Vernon L. Smith

Vernon Lomax Smith (born January 1, 1927) is an American economist and professor of business economics and law at Chapman University. He was formerly a professor of economics and law at George Mason University, and a board member of the Mercatus Center. He was also a founding board member of the Center for Growth and Opportunity at Utah State University.[1][2][3]

Vernon L. Smith
Smith in January 2011
Born
Vernon Lomax Smith

(1927-01-01) January 1, 1927
Wichita, Kansas
NationalityAmerican
FieldExperimental economics
School or
tradition		New classical economics
Alma materFriends University
California Institute of Technology (BA)
University of Kansas (MA)
Harvard University (PhD)
Doctoral
advisor		Wassily Leontief
InfluencesFriedrich von Hayek, Richard S. Howey
ContributionsCombinatorial auction
Experimental economics
AwardsNobel Memorial Prize in Economic Sciences (2002)
Information at IDEAS / RePEc

Smith shared the 2002 Nobel Memorial Prize in Economic Sciences with Daniel Kahneman for his contributions to Behavioral Economics.[4]

Smith is the founder and president of the International Foundation for Research in Experimental Economics, a Member of the Board of Advisors for The Independent Institute, a Senior Fellow at the Cato Institute in Washington D.C.. In 2004 Smith was honored with an honorary doctoral degree at Universidad Francisco Marroquín,[5] the institution that named the Vernon Smith Center for Experimental Economics Research after him.[6]

Education

Smith was born in Wichita, Kansas, where he attended Wichita North High School and Friends University. He received his bachelor's degree in electrical engineering from Caltech in 1949, an M.A. in economics from the University of Kansas in 1952, and his Ph.D. in economics from Harvard University in 1955.[7]

Academic career

Smith's first teaching post was at the Krannert School of Management, Purdue University, which he held from 1955 until 1967, attaining the rank of full professor.[7]

Smith also taught as a visiting associate professor at Stanford University (1961–1962) and there made contact with Sidney Siegel, who was also doing work in experimental economics. Smith moved with his family to Massachusetts and got a position first at Brown University (1967–1968) and then at the University of Massachusetts (1968–1972). Smith also received appointments at the Center for Advanced Study in the Behavioral Sciences (1972–1973) and Caltech (1973–1975).[7]

Much of the research that earned Smith the Nobel Memorial Prize in Economic Sciences was conducted at the University of Arizona between 1976 and 2001. In 2001, Smith left Arizona for George Mason University.[8] From 2003 to 2006, he held the Rasmuson Chair of Economics at the University of Alaska Anchorage.[9][10] In 2008, Smith founded the Economic Science Institute at Chapman University in Orange, California.[11]

Smith has served on the board of editors of the American Economic Review, The Cato Journal, Journal of Economic Behavior and Organization, Science, Economic Theory, Economic Design, and the Journal of Economic Methodology.[3] He also served as an expert for the Copenhagen Consensus.[12]

Academic work

It was at Purdue that Smith's work in experimental economics began. 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.[7]

In framing the experiment, Smith varied certain institutional parameters seen in the first classroom economics experiments as conducted by Edward Chamberlin: in particular, he ran the experiments for several trading periods, to give the student subjects time to train.[13]

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 the American Economic Review (AER).[14] 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 of mechanism design, a microeconomic system developed by Leonid 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, and experimental 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.[15]

In February 2011, Smith participated in the "Visiting Scholars Series" at the Nicholas Academic Centers in Santa Ana, California, conducted in collaboration with Chapman University. Smith and his colleague Bart Wilson conducted experiments designed to expose high school students from underserved neighborhoods to market dynamics and how concepts such as altruism influence economic behavior.[16]

Smith has authored or coauthored articles and books on capital theory, finance, natural resource economics and experimental economics. He was also one of the first to propose the combinatorial auction design, with Stephen J. Rassenti and Robert L. Bulfin in 1982.[17]

In January 2009, Smith signed a public petition opposing the passage of the American Recovery and Reinvestment Act.[18] In a 2010 Econ Journal Watch study, Smith was found to be one of the most active petition-signers among US economists.[19]

The Vernon Smith Prize for the Advancement of Austrian Economics is named after him and is sponsored by the European Center of Austrian Economics.[20]

Personal life

In February 2005, Smith publicly attributed features of his personality to Asperger's syndrome[21] after a process of self-diagnosis.

