Kevin McCabe on Behavioral Economics and the Law
Having started my career as an experimental economist I probably have a little different, but I hope complimentary, perspective on behavioral economics and other experimental programs in general.
I view the difference between experimental and behavioral economics in terms of (1) what is studied, and (2) how it is studied. Experimental economists are interested in institutional and organizational rules and how these rules affect both, the joint behavior of participants, and the outcome generating, or process, performance of the institutional rules in question. To study this the experimental economist induces preferences and implements a microeconomic system. One major problem for this approach is that ‘risk preferences’ are very noisy, when induced, due either to, the added complexity imposed on subjects of having to work with induced preferences, or that the induced preferences conflict with a subject’s actual preferences. A second major problem with this approach is that institutional rules that are isolated in the lab often depend on on additional rules that are not being studied, or social and cultural norms that are not present in the lab. Experimental economists have learned to manage these problems and many interesting research papers have been produced.