Thought- and performed experiments in Hayek and Morgenstern (original) (raw)

2005, The Experiment in the History of Economics

The necessary consequence of the reason why we use competition is that, in those cases in which it is interesting, the validity of the theory can never be proved empirically. We can test it on conceptual models, and we might conceivably test it in artificially created real situations where the facts which competition is intended to discover are already known to the observer. But in such cases it is of no practical value, so that to carry out the experiment would hardly be worth the expense… The peculiarity of competition-which it has in common with the scientific method-is that its performance cannot be tested in particular instances where it is significant, but is shown only by the fact that the market will prevail in comparison with any alternative arrangements. (Friedrich A.Hayek 1968, p. 180) …experiments are designed to enable us to predict outcomes under controlled conditions and to make it possible to conclude from those to wider applications. There are, of course, limits to experiments in economics, but in a sense any variation in taxation, in foreign exchange rates, in tariffs, etc. etc., can be viewed as a coarse experiment whose result can lead to new theories and hence to better prediction when the new occasion comes around. (Oskar Morgenstern 1972, p. 710) 4.1 Introduction It has been argued that the emergence and early progress of experimental economics are related to the work of Oskar Morgenstern (Schotter 1992). Although he did not publish