under risk, this paper proposes a conceptual categorization, that is experimentally testable, of possible sequential decision making behaviors of non-EU maximizers. (shrink)

The linguistic and cognitive sciences have severely underestimated the degree of linguistic diversity in the world. Part of the reason for this is that we have projected assumptions based on English and familiar languages onto the rest. We focus on some distortions this has introduced, especially in the study of semantics.

We report an experiment where each subject’s ambiguity sensitivity is measured by an ambiguity premium, a concept analogous to and comparable with a risk premium. In our design, some tasks feature known objective risks and others uncertainty about which subjects have imperfect, heterogeneous, information. We show how the smooth ambiguity model can be used to calculate ambiguity premia. A distinctive feature of our approach is estimation of each subject’s subjective beliefs about the uncertainty in ambiguous tasks. We find considerable heterogeneity (...) among subjects in beliefs and ambiguity premia; and that, on average, ambiguity sensitivity is about as strong as risk sensitivity. (shrink)

Experimental studies on punishment have sometimes been over-interpreted not only for the reasons Guala lists, but also because of a frequent conflation of proximate and ultimate explanatory levels that Guala's review perpetuates. Moreover, for future analyses we may need a clearer classification of different kinds of punishment.

That the rationality of individual people is ‘bounded’ – that is, finite in scope and representational reach, and constrained by the opportunity cost of time – cannot reasonably be controversial as an empirical matter. In this context, the paper addresses the question as to why, if economics is an empirical science, economists introduce bounds on the rationality of agents in their models only grudgingly and partially. The answer defended in the paper is that most economists are interested primarily in markets (...) and only secondarily in the dynamics of individual decisions – specifically, they are interested in these dynamics mainly insofar as they might systematically influence the most useful approaches to modeling interesting markets. In market contexts, bounds on rationality are typically generated by institutional and informational properties specific to the market in question, which arise and are sustained by structural dynamics that do not originate in or reduce to individuals' decisions or psychologic.. (shrink)

Several allocation rules allow for possible violations of the ‘independence of irrelevant alternatives’ axiom in cooperative bargaining game theory. Nonetheless, there is no conclusive evidence on how contractions of feasible sets exactly affect bargaining outcomes. We have been able to identify a definite behavioral channel through which such contractions actually determine the outcomes of negotiated bargaining. We find that the direction and the extent of changes in bargaining outcomes, due to contraction of the feasible set, respond to the level of (...) agent asymmetry with a remarkable degree of regularity. Alongside, we conclude that the validity of the IIA axiom is only limited to symmetric games. (shrink)

Can human social cognitive processes and social motives be grasped by the methods of experimental economics? Experimental studies of strategic cognition and social preferences contribute to our understanding of the social aspects of economic decisions making. Yet, papers in this issue argue that the social aspects of decision-making introduce several difficulties for interpreting the results of economic experiments. In particular, the laboratory is itself a social context, and in many respects a rather distinctive one, which raises questions of external validity.