Vernon L. Smith | |
|---|---|
 Smith in January 2011 | |
| Born | Vernon Lomax Smith (1927-01-01)January 1, 1927 (age 99) Wichita, Kansas, U.S. |
| Academic background | |
| Education | California Institute of Technology (BS) University of Kansas (MA) Harvard University (PhD) |
| Thesis | A theoretical and empirical inquiry into the economic replacement of capital equipment (1955) |
| Doctoral advisor | Wassily Leontief |
| Influences | Friedrich Hayek Richard S. Howey |
| Academic work | |
| Discipline | Experimental economics |
| School or tradition | New classical economics |
| Notable ideas | Combinatorial auction Experimental economics |
| Awards | Nobel Memorial Prize in Economic Sciences (2002) |
| Website | |
Vernon Lomax Smith (born January 1, 1927) is an Americaneconomist who is currently a professor of economics and law atChapman University.[1] He was formerly the McLellan/Regent's Professor of Economics at theUniversity of Arizona, a professor of economics and law atGeorge Mason University, and a board member of theMercatus Center.[1] Along withDaniel Kahneman, Smith won the 2002Nobel Memorial Prize in Economic Sciences for his contributions tobehavioral economics and his work in the field ofexperimental economics, which helped establish "laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms."[2][3]
Smith is the founder and president of theInternational Foundation for Research in Experimental Economics (IFREEE), a member of theIndependent Institute’s board of advisors, and a senior fellow at theCato Institute inWashington D.C. He was elected aFellow of theEconometric Society in 1987, and was elected to theNational Academy of Sciences in 1995.[4][5][1] In 2004, Smith was awarded anhonorary doctorate by theUniversidad Francisco Marroquín,[6] where the Vernon Smith Center for Experimental Economics Research is named for him.[7] He was also a founding board member of the Center for Growth and Opportunity at Utah State University.[8][9][10] As of 2023, Smith also sits on the advisory board of the Madden Center for Value Creation atFlorida Atlantic University.[11]
Smith was born inWichita, Kansas, where he attendedWichita North High School andFriends University. Grover Bougher, Vernon's mother's first husband, who worked as a fireman on the Santa Fe railroad, died in an accident. The life insurance money provided by the Santa Fe railroad was invested in a farm which became the sole means of survival for Vernon's family during the tough years of theGreat Depression. His future interests were influenced by his childhood at the farm.[12]
Smith received his bachelor's degree inelectrical engineering fromCaltech in 1949, anM.A.in economics from theUniversity of Kansas in 1952, and hisPh.D. in economics fromHarvard University in 1955.[3] His Ph.D. thesis title wasA theoretical and empirical inquiry into the economic replacement of capital equipment.[13]
Smith's first teaching post was at theKrannert School of Management,Purdue University, which he held from 1955 until 1967, attaining the rank of full professor.[3]
Smith also taught as a visiting associate professor atStanford University (1961–1962) and there made contact withSidney Siegel, who was also doing work inexperimental economics. Smith moved with his family toMassachusetts and got a position first atBrown University (1967–1968) and then at theUniversity of Massachusetts (1968–1972). Smith also received appointments at theCenter for Advanced Study in the Behavioral Sciences (1972–1973) andCaltech (1973–1975).[3]
Much of the research that earned Smith theNobel Memorial Prize in Economic Sciences was conducted at theUniversity of Arizona between 1976 and 2001. In 2001, Smith left Arizona forGeorge Mason University.[14] From 2003 to 2006, he held the Rasmuson Chair of Economics at theUniversity of Alaska Anchorage.[15][16] In 2008, Smith founded the Economic Science Institute atChapman University inOrange, California.[17]
Smith has served on the board of editors of theAmerican Economic Review, theCato Journal,Journal of Economic Behavior and Organization,Science,Economic Theory,Economic Design, and theJournal of Economic Methodology.[10] He also served as an expert for theCopenhagen Consensus.[18]
Smith began his work inexperimental economics atPurdue University. As Smith describes it:
In the Autumn semester, 1955, I taught Principles of Economics, and found it a challenge to convey basic microeconomic theory to students. Why/how could any market approximate a competitive equilibrium? I resolved that on the first day of class the following semester, I would try running a market experiment that would give the students an opportunity to experience an actual market, and me the opportunity to observe one in which I knew, but they did not know what were the alleged driving conditions of supply and demand in that market.[3]
In framing the experiment, Smith varied certain institutional parameters seen in the first classroom economics experiments as conducted byEdward Chamberlin: in particular, he ran the experiments for several trading periods, to give the student subjects time to train.[19]
