The Sidney Siegel Tradition: The Divergence of Behavioral and Experimental Economics at the End of the 1980s

Abstract

Over two days in February 1988, several key experimental economists and cognitive psychologists met to explore the possibilities of joint research promoted by the Sloan and Russell Sage Foundations under the rubric behavioral economics. The original vision that the meeting could open a line of inquiry on the growing body of behavioral “anomalies” and their robustness in a market setting proved naive. The divide between both camps was too big to bridge given the fundamentally different approaches to experimentation. The article traces how the work of Sidney Siegel, a psychologist briefly active in the 1950s, was recast by experimental economists as the basis of their experimental research, including the emphasis on performance-based payments of experimental subjects and avoiding deception. My reconstruction of this meeting and its aftermath sheds new light on the origin of the divergence of experimental and behavioral economics at the end of the 1980s.

What is considered deception in experimental economics?

“…The policy against deception is said to originate with Sidney Siegel, the noted statistician and psychologist who was active in the 1950s and 1960s. 2 In the following decades, Vernon Smith and Charles Plott were key figures who implemented the norm in experimental economics (Svorenčík, 2016). Strong views have been expressed in the literature: Wilson and Isaac (2007, p. 5) write "In economics all deception is forbidden.…”

“…Vernon Smith stated that Siegel had two precepts: (1) Participants have to be paid, and (2) Participants have to believe what they are being told. A discussion of the history behind deception is also provided inSvorenčík (2016).3 In a philosophical paper,Hersch (2015) makes the argument that banning explicit, but not implicit, deception is inconsistent.…”

Harry Helson’s Adaptation-Level Theory, Happiness Treadmills, and Behavioral Economics

“…On the other side, those studying expected utility theory, such as Nicola Giocoli (2003), Philippe Mongin (2009), or Ivan Moscati (2016), explain the relationship between the two disciplines through the work of John von Neumann and Oskar Morgenstern, Milton Friedman, Leonard Savage, and Harry Markowitz, among others, and, later on, Kahneman and Tversky’s prospect theory. The recent rise of behavioral economics has motivated much of this research, which includes the impact of experimentation on economics (e.g., Svorenčík 2016).…”

A history of statistical methods in experimental economics

“…We thus consider that Siegel's 1956 book was still a psychologist's contribution for psychologists. On the methodological influence of Siegel in experimental economics (seemingly unrelated to the statistical influence), see Svorenčík (2016).…”