Prof. Avner Shaked Talks about the Current Flaws of Economics
Tuesday, 10 December, 2013

On December 4, ISET hosted a lecture by Professor Avner Shaked from the University of Bonn – one of the greatest modern game theorists who also delivers courses in game theory and industrial organizations at ISET. The talk was devoted to a serious flaw uncovered concerning famous economic journals the Quarterly Journal of Economics (QJE) and Econometrica. The flaw is that the papers "A theory of fairness, competition, and cooperation", by E. Fehr and K.M. Schmidt in QJE (1999) and "Fairness and contract design", by E. Fehr, A. Klein and K.M. Schmidt in Econometrica (2007), which both concerned behavioral and experimental economics, exposed logical and scientific imperfections. As Prof. Shaked stated: “Experimental economics is good and I have nothing against it, but the problem is that the people who do it are not good”. Concerning the seriousness of this topic, attendants of the presentation included ISET faculty members, students, and even graduates.

During the presentation prof. Shaked step-by-step followed those two papers and based on game-theoretic reasoning revealed the authors in fraud. He proved that the results and the methodology the authors used were completely wrong. Shaked argued that the authors had cheated and were angry about the fact that these, to put it softly, incorrect papers had been published in QJE and Econometrica. That they were, he said, meant that neither the editors nor the referees had read the papers and that they had probably just evaluated them on the basis of the fame of the authors.

At the end of the presentation, Prof. Shaked extended the topic of the lecture to conclude that three major problems currently exist in the study of economics: 

  1. Critiques of published papers do not get published
  2. Universities need to scientifically teach methods for setting up experiments
  3. World-renowned universities should invite professors based not on where they have published papers, but on the actual review and understanding of their papers.