Nicholas Bardsley

Experimental Economics: Rethinking the Rules

Since the 1980s, there has been explosive growth in the use of experimental methods in economics, leading to exciting developments in economic theory and policy. Despite this, the status of experimental economics remains controversial. In Experimental Economics, the authors draw on their experience and expertise in experimental economics, economic theory, the methodology of economics, philosophy of science, and the econometrics of experimental data to offer a balanced and integrated look at the nature and reliability of claims based on experimental research. The authors explore the history of experiments in economics, provide examples of different types of experiments, and show that the growing use of experimental methods is transforming economics into a genuinely empirical science. They explain that progress is being held back by an uncritical acceptance of folk wisdom regarding how experiments should be conducted, a failure to acknowledge that different objectives call for different approaches to experimental design, and a misplaced assumption that principles of good practice in theoretical modeling can be transferred directly to experimental design. Experimental Economics debates how such limitations might be overcome, and will interest practicing experimental economists, nonexperimental economists wanting to interpret experimental research, and philosophers of science concerned with the status of knowledge claims in economics.

Explaining Focal Points: Cognitive Hierarchy Theory Versus Team Reasoning

This article reports experimental tests of two alternative explanations of how players use focal points to select equilibria in one-shot coordination games. Cognitive hierarchy theory explains coordination as the result of common beliefs about players’ pre-reflective inclinations towards the relevant strategies; the theory of team reasoning explains it as the result of the players’ using a non-standard form of reasoning. We report two experiments. One finds strong support for team reasoning; the other supports cognitive hierarchy theory. In the light of additional questionnaire evidence, we conclude that players’ reasoning is sensitive to the decision context.

Experimental economics and the artificiality of alteration

A neglected critique of social science laboratories alleges that they implement phenomena different to those supposedly under investigation. The critique purports to be conceptual and so invulnerable to a technical solution. I argue that it undermines some economics designs seeking to implement features of real societies, and counsels more modesty in experimental write‐ups. It also constitutes a plausible argument that laboratory economics experiments are necessarily less demonstrative than natural scientific ones. More radical sceptical conclusions are unwarranted.

Who bears the brunt? Distributional effects of climate change mitigation policies

Climate change scholars generally urge that CO2 emissions need to be cut rapidly if we are to avoid dangerous risks of climate change. However, climate change mitigation policies are widely perceived to have regressive effects — that is, putting a higher financial burden as a proportion of household income on poor than on rich households. This is one of several major barriers to the adoption of effective mitigation policies. They would also have considerable social justice implications requiring significant welfare state responses. We assess the claim that climate change policies have regressive effects by comparing different types of mitigation policies. We will argue that many of these are indeed likely to have regressive distributional implications but that there are several policy options to counteract regressive effects.

Governance, agricultural intensification, and land sparing in tropical South America

Significance Tropical South America has forest resources of global significance but exhibits a relatively high rate of deforestation. As agricultural expansion remains the most important cause of forest loss and degradation there, it is important to understand its main drivers. In this paper we address two important questions: How do the quality of governance and agricultural intensification combine to impact the spatial expansion of agriculture? Which aspects of governance are more likely to ensure that agricultural intensification allows sparing land for nature? By distinguishing between conventional and environmental dimensions of governance (which includes also the establishment of protected areas), we investigate which of these two aspects, by interacting with the process of agricultural intensification, is likely to promote land sparing. In this paper we address two topical questions: How do the quality of governance and agricultural intensification impact on spatial expansion of agriculture? Which aspects of governance are more likely to ensure that agricultural intensification allows sparing land for nature? Using data from the Food and Agriculture Organization, the World Bank, the World Database on Protected Areas, and the Yale Center for Environmental Law and Policy, we estimate a panel data model for six South American countries and quantify the effects of major determinants of agricultural land expansion, including various dimensions of governance, over the period 1970–2006. The results indicate that the effect of agricultural intensification on agricultural expansion is conditional on the quality and type of governance. When considering conventional aspects of governance, agricultural intensification leads to an expansion of agricultural area when governance scores are high. When looking specifically at environmental aspects of governance, intensification leads to a spatial contraction of agriculture when governance scores are high, signaling a sustainable intensification process.

