How an inconvenient economist upset the cool crowd

At a recent conference on experimental economics, John List, professor of economics at the university of chicago, shared a beer with other delegates and opined, “I think I used to be the most hated guy in this field.” His drinking companions jovially assured him that he still was.

So why the sharp elbows from his colleagues? Quite simply, List’s attention to the nuts and bolts of experimental method has demolished some of the most cherished results in the cool field of behavioural economics.

Consider a class of experimental games much cited by those who dispute the classical model of rational economic choice. There is the “ultimatum” game, in which player A (Anna) is given $10 and asked how much, if any, she proposes to offer to player B (Bernard). Bernard can accept the offer, but if he rejects it, neither Anna nor Bernard get anything. If Anna and Bernard were rational income-maximisers, Anna would offer one cent and Bernard would accept it as better than nothing. This never happens, so Anna and Bernard are not rational income-maximisers.

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Tim, also known as the Undercover Economist, writes about the economics of everyday life.