“Behavioral experiments” in economics

Abstract

Behavioral economics has grown significantly in importance and prevalence within the economics profession over the last couple of decades. Most economics departments now include researchers conducting behavioral research, and most economics journals regularly publish behavioral work. Behavioral economics is generally defined as using evidence and constructs from neighboring social sciences, especially about limits on computation, willpower, and self-interest, to inform economic analysis (e.g., Camerer and Loewenstein, 2003). While many of these constructs come from psychology, other social sciences have much to contribute as well (see Weber and Dawes, 2005). For instance, anthropological research has provided important insights into the understanding of how social institutions and interactions shape strategic behavior (see Henrich et al., 2001). Behavioral economics can often be defined by goals and methods. Behavioral research usually seeks to develop theory that is consistent with realistic aspects of human judgment and decision making, such as bounded rationality and non-egoistic motives. As a result, most behavioral research is based on the careful comparison between theoretical predictions and the actual behavior of individuals and the outcomes observed in economic environments. Put differently, behavioral economics seeks to inform economics and economic theory by how people and economic institutions actually behave. Importantly, most behavioral economists have the goal, not of developing an alternative to economic theory and methods, but instead to incorporate new assumptions and methods into mainstream economics research. Thus, the goal of behavioral economists is not to develop a “behavioral economic theory” but instead to improve economic theory so that it is also “behavioral.” Before proceeding to a discussion of the important methodological relationship between behavioral and experimental economics, it is worth noting one important likely consequence of the growth of behavioral research within the economic profession. Historically, behavioral economics has often been defined in practice as adding variables to a rational-choice model or weakening rationality (including self-interest) in a systematicway. As this approach becomes a more widespread practice, using a single term “behavioral economics” to describe all the contributions is likely to become unwieldy and the term will likely evaporate (replaced by specific names of models as they become familiar).