Under what circumstances are people prepared to do things that are good for the environment or society? And what is behind the exclusive pursuit of profit alone? Numbers and theories alone often do not help shed light on these issues. But experiments can.
Research that relies on experiments only began to establish itself in the economic sciences about 50 years ago. The American economist Vernon Smith is regarded as a pioneer. He came up with the idea of simply testing on real people whether the nice theories of his discipline would stand up to reality. Just like his German colleague Reinhard Selten, who was active in this field early on as well, Smith was also awarded the Nobel Prize for Economics. This is an impressive demonstration of the sharp ascent of experimental economics.
Nevertheless, it took time. When Till Requate took over the chair of Environmental Economics at the University of Heidelberg in 1996 and began experiments, he was frequently confronted with statements such as: “What you are doing there can’t really be called science.” In the meantime, experimental economic research has experienced "somewhat of a triumph", says Requate, who has held the Chair of Innovation, Competition Policy and New Institutional Economics at Kiel University since 2002.
At the CAU, this is also reflected in the amount of space dedicated to the subject. A few months ago the experimental laboratory KEEL (Kiel Experimental Economic Laboratory), founded in 2003, moved and more than doubled its capacity. Where there used to be 20 experiment stations, there are now 42 with networked computers, and two rooms equipped with professional camera and audio technology for group experiments. In addition, there is a control room where research activities can be tracked and controlled in real time using modern software.
At the same time, the laboratory’s scope has also expanded. What the human factor triggers in the economy is no longer only investigated by teams led by the economist Requate, but also by researchers in Professor Claudia Buengeler's environment. The business economist specialises in human resources and organisation and has completely different aspects in mind than her colleague who is more focused on comprehensive economic events.
He wonders, for example, what needs to be done for heads of companies and governments to be willing to dedicate financial resources to public goods such as climate protection. This can be achieved with positive incentives or disincentives such as penalty taxes or other sanctions. Claudia Buengeler and her team, by contrast, are investigating how management styles affect employees psychologically and physically.
“This experiment raises many questions,” says Buengeler. The question is whether passive managers wreak as much havoc on personnel as destructive ones. Or what happens when the boss keeps changing management styles? In describing the phenomenon, Buengeler says "Nobody can maintain a 100 percent consistent behaviour all the time."
Experiments that require high levels of interaction are being carried out in the group rooms. According to Claudia Buengeler, the issue can be whether a high degree of diversity in a team in terms of gender, nationality, age and other criteria results in particularly creative solutions – or possibly leads to the development of typical pecking orders. Here, team-based diversity training is intended to help exploit the potential diversity represents.
The willingness to participate in experiments like this is remarkably high. Several thousand volunteers are registered in KEEL's data pool because they enjoy the experiments and are often paid to participate. "We pay about as much as for other student jobs so they take it seriously," says Professor Requate. He admits that the test groups may produce skewed statements as they are often made up mainly of students. Additional surveys are conducted for instance with employees of real companies in an attempt to eliminate any adverse effects this may have.
Author: Martin Geist