#94 – John List – Books

The Evolution of John List’s Experimental Economics: A Journey of Influence and Innovation

Introduction: Pioneering the Field of Experimental Economics

John List, an economics professor at the University of Chicago, stands out as a significant influence in the field of economics, particularly for his pioneering work in experimental economics. His journey, marked by a blend of innovation and resilience, has profoundly impacted how economists think about the world. Unlike many in top economics departments, List’s path was unconventional, emerging from non-elite institutions like the University of Wisconsin-Stevens Point and the University of Wyoming. His initial dream was to become a professional golfer, but his natural inclination towards economics eventually steered him towards an academic career. Despite facing initial rejections from 149 out of 150 job applications, his perseverance and unique approach to economics research eventually led to his recognition as a leading figure in the field​​.

The Revolution of Randomized Experiments in Economics

List’s significant contribution lies in his advocacy and implementation of randomized experiments in economics, a method previously underutilized in the discipline. Surprisingly, the concept of randomized experiments, though straightforward and powerful, was not commonplace in economics until the late 20th century. This hesitancy was rooted in the belief that economics, unlike physical sciences, could not control variables effectively in experiments. However, List’s work demonstrated the feasibility and effectiveness of conducting field experiments in real-world settings, such as baseball card conventions, offering new insights into economic behaviors and theories​​.

The Shift in Focus: From Academic Curiosity to Real-World Impact

Over time, List’s focus shifted from purely academic pursuits to having a tangible impact on the real world. His earlier work, including studies on market discrimination, was instrumental in understanding and quantifying discriminatory behaviors in economic transactions. These field experiments provided not just measurements of discrimination but also insights into the motivations behind such behaviors, distinguishing between prejudice-driven actions and profit-oriented discrimination. This work laid the foundation for more profound explorations into the applications of experimental economics in addressing real-world issues​​.

Scaling Experiments: The Challenge of Real-World Application

One of the critical realizations in List’s career was the challenge of scaling experiments from controlled settings (“petri dishes”) to broader applications. He observed that many interventions that showed promise in small-scale experiments failed to deliver similar results when scaled up. This “voltage drop” in efficacy highlighted the need for more rigorous testing and replication in experimental economics. List emphasized the importance of designing experiments with scalability in mind, considering the potential constraints and variables that would come into play in larger settings. This approach is essential in ensuring that experimental findings are not just academically interesting but practically applicable and beneficial to society​​.

John List’s Influence and Legacy

List’s journey from an unconventional academic background to becoming a significant influence in economics underscores the importance of diverse perspectives and approaches in the field. His work has not only transformed how experimental economics is conducted but also demonstrated the potential of these experiments in informing policy and driving real-world change. His story is a testament to the power of perseverance, innovation, and the willingness to challenge established norms in pursuit of knowledge and impact​​.

The Genesis of Practical Economics: From Theory to Field Experiments

John List’s foray into experimental economics began with his unique experiences at baseball card shows. While initially driven by the desire to maximize profits in trading, his natural inclination toward economics led him to experiment with different selling and negotiation tactics. This hands-on approach provided List with real-world insights that were often at odds with established economic theories, spurring him to pursue field experiments as a more accurate method of studying economic behaviors. This pragmatic approach, though initially met with skepticism, later became a cornerstone of his academic work​​.

Overcoming Academic Inertia: The Struggle for Acceptance

Despite the promise shown by his early field experiments, List faced significant resistance in the academic community. His unconventional methods, often conducted outside the traditional laboratory setting, were initially dismissed by many peers. However, List’s persistence and the tangible results of his experiments gradually led to a broader acceptance of field experiments in economics. This shift marked a significant departure from the previously dominant reliance on naturally occurring data or lab-based studies, paving the way for a more dynamic and applicable understanding of economic principles​​.

