Behavioral Economics Criticism

Irrationality of Economic Experiments

Experiments can be extremely valuable in the scientific world when analyzing things such as gravity and magnetism. In the lab, you always know if you drop a ball it will fall to the ground, and this will be true for the world outside the laboratory as well. Economists are trying to use experiments done with humans to explain actions of the outside world. Unfortunately, economic experiments are not the same as scientific experiments. What is shown in an economic experiment in a laboratory will not always coincide with what is really occurring in the real world. There are four major reason as to why it is not feasible to relate laboratory results to the outside world.

1. Subjects know they are being watched

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1. Ability for experiments to be controlled
2. Small stakes
3. Ability for subjects to be self-selecting