On collective intentions: collective action in economics and philosophy

Philosophers and economists write about collective action from distinct but related points of view. This paper aims to bridge these perspectives. Economists have been concerned with rationality in a strategic context. There, problems posed by “coordination games” seem to point to a form of rational action, “team thinking,” which is not individualistic. Philosophers’ analyses of collective intention, however, sometimes reduce collective action to a set of individually instrumental actions. They do not, therefore, capture the first person plural perspective characteristic of team thinking. Other analyses, problematically, depict intentions ranging over others’ actions. I offer an analysis of collective intention which avoids these problems. A collective intention aims only at causing an individual action, but its propositional content stipulates its mirroring in other minds.

Interpersonal Interaction and Economic Theory: The Case of Public Goods

Interpersonal interaction in public goods contexts is very different in character to its depiction in economic theory, despite the fact that the standard model is based on a small number of apparently plausible assumptions. Approaches to the problem are reviewed both from within and outside economics. It is argued that quick fixes such as a taste for giving do not provide a way forward. An improved understanding of why people contribute to such goods seems to require a different picture of the relationships between individuals than obtains in standard microeconomic theory, where they are usually depicted as asocial. No single economic model at present is consistent with all the relevant field and laboratory data. It is argued that there are defensible ideas from outside the discipline which ought to be explored, relying on different conceptions of rationality and/or more radically social agents. Three such suggestions are considered, one concerning the expressive/communicative aspect of behaviour, a second the possibility of a part-whole relationship between interacting agents and the third a version of conformism.

Methodological innovation and developing understandings of 21st century society

The task of keeping up with social change presents significant and on-going challenges to social science researchers. One issue is that social scientific knowledge requires constant updating as patterns of social and economic life evolve. A second is that the research tools employed in collecting and analysing data also do not stand still. Both issues are reasons why findings sooner or later come to be regarded as out of date. Max Weber’s celebrated speech on the vocational character of academic careers includes the sobering observation that ‘In science, each of us knows that what he has accomplished will be antiquated in ten, twenty, fifty years’ (Weber, 1958, p.138). Knowledge about the social world moves on in response to the world itself moving on, and because of advances in the processes by which knowledge of the social world is generated. In our current position early in the 21st century it can be argued that the social sciences are faced with these familiar challenges in acute form. Not only is the pace of social change remarkably rapid, but the same is true of the pace of innovation in social research methods. Indeed, it is plausible to suggest that there are common factors driving these developments, notably those that are at work in the fields of technology and communications. The revolutions in these fields that have ushered in the 24/7 society and global interconnectedness have also made possible unprecedented levels of knowledge about emergent patterns of social and economic relationships. They can also be said to have contributed to the demand for such knowledge, which shows no signs of abating. 21st Century Society Vol. 4, No. 2, 115–118, June 2009

Chapter 10 Human nature and sociality in economics

Since homo sapiens is a social animal, one might expect human nature - the set of psychological propensities with which our species is naturally endowed - to equip human beings to live in social groups. In this chapter, we consider the implications of this idea for economics and game theory. We begin by discussing four classic accounts of the forces that hold human societies together - those of Hobbes, Hume, Rousseau, and Smith, who focus respectively on rational self-interest, convention, collective reasoning, and natural fellow-feeling. Turning to the modern literature, we review some of the ways in sociality has been introduced into decision and game theory by means of assumptions about non-self-interested preferences - specifically, assumptions about altruism, warm glow, inequality aversion and reciprocity. We identify some of the limitations of these theories as explanatory devices, and suggest that these limitations derive from a common source: that sociality is being represented within a framework of methodological individualism. We then discuss more radical approaches to explaining social interaction, based on the concepts of expressive rationality and team reasoning. Finally, we pose the fundamental question of whether it is possible to explain social interaction all the way down without going beyond the bounds of methodological individualism.

Something from nothing: estimating consumption rates using propensity scores, with application to emissions reduction policies

Consumption surveys often record zero purchases of a good because of a short observation window. Measures of distribution are then precluded and only mean consumption rates can be inferred. We show that Propensity Score Matching can be applied to recover the distribution of consumption rates. We demonstrate the method using the UK National Travel Survey, in which c.40% of motorist households purchase no fuel. Estimated consumption rates are plausible judging by households’ annual mileages, and highly skewed. We apply the same approach to estimate CO2 emissions and outcomes of a carbon cap or tax. Reliance on means apparently distorts analysis of such policies because of skewness of the underlying distributions. The regressiveness of a simple tax or cap is overstated, and redistributive features of a revenue-neutral policy are understated.