Thought Experiments and
Storytelling
Experiments
• As economists and economics educators are
painfully aware, our discipline does not lend
itself well to the conduct of experiments like
our colleagues are able to do in the natural
sciences.
• It’s not impossible; it’s just difficult.
Economists suffer from a bit of “physics envy”
Thought Experiments and Storytelling by
Richard Gosselin
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Thought Experiments
• Of course it doesn’t prevent us from trying but we all
know that in the end we face the classic problem of
the participant being aware of being observed.
• Naturally, this makes us suspicious of what we see.
What we can do though is to conduct “thought
experiments”.
Thought Experiments and Storytelling by
Richard Gosselin
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Tactics Versus Strategies – Problems
Versus Exercises
• We should want students to be explorers.
• What is an explorer?
• He or she is the one who is lost. If he’s not lost then he
can’t be an explorer since he already knows where he
is going.
• “Sticking your butt out” – counterintuitive mountain
climbing advice. Great analogy which helps students
look for the not-so-obvious explanations for economic
phenomena.
• “Sawing the giraffe” – an outrageous solution given by
a middle school student on how to weigh a giraffe.
Thought Experiments and Storytelling by
Richard Gosselin
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So What are Thought
Experiments?
• Thought experiments have the virtue of not
having to worry about participants and
observers.
• Why conduct a thought experiment?
Thought Experiments and Storytelling by
Richard Gosselin
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Thought Experiments
• Given the structure of a potential experiment,
it may or may not be possible to actually
perform it, and, in the case that it is possible
for it to be performed, there need be no
intention of any kind to actually perform the
experiment in question.
Thought Experiments and Storytelling by
Richard Gosselin
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What is the Goal?
• The common goal of any thought experiment
is to explore the potential consequences of
the principle in question.
• Galileo did this in his famous work “Dialogue
Concerning the Two Chief World Systems”
Thought Experiments and Storytelling by
Richard Gosselin
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Galileo’s Dialogue
• What he did was to create an artificial or
hypothetical dialogue between two fictional
characters and arrived at his hypothesis by
deduction. In other words, he told a story.
Thought Experiments and Storytelling by
Richard Gosselin
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Good Enough for Galileo
• Storytelling, unlike traditional lecturing doesn’t
have to rely on the lecturer alone. The story can
actually involve the audience members as well. In
our profession that means our students.
• Through the process of Socratic questioning we
can tease out the answers to some important and
fundamental economic questions that we want
our students to think about.
Thought Experiments and Storytelling by
Richard Gosselin
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Galileo’s Thought Experiment
• Salviati. If then we take two bodies whose natural speeds are
different, it is clear that on uniting the two, the more rapid one will
be partly retarded by the slower, and the slower will be somewhat
in this opinion?
• Simplicio. You are unquestionably right.
• Salviati. But if this is true, and if a large stone moves with a speed
of, say, eight while a smaller moves with a speed of four, then when
they are united, the system hastened by the swifter. Do you not
agree with me will move with a speed less than eight; but the two
stones when tied together make a stone larger than that which
before moved with a speed of eight. Hence the heavier body moves
with less speed than the lighter; an effect which is contrary to your
supposition. Thus you see how, from your assumption that the
heavier body moves more rapidly than the lighter one, I infer that
the heavier body moves more slowly.
Thought Experiments and Storytelling by
Richard Gosselin
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Less Telling and Less Showing
• A real good economics story involves less
telling, less showing and more discovering.
• In a way it is a method of discovering the truth
poetically.
• It’s sort of the opposite of
of Mr. Grandgrind in Dickens’
Hard Times whose utilitarianism is
satirized. The facts, and only the facts.
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Richard Gosselin
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Examples – Short Ones
• The Black Box – “The End of Scarcity”
• Health Care – 1950’s prices – Yipee! – Greg
Mankiw
• The “Ten Cent Miracle Pill” – similar to Greg
Mankiw’s parable but with a twist.
• Flying on Standby – opportunity cost and sunk
cost
• The Demographic Quiz – a demonstration of the
principle of heuristics.
Thought Experiments and Storytelling by
Richard Gosselin
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Examples – Longer Ones
• “Who Wants to be a Millionaire” – explores
the concept of the wisdom of crowds
principle. Also can be used to explain bubbles.
• The Grocery Manager’s Shopping Cart –
explores the weaknesses of the simple CPI.
• The Babysitting Co-Op – recessions and
monetary policy (Paul Krugman)
Thought Experiments and Storytelling by
Richard Gosselin
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Examples – Longer Ones
• Warehouse Receipts - Murray Rothbard on
Money Creation and the concept of bailment.
Explores the pitfalls and moral dimensions of
fractional reserve banking.
• The Strange Case of Pure Competition – lessons
from a Nobel Prize winner. (Joseph Stiglitz).
Questions the whole assumption of pure
competition and casts doubt that there is actually
a supply curve at all. See his Nobel address.
Thought Experiments and Storytelling by
Richard Gosselin
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Examples – Longer Ones
• Income Inequality – The Easterlin Paradox
He found that within a given country people with
higher incomes were more likely to report being
happy. However, in international comparisons, the
average reported level of happiness did not vary much
with national income per person, at least for countries
with income sufficient to meet basic needs.
• The $100 bill Auction – a lesson in rationality which
helps students understand that there is more to
rational behavior than meets the eye. Can be discussed
as an actual experiment or used as a thought
experiment.
Thought Experiments and Storytelling by
Richard Gosselin
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Examples
• Interdependent utility – the Ultimatum game
and the Dictator game. Both games are
discussed by Scott Huettel who studies
neuroscience at Duke University.
• Ebay – great company whose service helps
illustrate the importance of trust in a marketbased economy.
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Richard Gosselin
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