Origins of experimental economics

Abstract

The discipline of experimental economics developed as a response to the methodological constraints imposed by the deductive traditions of neoclassical theory. While Lionel Robbins’s influential 1932 definition of economics focused on human behavior through the lens of scarcity and choice, it initially discouraged experimental methods by prioritizing a priori deduction over inductive empirical research. The subsequent isolation of economic models from psychological and social realities led to the gradual integration of experimental approaches, beginning with early investigations into the St. Petersburg paradox and the formalization of game theory. Key empirical milestones, such as Edward Chamberlin’s market simulations and Vernon Smith’s development of induced values and double auction mechanisms, shifted the paradigm toward the laboratory testing of microeconomic assumptions. Although macroeconomics initially resisted experimental intervention due to the perceived complexity of aggregate variables, the field now employs controlled studies to analyze expectation formation, coordination problems, and the effects of fiscal and monetary policies. By addressing the microfoundations of economic activity and challenging the rigid axioms of rational choice, experimental economics has evolved from a heterodox critique into an essential tool for refining both micro- and macroeconomic theory within the mainstream. – AI-generated abstract.