Agricultural economists' use of classroom economic experiments

Journal of Agricultural and Applied Economics, Aug 2003 by Barnett, Barry J, Kriesel, Warren

Results are presented from a Web-based survey of instructors in agricultural economics and related departments about their use of, and attitudes about, classroom economic experiments.

Key Words: classroom economic experiments, teaching

Economics belongs in everyone's education once we have learned how to teach it.

-George J. Stigler

A number of economists now use experimental methods to analyze economic behavior (Davis and Holt). Experiments are designed to test various hypotheses derived from economic theory. Experimental approaches allow researchers to control important aspects of the economic environment to which subjects are exposed. This allows for analysis of how individual behavior changes when important aspects of the economic environment are altered. In contrast, data derived from actual market transactions are often at an aggregate level and reflect behavior influenced by any number of institutional and environmental factors that vary over both space and time.

The past half century has witnessed a significant increase in the number of economic researchers employing experimental techniques. Experimental economics research is now published in both mainstream economics journals and specialized journals such as Experimental Economics. In 2002, Vernon Smith was awarded the Nobel Memorial Prize in Economic Science for his work with economic experiments.

Early researchers soon realized that economic experiments could also be used as pedagogical tools. However, the use of classroom economic experiments for teaching, rather than research, purposes did not become wide-spread until the 1990s. Articles on classroom economic experiments have since been published in a number of economics journals. In particular, the Journal of Economic Education has published many articles in which instructors describe their experiences using classroom economic experiments. Textbooks that focus on the use of experimental economics as pedagogical tools are now available. These texts contain many widely used economic experiments, along with instructional materials such as suggested assignments (e.g., Bergstrom and Miller). The internet newsletter Classroom Expernomics (Delemeester and Neral) is an extremely accessible source of information on classroom economic experiments, as is the Web site Games Economists Play: Non-Computerized Classroom Games for College Economics (Delemeester and Brauer). Both of these sources allow users to search for information on classroom experiments by subject matter.

This article examines the use of classroom economic experiments among instructors in agricultural economics. The article begins with a literature review that focuses on examples of classroom economic experiments and economic concepts commonly taught using experimental methods. The remainder of the article describes results from a Web-based survey administered to agricultural economics instructors.

What Are Classroom Economic Experiments?

Economic experiments are characterized by the use of "laboratory" conditions that allow for the collection of data in a controlled economic environment (Davis and Holt). Controlling various aspects of the economic environment allows for more direct testing of behavioral hypotheses. Laboratory animals have been used in some economic experiments (Walker), but humans are the typical research subjects. Economic experiments have been conducted in a variety of settings, including focus groups, computer labs, casinos, and grocery stores.

University researchers often use students as subjects for economic experiments (e.g., Chamberlin). Occasionally, those experiments are conducted in a classroom setting; yet, it is important to distinguish between experiments conducted primarily for research purposes and those conducted primarily for instructional purposes. The latter are the focus of this article.

There appears to be no widely accepted definition of exactly what constitutes a classroom economic experiment. For purposes of this article, we will assume that classroom economic experiments are activities that, at minimum, meet the following conditions: (1) the activity is conducted primarily for instructional purposes to demonstrate specific economic concepts, (2) the activity involves participants making economic decisions within a somewhat controlled environment, and (3) participants' economic decisions are compared to behavioral hypotheses derived from economic theory. These conditions are intended to distinguish classroom economic experiments from other widely used experiential learning tools, such as case studies, role-playing exercises, and management simulations. Some classroom economic experiments have been computerized (Bernard and Schulze; Wells; Williams and Walker), but most are simple interactive simulations that require a bit of planning but no special supplies or equipment.

Examples of Classroom Economic Experiments

Double Oral Auction

Perhaps the most widely used classroom economic experiment is the double oral auction (DeYoung; Holt; Joseph; Wells). In this experiment, the class is divided into buyers and sellers. The buyers are each assigned a willingness to pay. The various willingness to pay positions are taken from an underlying demand curve that is not revealed to the students until after the experiment is completed. The sellers are each assigned a cost of production position from an underlying supply curve that, again, is not initially revealed to the students. Buyers are instructed to purchase at the lowest possible price as long as that price is less than or equal to their willingness to pay. Sellers are instructed to sell at the highest possible price that is above their cost of production. Transactions occur in an open outcry market structure. One of the primary learning objectives is to demonstrate how price discovery occurs in competitive markets through the uncoordinated activities of individuals engaged in optimizing behavior.