To study the mechanisms of the market system and test the validity of the theories put forward, an economic experiment is used, which in modern realities can be carried out not only on a limited scale. It allows obtaining information about the typical behavior of economic agents under control.
Founder of experimental economics
Active application of economic experiments was found by Vernon Smith, who was born in a family with socialist views on life. Therefore, one should not be surprised that this person began his research as an adherent of the state and social system. In his understanding, such a structure was drawn in which competent people make decisions for other people.
The scientist became interested in economics after spiritual evolution, when he became a classical liberal. In 1952, he managed to get a master's degree, and three years later - to defend his doctoral dissertation. Beforehe was trained as an electrical engineer.
Participation of the founder in the first scientific experiment
The not yet held Nobel laureate observed the first economic experiment under the guidance of his teacher. It was devoted to the formation of market equilibrium. Students were divided into sellers and buyers with budget constraints. For the first of them, an acceptable level of costs was set, and for the second, a monetary threshold.
As a result of the conducted research, it turned out that when carrying out trades, persons who, in theory, could not conduct a transaction, under experimental conditions, made it with some benefit. Other bidders, who are in the opposite situation, sometimes managed to be forced out of the market. And it wasn't an accident, as these effects happened quite often (with a probability of up to 25 percent).
It turned out that more factors can influence the general equilibrium than the theory suggested. Even the correct result can be reached in different ways. In the course of scientific experience, methodological and technical difficulties arose. However, this economic experiment already predetermined two separate directions in the future discipline.
Purpose of research
To date, the role of ongoing experiments has increased significantly, since not one serious discipline is simply unthinkable without them. Initially, the research was carried out at the micro level, when small economic structures are taken as a basis. However, things have changed over time.
A large number of experiments in economic science began to be carried out at the macro level. They have to be carried out under certain conditions that cannot be completely leveled in the process of research. Most often, scientific experiments in macroeconomics are field, not laboratory. The differences from the micro level are quite significant.
Despite the different approaches, the main task of any research is to test the practical application of certain programs and tasks that will avoid major mistakes and failures in economic activity. An economic experiment does not prove or disprove theoretical research, but it makes it possible to establish the likelihood of an event occurring.
Experimental Process Methodology
Controlled studies share commonalities. All of them are designed to simulate ongoing dynamic processes. However, the system itself in this case is formed by the experimenter. People in it act as economic agents who were recruited according to some criteria. In reality, participants perform many functions from which they cannot completely abstract. Therefore, the methods of the economic experiment must be different.
Formation of a model is associated with the loss of some part of the data. This provides an opportunity to abstract away less significant elements. Attention in this case is concentrated on the basic components of the system and interconnections. Two types can be introduced into the modelValues:
- Exogenous. Implemented in finished form.
- Endogenous. Appear inside the model as a result of solving a specific problem.
Thus, it can be argued that the economic experiment is closely related to the creation of models, which are a formalized description of the economic process, the structure of which is determined by objective properties and subjective characteristics.
Key milestones
Modern experiments take place in several stages:
- A clear study of the system is being carried out, the dynamics of which is supposed to be studied in order to correctly select the required section of the theory, on the basis of which the model specification will be constructed.
- A simulation model for the studied system is being developed. It should include a large number of descriptions for the main objects, the conditions for transition from one state to another.
- An experiment is being done with the decision maker. During the process, he is asked to consider a certain situation. Some decision must be made in it.
- The specification of the base rules is determined, and the evaluation of the main parameters is also performed. The developed principles are entered directly into the model, after which it becomes autonomous.
- An independent prototype is tested, thanks to which it is possible to obtain a time frame for the behavior of the system under changing initial states. After that, static research methods are applied.
- The finished simulation model is used to improve the effectiveness of the control of the system under consideration by predicting the possible behavior in time.
The model takes into account various economic agents that purchase homogeneous products. The market in this case acts as the external environment of the presented product. Guided by the dynamics of price changes, consumers make a certain forecast.
Illustrative examples of economic experiments
One illustrative example of the problem with the role of the experimenter is a study conducted at Western Electric. At that time, it was planned to establish on what factors labor productivity depends. More than a dozen experiments have been conducted regarding free breakfasts, more breaks, and other perks for workers.
The result amazed everyone. After the abolition of worker benefits, labor productivity in the factory began to rise. The experimenters made a mistake that led to a distortion of the indicators. The observer has become an endogenous factor. The workers realized that the ongoing research was invaluable to the development of American society. It follows that the leader should be in the shadows.
A large number of economic experiments were conducted by Henry Ford. To increase the income of the enterprise, he offered the workers to receive a percentage of the total profit. As a result, their labor productivity increased significantly, since it was profitable for peoplework effectively.
Coordination games
Experienced economists, when considering such games, think about whether it is possible, if necessary, to coordinate laboratory elements on one of the equilibria. If possible, are there any general provisions that can help in a particular prediction. It turns out that under certain conditions, human subjects can coordinate the best equilibria, even the less obvious ones.
Deductive selection factors are those that allow you to make predictions based on the properties of the game. As for the inductive principles, they make it possible to predict the result on the characteristic dynamics.
Market trading
The founder of the experimental economy conducted a series of experiments on the consolidation of prices and volumes. He paid attention to theoretical equilibrium values directly in market conditions. In the course of the research, the behavior of conditional sellers and buyers was studied. The economist found that in certain configurations of centralized trading, price indicators have a common edge with sales volumes.
As a conclusion
Although the economic experiment does not prove any theoretical assumptions, it allows you to make a qualitative assessment of a certain situation in the economic activities of the state or any other association. Much depends on the parameters taken into account in the research.
