Skip to main content
SpringerLink
Log in

Introduction: Applying the Experimental Method to Economic Thought: From Adam Smith to Vernon Smith

  • Chapter
  • First Online:
Social Preference, Institution, and Distribution

Part of the book series: Evolutionary Economics and Social Complexity Science ((EESCS,volume 3))

  • 521 Accesses

Abstract

This paper aims to identify the significance of the emergence of experimental methods in economics, by reviewing behavioral theory in the history of economic thought. Economists have adopted numerous approaches in their attempts to resolve what is called das Adam Smith Probleme (the Adam Smith problem)—how to theoretically explain human behaviors driven by social and selfish incentives. For example, Menger separated economic aspects from social aspects, Mises or Weber established a comprehensive concept of purposive behavior, and Keynes strategically avoided micro-foundations for macroanalysis. Moreover, Popper attempted to solve the problem by introducing situational logic that understands human behaviors as appropriate responses to given social conditions. Meanwhile, institutional economists such as Commons attempted to understand humans as acting according to rules in given social institutions. Based on these historical discussions, this paper proposes three meanings of experimental methods: (1) such methods enrich micro-foundations of economics, by enabling the testing of behavioral hypotheses regarding human action under social institutions; (2) such methods serve to create micro-foundations for macro-theory, based on assumptions regarding a “behavioral trend”; and (3) such methods enable the reexamination of the behavioral assumptions of past theories.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 54.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 54.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The behavioral assumptions associated with homo economicus, according to standard economic theories, can be summarized as follows: “Economic agents are rational”; “Economic agents are motivated by expected utility maximization”; “An agent’s utility is governed by purely selfish concerns, in the narrow sense that it does not take into consideration the utility of others”; “Agents are Bayesian probability operators”; “Agents have consistent time preferences according to the discounted utility model”; “All income and assets are completely fungible” (Wilkinson 2008, p. 5).

  2. 2.

    Camerer and Loenstein (2004) states, “The neoclassical approach is useful because it provides economists with a theoretical framework that can be applied to almost any form of economic (and even noneconomic) behavior, and it makes refutable predictions” (p. 3).

  3. 3.

    For instance, Locke (1689) states, “Custom settles habits of thinking in the understanding, as well as of determining in the will, and of motions in the body; all which seem to be but trains of motion in the animal spirits” (p. 529).

  4. 4.

    For recent discussions of the Adam Smith problem, see (Paganelli 2008; Lundestad 2014).

  5. 5.

    Regarding the tautological problem of a conceptualization of human action by Mises, see Tokumaru (2009).

  6. 6.

    Smith states that every man “…must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase” (Smith 1776, p. 47).

References

  • Bolton GE, Ockenfels A (2000) ERC: a theory of equity, reciprocity, and competition. Am Econ Rev 90(1):166–193

    Article  Google Scholar 

  • Camerer CF, Loewenstein G (2004) Behavioral economics: past, present, future. In: Camerer CF, Loewenstein G, Rabin M (eds) Advances in behavioral economics. Princeton University Press, New York, pp 3–51

    Google Scholar 

  • Cherry TL, Frykblom P, Shogren JF (2002) Hardnose the dictator. Am Econ Rev 92(4):1218–1221

    Article  Google Scholar 

  • Commons JR (1931) Institutional economics. Am Econ Rev 21:648–657

    Google Scholar 

  • Commons JR (1934) Institutional economics: its place in political economy. Macmillan, New York

    Google Scholar 

  • Fehr E, Schmidt KM (1999) Theory of fairness, competition, and cooperation. Q J Econ 114(3):817–868

    Article  Google Scholar 

  • Friedman M (1962) Capitalism and freedom. The University of Chicago, Chicago

    Google Scholar 

  • Frohlich N, Oppenheimer J, Kurki A (2004) Modeling other-regarding preferences and an experimental test. Public Choice 119:91–117

    Article  Google Scholar 

  • Güth W, Rolf S, Bernd S (1982) An experimental analysis of ultimatum bargaining. J Econ Behav Organ 3:367–388

    Article  Google Scholar 

  • Hayek FV (1945) The use of knowledge in society. Am Econ Rev 35(4):519–530

    Google Scholar 

  • Kahneman D, Knetsch JL, Thaler RH (1986) Fairness as a constraint on profit seeking: entitlements in the market. Am Econ Rev 76(4):728–741

    Google Scholar 

  • Keynes JM (1936/1961) The general theory of employment, interest and money. Macmillan/Maruzen, London/Tokyo

    Google Scholar 

  • Locke J (1689) An essay concerning human understanding (1894). Clarendon Press, Oxford

    Google Scholar 

  • Lundestad E (2014) The Adam Smith problem: a reinterpretation. J Scott Philos 12(2):181–197

