THE TEACHING ECONOMIST - William A. McEachern 
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Issue 15, Spring 1998
William A. McEachern, Editor
Experimental Economics
Experimental economics, after bubbling for years on the periphery of the
profession, has gone mainstream The first three articles in the December
1997 American Economic Review are based on laboratory experiments,
authored by such household names in the field as the two Charlies-Plott
of Cal Tech and Holt of Virginia. Experimental economists now have their
own association, the The field is moving beyond research experiments to classroom exercises
that can help students learn economics. For example, the Journal of
Economic Perspectives now carries a regular feature written by Holt
that discusses the use of classroom experiments. The Fall 1997 entry outlines
a card game that introduces students to the free-rider problem.
A new workbook, Experiments with Economic Principles (McGraw-Hill,
1997) by Ted Bergstrom and John Miller, provides self-contained material
for running experiments in class. The book, which sells for $24 at my bookstore,
can be used in conjunction with a regular textbook in microeconomic principles
courses and in some intermediate courses. Bergstrom and Miller have a Website
that includes reports on experimental results from class (http://zia.hss.cmu.edu/miller/eep/eep.html).
One problem with classroom experiments is that they take time. For most
experiments, Bergstrom and Miller recommend taking the entire class period.
Keeping a record of results can also be time consuming. Another concern
is how to motivate students. Results are more realistic if students have
an incentive to do well. One approach is to ask students to contribute
voluntarily, say $20, at the beginning of the term to be pooled and paid
at the end of the term as a reward based on performance throughout the
term. But students who don't contribute are usually cut off from prize
money, so they have less motivation. Another possibility is to base the
course grade in part on performance in the experiments, but many students
feel the results often rely on the luck of the draw and should not therefore
affect course grades.