On the weekend, I attended the annual Australia New Zealand Workshop on Experimental Economics (pdf program), this year held at Murdoch University. It was an interesting conference, but as most of the presentations concerned papers that are not yet in the public domain, I won’t go into any detail on the particulars (for the moment). However, a few observations are worth making. They may not be news to someone ensconced in the world of experimental economics, but they were news to me.
First, this was the first economics audience I have sat in where alternatives to the expected utility framework that dominates mainstream economics were practically discussed and at the forefront of people’s minds. Prospect theory was used to describe many of the reported experimental results and was often raised in discussions. The more common scenario I have experienced is a flood of complaints about the existing framework but little direct use of the alternatives. For economic models to be discarded and replaced the alternatives must be ready, and here it was actively occurring.
The presentations were also a timely reminder of the difference between important and significant. While most of the presentations involved a statistically significant finding in the experiment, the effect was often small. Given the state of my knowledge of experimental economics, it was often the small size of the effect, rather than the finding that the result was statistically significant that was the surprise. It reflects my general dissatisfaction with the word “significant” in reporting results. The practice of putting “statistically” before significant might help draw the distinction between significant and material .
At the conclusion of one of the presentations, I asked if the effect that was being observed might be the Dunning-Kruger effect – that the unskilled suffer the dual burden of being unskilled and lacking the metacognitive ability to recognise it. I also went on to state that Dunning and Kruger have suggested that the effect is persistent, so don’t be overly optimistic about improving the knowledge of the unskilled about their lack of skill. Andreas Ortmann, who was in the audience, responded that more recent work (of which he was a co-author) led to a more optimistic conclusion and that the unskilled may not be doomed to be unaware. I note that Ortmann has recently blogged about the paper at Core Economics.
Finally, as I always note at events of this nature, evolutionary theory has generally not threaded its way into people’s minds and work. I also doubt that we are going to see much genoeconomics in experimental economics for some time, as the sample sizes in the experiments (and the budgets to increase them) are far too small.