Experimental Methods in Economics and Political Science: The Design and Testing of Policy Options

[Introduction] Designer markets are becoming a reality: theoretical developments in economics and political science are now being combined with advances in laboratory technology to produce new uses of basic science and a new approach to policy. In essence the approach is similar to that of engineering, in which scientific principles and practical knowledge from laboratory experiments arc used to design systems or devices to perform a specific function. The new research efforts can be understood as involving a design methodology in the truest sense of the word. Policy issues are first cast as problems of decision process design and the architectures of decision mechanisms are then built on basic research foundations. Refinements and adjustments to institutions, organizations and procedures - which provide strength and desirability to a policy process - are then added as a result of the practical experience provided by laboratory experimentation and testing. The practical experience and testing are achieved by involving real people in controlled exercises that carefully replicate the constraints, the freedom for individual initiative, and the potential rewards of the process under test.