THE EXPERIMENTAL TURN IN ECONOMICS A History of Experimental Economics Assessment Committee: Prof. Dr. K. Knorr Prof. Dr. F.A.A.M. van Winden Prof. Dr. S. Rosenkranz Prof. Dr. L.T.G. Theunissen Prof. S.G. Medema Printed by: Ridderprint BV Pottenbakkerstraat 15-17 2984 AX Ridderkerk © 2015 Andrej Svorenčík All Rights Reserved THE EXPERIMENTAL TURN IN ECONOMICS A HISTORY OF EXPERIMENTAL ECONOMICS De experimentele wending in de economie (met een samenvatting in het Nederlands) Experimentálny obrat v ekonómii (so zhrnutím v slovenskom jazyku) PROEFSCHRIFT ter verkrijging van de graad van doctor aan de Universiteit Utrecht op gezag van de rector magnificus, prof.dr. G.J. van der Zwaan, ingevolge het besluit van het college voor promoties in het openbaar te verdedigen op vrijdag 30 januari 2015 des ochtends te 10.30 uur door ANDREJ SVORENČÍK geboren op 26 maart 1982 te Bratislava, Slowakije Promotoren: Prof.dr. J. Plantenga Prof.dr. M. Morgan Copromotor: Dr. H.B.J.B. Maas This thesis was accomplished with financial support from The Netherlands Organization for Scientific Research, the NWO, (VIDI-grant #276-53-004). TABLE OF CONTENTS TABLE OF CONTENTS ..................................................................................................................... iii Table of Figures ...................................................................................................................................vi Acknowledgements .......................................................................................................................... vii 1 The Experimental Turn of Economics ........................................................................................ 1 1.1 Driving Forces and Levels of the Experimental Turn........................................................ 5 1.2 Combination and Colligation................................................................................................ 8 1.3 Sociological and Epistemic Strands of the Turn ............................................................. 14 1.4 The Turn and the Scientific Communities ....................................................................... 19 1.5 The History of the Experimental Turn ............................................................................. 23 1.5.1 Internal Accounts .................................................................................................................. 24 1.5.2 External Accounts ................................................................................................................. 28 1.6 Outline of the Dissertation ................................................................................................ 30 2 From Personal to Communal Turn .......................................................................................... 33 2.1 John Ledyard’s Data-Theory Symmetry .......................................................................... 34 2.2 Charles Plott’s Rigorousness ............................................................................................. 40 2.3 James Cox’s Data Integrity ................................................................................................ 46 2.4 Reinhard Selten’s Virtuous Circle ..................................................................................... 49 2.5 Intersecting Trajectories .................................................................................................... 54 2.5.1 Tucson Meetings .................................................................................................................... 56 2.5.2 Experimental Imperialism ................................................................................................. 58 3 The Place and Space of Experimental Economics – The New Site of Economic Research 61 3.1 From a Classroom to a Computerized Lab ...................................................................... 66 3.1.1 Austin C. Hoggatt and his Visionary Lab ...................................................................... 67 iii 3.1.2 Battalio and Kagel’s Animal Laboratory ....................................................................... 70 3.2 A Tale of Two Laboratories ................................................................................................ 74 3.2.1 Smith’s ESL in Arizona ........................................................................................................ 75 3.2.2 Plott’s EEPS at Caltech ......................................................................................................... 79 3.3 From Place to Space: Computers &Community............................................................. 82 3.3.1 Social Infrastructure of an Economic Laboratory .................................................... 84 3.3.2 Division of Labor ................................................................................................................... 86 3.3.3 Portability ................................................................................................................................ 89 3.4 Experimental Economics in Amsterdam ......................................................................... 92 3.5 Experimental Control and other Epistemic Functions of Laboratory Space ............. 96 3.6 Conclusions........................................................................................................................ 104 3.7 Photos of Laboratories .................................................................................................... 106 4 Institutionalization of Experimental Economics ................................................................ 111 4.1 The Prologue ..................................................................................................................... 112 4.2 Selecting a Name – the Birth of the Economic Science Association ....................... 119 4.3 Early Reception of ESA .................................................................................................... 128 4.4 ESA Structural Changes ................................................................................................... 130 4.4.1 Against a Dedicated Journal ........................................................................................... 132 4.4.2 Internationalization & the ESA journal – two sides of the same coin ............ 137 4.5 Conclusions – a Congenital Design Deficiency? .......................................................... 146 5 Rejecting Rejections – the Passive Reception of Experimental Economics .................. 149 5.1 Publication Strategies ...................................................................................................... 151 5.1.1 A Representative Letter ................................................................................................... 154 5.1.2 A Survey and Interpretation of Strategies ................................................................ 160 5.1.2.1 S1 Knowledgeable Referees ....................................................................................................................... 160 5.1.2.2 S2 Results are relevant for theory and have applications ............................................................ 162 iv 5.1.2.3 S3 Experiments present real situations & S4 Theory applies to them as well .................... 164 5.1.2.4 S5 It’s Basic Research .................................................................................................................................... 167 5.1.2.5 S6 More experiments are needed ............................................................................................................ 169 5.1.2.6 S7 Shifting of the Burden of Proof ........................................................................................................... 170 5.1.2.7 S8 Specialized journal ................................................................................................................................... 173 5.1.2.8 S9 A Method or a Field? ................................................................................................................................ 175 5.1.3 Space Limitations ............................................................................................................... 177 5.2 Lowering the Barriers to Entry ....................................................................................... 179 5.3 NSF and the Funding of Experimental Economics ...................................................... 183 5.4 Conclusions........................................................................................................................ 191 6 The First-Price Auction Controversy..................................................................................... 193 6.1 Inducing (Risk) Preferences ............................................................................................ 197 6.2 Establishing Overbidding in First-Price Private Value Auctions ............................... 201 6.3 CRRAM and the Lottery Procedure ............................................................................... 208 6.4 Learning and Error in Common Value Auctions .......................................................... 211 6.5 Harrison’s Critique: from Message Space to Pay-off Space ...................................... 215 6.6 Comments on Harrison and his Reply .......................................................................... 220 6.7 The Showdown ................................................................................................................