At Caltech,Charles Plott encouraged Smith to formalize the methodology of experimental economics, which he did in two articles. In 1976, "Experimental Economics: Induced Value Theory" was published in theAmerican Economic Review (AER).[20] It was the first articulation of the principle behind economic experiments. Six years later, these principles were expanded in "Microeconomic Systems as an Experimental Science," also in the AER. This paper adapts the principles ofmechanism design, a microeconomic system developed byLeonid Hurwicz, to the development of economic experiments. In Hurwicz's formulation, a microeconomic system consists of an economic environment, an economic institution (or economic mechanism), and an economic outcome. The economic environment is simply the preferences of the people in the economy and the production capabilities of the firms in the economy. The key insight in this formulation is that the economic outcome can be affected by the economic institution. The mechanism design provides a formal means for tests of the performance of an economic institution, andexperimental economics, as developed by Smith, provided a means for formal empirical assessment of the performance of economic institutions. The second main contribution of the paper is to the technique of induced values, the method used in controlled laboratory experiments in economics, political science, and psychology, which allows experimental economists to create a replica of a market in a laboratory. Subjects in an experiment are told that they can produce a "commodity" at a cost and then sell it to buyers. The seller earns the difference between the price received and its cost. Buyers are told that the commodity has a value to them when they consume it, and they earn the difference between the value of the commodity to them and its price. Using the technique, Smith and his coauthors have examined the performance of alternative trading mechanisms in resource allocation.[21]
In February 2011, Smith participated in the "Visiting Scholars Series" at the Nicholas Academic Centers inSanta Ana, California, conducted in collaboration with Chapman University. Smith and his colleagueBart Wilson conducted experiments designed to expose high school students from underserved neighborhoods to market dynamics and how concepts such as altruism influence economic behavior.[22]
Smith has authored or coauthored articles and books on capital theory,finance,natural resource economics andexperimental economics. He was also one of the first to propose thecombinatorial auction design, with Stephen J. Rassenti and Robert L. Bulfin in 1982.[23]
In January 2009, Smith signed a public petition opposing the passage of theAmerican Recovery and Reinvestment Act.[24] In a 2010 Econ Journal Watch study, Smith was found to be one of the most active petition-signers among US economists.[25]
The Vernon Smith Prize for the Advancement ofAustrian Economics is named after him and is sponsored by the European Center of Austrian Economics.[26]
Vernon Smith is renowned for his seminal contributions to the elucidation ofspontaneous order within the field of economics. He posits spontaneous order as the organic emergence of structure and coherence from apparent disorder, a phenomenon ubiquitously observed in both social and economic contexts. His work on this has even extended out to using methods ofself-organization from the physical sciences to model sociability.[27] Smith has expounded upon the notion of spontaneous order in the context of his pedagogical endeavors as well. In his instructive course titled "Spontaneous Order and the Law" at theFowler School of Law, Chapman University,[28] he illuminates how social norms and legal frameworks emerge organically through human interaction, gradually coalescing from apparent chaos into structured societal systems.
In recent years, Vernon L. Smith's research has expanded to include the study ofNeuroeconomics[29] where he integrates economic theory with neuroscience to understand decision-making processes. Vernon Smith's work in this area has led to new insights into how brain activity influences economic decisions. Additionally, he has been instrumental in promoting the use of experimental methods in economics education, advocating for a hands-on approach to learning economic concepts. Some of these contributions were used inNeuroeconomics Lab[30] books published byAcademic Press (2014).
In February 2005, Smith publicly attributed features of his personality toAsperger syndrome[31] after a process ofself-diagnosis. Smith donated hisNobel Prize medal toChapman University in 2009.[32]
, accessed 22 October 2020
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| Preceded by | Laureate of the Nobel Memorial Prize in Economics 2002 Served alongside:Daniel Kahneman | Succeeded by |
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