Funded by a grant from the International Foundation for Research in Experimental Economics (IFREE), and co-hosted by Chapman University and Reason Foundation, a lively luncheon discussion, “Experimental Economics and Economic Policy” was held last Tuesday, Feb. 2 in Argyros Forum.
Guests included members of Chapman’s Economic Science Institute (ESI), the Argyros School of Business and Economics, Chapman administration, senior staff at the Reason Foundation, a visitor from Harvard and also visitors who have served in political office. The discussion centered loosely around the broad question, “What is the relationship between experimental economics and economic policy?” and upon how experimental economists approach problems which may or may not eventually have policy implications. As one experimentalist stated, “We don’t assume we can start with the question, ‘What is good policy?’ and then reason through to specific policy, or try to design experiments that prove what we start out thinking or what a policy maker might want us to prove. We don’t start out with the assumption that the research will even have policy implications.”
Another experimentalist stated, “ESI does not do ‘policy research’, but develops experiments intended to enable a fuller understanding of the performance and behavioral properties of particular markets. Every market has its own special features whose details are addressed in appropriate market designs. Once this understanding is obtained, it is possible to study the effect of particular policies.”
In the informal discussion luncheon setting, many topics emerged, including market-to-market expectations, how price information is conveyed in markets and how politicians respond to economic information. Many research examples were discussed: healthcare, electricity market design, asset market bubbles in the housing-mortgage crisis, gasoline markets and in-house markets for allocating resources to science instruments in space probes (Cassini Mission).
Participants identified as a highlight that the experimenters were able to explain how experiments have affected actual policy makers (and not just where the experiments might reflect on public policy itself), and could give examples of how they had been surprised time and again my their own experimental results. As one participant stated, “If there was a recurring theme from each of the experimenters it was that there is a lot of uncertainty and complexity in the world that we can’t cut through very well without experimentation. We can reason through a situation logically, build complex models around it, and think very hard about it. But those introspective methods contain remarkable error, and experiments are a very nice way of exposing those errors cheaply in the lab. That’s a lot better than exposing them expensively in public policy where they do real damage.”
An outcome expressed by many attendees was that if there is a “next time,” one or more particular issues might be approached in greater detail. Also mentioned was that a “next time” benefit for folks in politics or education or advocacy would be to spend more time discussing HOW experiments might be used on current policy issues, HOW policy makers could be encouraged to turn to experiments for guidance, and HOW the general public could come to see economic experiments as a way to improve public policy.