Scaling and Its Challenges: The Realities of Broad Application

List’s work highlighted a critical aspect of experimental economics: the challenge of scaling. He observed that experiments conducted in controlled, small-scale environments often failed to produce the same results when expanded to larger settings. This phenomenon, which he termed the “voltage drop,” underscored the need for scalability considerations in experimental design. List emphasized the importance of replicating experiments in varied settings and incorporating real-world constraints to ensure that the findings are robust and applicable on a larger scale. His approach encouraged a more holistic view of experimental economics, focusing not just on theoretical validation but also on practical implementation​​.

A New Dimension in Economics: Tackling Discrimination Through Experiments

One of List’s notable contributions was his research on market discrimination. By setting up field experiments at baseball card conventions, he was able to measure and analyze how sellers treated different groups of customers, such as women, older people, or people of different races. These experiments provided concrete evidence of discriminatory practices and helped to differentiate between the underlying motivations of sellers, whether driven by prejudice or profit. This work not only shed light on the extent and nature of discrimination in markets but also offered a framework for exploring other complex socio-economic issues through experimental methods​​.

Transition to the Corporate World: From Academia to Real-World Impact

List’s expertise in experimental economics eventually led him to roles in the corporate world, including positions as Chief Economist at Uber and later at Walmart. These roles provided him with new platforms to apply his experimental approaches to real-world business problems. At Uber, for example, he conducted experiments on tipping and driver satisfaction, contributing to the company’s understanding of driver behavior and market dynamics. His work in these corporate environments demonstrated the practical applications of experimental economics in business settings, further solidifying the value of his research approach beyond academia​​.

The Interplay of Economics and Business: Insights from Uber and Walmart

John List’s transition from academia to the business world, particularly his roles at Uber and Walmart, provided him with a unique perspective on the practical applications of economic theories. At Uber, he was involved in designing and analyzing the impact of various policies and strategies, such as the introduction of tipping for drivers. His work highlighted the complexities of economic behavior in the real world, demonstrating how changes in one aspect (like tipping) could lead to unexpected outcomes in another (like driver supply and earnings). This experience at Uber was instrumental in shaping his understanding of market dynamics and consumer behavior, further enriching his economic insights​​.

Scaling Experiments in Corporate Settings

List’s role at Uber also involved scaling up experiments and policies across different markets, a challenge that brought to light the intricacies of applying theoretical models in diverse real-world scenarios. His experiences underscored the importance of considering the unique characteristics of each market and the need for flexible, adaptable approaches in economic experimentation and policy-making. This was evident in his work on scaling up the tipping model, which revealed nuanced responses from drivers and riders across different regions and contexts​​.

The Walmart Experience: Economics at Scale

Moving to Walmart, List found himself at the helm of economic strategies for the world’s largest company by revenue. This position provided an unparalleled opportunity to apply and test economic theories at an unprecedented scale. His work at Walmart involved dealing with complex issues ranging from supply chain management to consumer behavior, each requiring a nuanced understanding of economics combined with practical business acumen. The sheer scale of Walmart’s operations presented unique challenges and opportunities for economic experimentation and innovation​​.

Beyond Academia: Real-World Applications and Legacy

John List’s journey from an academic economist to a key figure in the corporate world highlights the evolving nature of the economics profession. His experiences at Uber and Walmart demonstrate the increasing relevance and application of economic theories in solving real-world business problems. His work in these roles not only provided valuable insights for the companies but also enriched the field of economics with practical, real-world data and experiences. This blend of academic rigor and business acumen underscores the growing importance of economists in shaping business strategies and policies​​.

Conclusion: A Legacy of Innovation and Application

John List’s career path, marked by significant contributions to experimental economics and its application in real-world business scenarios, serves as an inspiration for both academics and practitioners. His journey from theoretical exploration to practical application encapsulates the evolving role of economists in the modern world. His work at Uber and Walmart, in particular, highlights the potential of economic theories to inform and shape business strategies, underscoring the value of bridging the gap between academia and the corporate sector. List’s legacy is one of innovation, resilience, and a deep commitment to applying economic principles to solve real-world problems​​.