    Article  Google Scholar 

  • Marx K (1867/1962) Das Capital. Buch I, Marx-Engels Werke, Band 23. Institut für Marxismus-Leninismus beim ZK der SED. Diertz Verlag, Berlin

    Google Scholar 

  • Menger C (1883/1985) Investigations into the method of the social science with special reference to economics (Untersuchungen über die Methode der Socialwissenschaften, und der Politischen Oekonomie insbesondere. Verlag von Duncker & Humblot, Leibzig) (trans: Nock JF). New York University Press, New York

    Google Scholar 

  • Mises L (1949) Human action: a treaties on economics. Yale University Press, New Haven

    Google Scholar 

  • Mises Lv (1933/1960) Grundprobleme der Nationalökonomie: Untersuchungen über Verfahren, Aufgaben und Inhalt der Wirtschafts und Gesellschaftslehre. Epistemological problems of economics (trans: Reisman G). Van Nostrand, Princeton

    Google Scholar 

  • Mises L (1962) The ultimate foundation of economic science: an essay on method. D. Van Nostrand, Princeton

    Google Scholar 

  • Paganelli MP (2008) The Adam Smith problem in reverse: self-interest in the wealth of nations and the theory of moral sentiment. Hist Polit Econ 40(2):365–382

    Article  Google Scholar 

  • Popper K (1994) In search of a better world: lectures and essays from thirty years. Routledge, London/New York

    Google Scholar 

  • Raphael DD (2007) The impartial spectator: Adam Smith’s moral philosophy. Clarendon Press, Oxford

    Book  Google Scholar 

  • Ricardo D (1817) On the principles of political economy and taxation. John Murray, London

    Google Scholar 

  • Roscher WGF (1843) Grundriss zur Vorlesungen über die Staatswirthschaft nach geschichtlicher Methode. Druck und Verlag der Dieterichschen Buchhandlung, Göttingen

    Google Scholar 

  • Schmoller G. v (1883/1987) Menger und Dilthey, Zur Methodologie der Staats- und Sozialwissenschaften. Gustav schmoller Kleine Schriften zur Wirtschaftsgeschichte Wirtschaftstheorie und Wirtschaftspolitik. Wolfram Fiedler und Rolf Kard (Hrsg.), Teil6. DDR: Zentralantiquariat der DDR

    Google Scholar 

  • Schumpeter JA (1934) The theory of economic development: an inquiry into profits, capital, credit, interest, and the business cycle (trans: Redvers O). Harvard University Press

    Google Scholar 

  • Smith A (1759/1981) The theory of moral sentiments. Liberty Fund, Indianapolis

    Google Scholar 

  • Smith A (1776/1984) An inquiry into the nature and causes of the wealth of nations. Liberty Fund, Indianapolis

    Google Scholar 

  • Tokumaru N (2009) Popper’s analysis of the problems of induction and demarcation and Mises’ justification of the theoretical social science. In: Cohen RS, Parusnikova Z (eds) Rethinking Popper, Boston studies in the philosophy of science, vol 272. Springer, Dordrecht, pp 161–174

    Google Scholar 

  • Viner J (1927) Adam Smith and Laissez Faire. J Polit Econ 35(2):198–232

    Article  Google Scholar 

  • Weber M (1904/1922) Die “Objektivität” sozialwissenschaftlicher und sozialpolitischer Erkenntnis. In: Gesammelte Aufsätze zur Wissenschaftslehre von Max Weber, 1.Aufl., J.C.B. Mohr

    Google Scholar 

  • Weber M (1913/1922) Ueber einige Kategorien der verstehenden Soziologie, in ibid

    Google Scholar 

  • Wilkinson N (2008) An introduction to behavioral economics. Palgrave Macmillan, Hampshire/New York

    Google Scholar 

  • Williamson O (1985) The economic institutions of capitalism. The Free Press, New York

    Google Scholar 

  • Young J (1997) Economics as a moral science: the political economy of Adam Smith. Edward Elgar, Cheltenham

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Graduate School of Economics, Kyoto University, Kyoto, Japan

    Natsuka Tokumaru

Authors
  1. Natsuka Tokumaru
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 2016 Springer Science+Business Media Singapore

About this chapter

Cite this chapter

Tokumaru, N. (2016). Introduction: Applying the Experimental Method to Economic Thought: From Adam Smith to Vernon Smith. In: Social Preference, Institution, and Distribution. Evolutionary Economics and Social Complexity Science, vol 3. Springer, Singapore. https://doi.org/10.1007/978-981-10-0137-6_1

Download citation

  • DOI: https://doi.org/10.1007/978-981-10-0137-6_1

  • Published:

  • Publisher Name: Springer, Singapore

  • Print ISBN: 978-981-10-0136-9

  • Online ISBN: 978-981-10-0137-6

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation