Policy and the Use of Laboratory Experimental Methodology in Economics

Abstract

Experimentation is a process of using special cases to learn things that you hope will help you when you are dealing with complex, general cases. The simple cases teach you about theory and it is theory that you use when approaching the general and complex. The theory might be very formal; or it might be an incomplete model and cover just critical aspects of the problem; or, it might be as elementary as a “hunch,” a vaguely articulated belief, or some form of “judgment and common sense.” The theory can take many forms and in spite of the claims of the contrary by people of practical affairs, it is theory based on experience that is acquired and used in policy decision. This essay is about the fundamental importance of connections between the simple case and the complex connections and how they become established in economics when the simple cases are those that can be created in a laboratory and the complex cases are those that involve policy.