Charles Plott, Distinguished Fellow 2008
Charles Plott is one of the pioneers in experimental economics, and the use of experimental methods to study the behavioral foundations of economics and political science. His laboratory at Caltech has been a model for the behavioral economics laboratories that now populate most of the major research centers in economics and business, and his principles for conduct of economics experiments have established the standard for the field. His research established the importance of agenda in group decision-making, and demonstrated how agenda mechanism design can be used to manipulate political decisions. He has studied market behavior out of equilibrium, and the propensity of market systems to find equilibrium, an important and neglected subject with implications for the formation of unstable phenomena such as bubbles. An important finding of these studies is that independent economic agents with primary interests in one market are able to effectively coordinate on the basis of information available from other markets. The observed behavior is considerably short of rational expectations theory in which all agents have a common model of the economy, but it does reflect awareness of linkages between markets. He has studied the effectiveness of regulation, including the advantages and disadvantages of public disclosure of information available to regulators, and the use of tradable priority permits for a congested resource. He has studied the design of auctions, including parimutuel betting processes and continuous auctions, in terms of the effective efficiency of the mechanism when modulated by agent behavior. Overall, his research has opened the theory of markets and behavior of economic agents to experimental study, and has led economists to become the architects of sophisticated, experimentally-driven designs for market institutions, information channels, and framing of market choices.