Edited by William F. Shughart II, Laura Razzolini and Michael Reksulak
Chapter 25: Experimental public choice
Economics is now considered to be a theoretical, an empirical and an experimental science. While in past years a contribution to the field had to be based on a rigorous theoretical model and then be tested with a sophisticated econometric model, today contributions to economics can be supported by experimental tests, conducted both in the laboratory and in the field. Experimental studies are now regularly reported in the top general-interest journals, and the Nobel memorial prize in economics has been awarded to a number of experimental economists, such as Vernon Smith and Daniel Kahneman, and most recently in 2009 to Elinor Ostrom ‘for her analysis of economic governance, especially the commons’. Public choice research has followed this same trend and it has also seen a rapid increase in the use of laboratory experiments as a means to further the field. In an economic experiment, subjects make real choices with monetary outcomes in a controlled environment. The environment is chosen, characterized and manipulated by the experimenter on the basis of the theory that is tested. At the end of the experiment, subjects are paid in cash amounts that depend on their own decisions and often on the decisions of the other participants with whom they interact.
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