Wednesday, February 23, 2011

John List, Economist Who Uses Randomized Controlled Field Experiments Instead Of Mathematical Models

An excellent article about economics professor John List who believes in testing economic and social ideas with randomized controlled study field experiments instead of computer models and lab experiments.

From Bloomberg, "Chicago Economist's `Crazy' Education Idea Wins Ken Griffin's Backing" by Oliver Staley:
The Griffin experiment may show that the U.S. doesn’t spend enough on helping parents, List says. “We have too many eggs in the kid basket,” says List, himself a father of five. “We need to spend much more time and many more resources on helping parents.”
List knew where he could experiment with real decisions about prices: at sports-card trade shows, which he attended as a collector of baseball and football memorabilia. In one experiment, aimed at finding out why people in business transactions treat each other fairly, List had card buyers ask dealers for a card of Chicago White Sox slugger Frank Thomas in mint condition.

He found that when dealers didn’t think they were being watched and they knew the buyer couldn’t check the quality, they gave unfair prices, to a degree that rose with the dealers’ distance from their home markets.
In a later experiment, List and two colleagues posted an ad for an administrative job on Craigslist in 16 cities. About 7,000 job seekers responded and were then given different compensation plans. Some were offered a flat hourly rate while others had to compete for their money.

In general, women shied away from competition, although they were more likely to compete when they operated in teams and when they could earn more than the prevailing wages in their region, the research found. The study helps explain why there are relatively few women executives in fields where promotion is based on competition, List says.

“An important component of gender imbalance is compensation structure,” he says. “If you had a different type of compensation regime, the composition of the top echelon of workers would be different.”
Read the complete article here.

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