Works
  • Gjerstad, Steven D.; Smith, Vernon L. (2014). Rethinking Housing Bubbles. New York: Cambridge University Press. ISBN 978-0521198097.
  • Gjerstad, Steven; Smith, Vernon L. (2012). "At Home in the Great Recession". In Miniter, Brendan (ed.). The 4% Solution: Unleashing the Economic Growth America Needs. New York: Crown Business. pp. 345–377. ISBN 9780307986146.
  • Gjerstad, Steven D.; Smith, Vernon L. (2013). "Balance Sheet Crises: Causes, Consequences, and Responses" (PDF). Cato Journal. 33 (3): 437–470. Retrieved 2017-10-21.
  • Plott, Charles R., and Vernon L. Smith, ed. (2008). Handbook of Experimental Economics Results, v. 1, Elsevier. Description and preview.
  • Rassenti, Stephen J.; Smith, Vernon L.; Bulfin, Robert L. (1982). "A Combinatorial Auction Mechanism for Airport Time Slot Allocation" (PDF). Bell Journal of Economics. 13 (2): 402–417. doi:10.2307/3003463. JSTOR 3003463.
  • Smith, Vernon L. (1962). "An Experimental Study of Competitive Market Behavior". Journal of Political Economy. 70 (2): 111–137. doi:10.1086/258609. JSTOR 1861810.
  • _____ (1976). "Experimental Economics: Induced Value Theory" (PDF). American Economic Review. 66 (2): 274–279.
  • Smith, Vernon L. (1980). "Relevance of Laboratory Experiments to Testing Resource Allocation Theory" (PDF). In Kmenta, Jan; Ramsey, James B. (eds.). Evaluation of Econometric Models. Academic Press. pp. 345–377. ISBN 978-0-12-416550-2.
  • _____ (1982). "Microeconomic Systems as an Experimental Science" (PDF). American Economic Review. 72 (5): 923–955.
  • _____ (1991). Papers in Experimental Economics [1962–88], Cambridge. Description and chapter-preview links.
  • _____ (2000). Bargaining and Market Behavior: Essays in Experimental Economics [1990–98], Cambridge. Description and chapter-preview links.
  • _____ (2003). Smith, Vernon L. (2003). "Constructivist and Ecological Rationality in Economics". American Economic Review. 93 (3): 465–508. CiteSeerX 10.1.1.501.5291. doi:10.1257/000282803322156954.
  • _____ ([1987] 2008a). "experimental methods in economics." The New Palgrave Dictionary of Economics, 2nd Edition, Abstract.
  • _____ (2008b). "experimental economics," The New Palgrave Dictionary of Economics, 2nd Edition, Abstract.
  • Williams, Arlington W.; Ledyard, John O.; Gjerstad, Steven; Smith, Vernon L. (2000). "Concurrent Trading in Two Experimental Markets with Demand Interdependence". Economic Theory. 16 (3): 511–528. CiteSeerX 10.1.1.22.1763. doi:10.1007/s001990050002. JSTOR 25055346. Reprinted in Timothy N. Cason and Charles Noussair, ed. (2001), Advances in Experimental Markets, pp. 15– 32.
gollark: Sadly, it appears that the new person is leaving.
gollark: Oh, you said and I didn't scroll down, silly me.
gollark: I heard somewhere that it got shortened to chi-mas, and the Greek letter chi looks like x.
gollark: "Okay", kite.
gollark: I have reasons, "kite".

See also

Notes
  1. "Board Members – Center for Growth and Opportunity".
  2. "Vernon Smith: Board Member". Mercatus Center. 2008-08-15. Retrieved 2017-10-21.
  3. "Vernon L. Smith: CV" (PDF). Chapman University. Retrieved May 11, 2018.
  4. "Vernon L. Smith – Facts". Nobelprize.org. Retrieved 2017-10-21.
  5. "Honorary Doctoral Degrees at Universidad Francisco Marroquín". Archived from the original on 2011-05-01.
  6. "El Centro Vernon Smith de Economía Experimental". Universidad Francisco Marroquín. Retrieved 2017-10-21.
  7. "Vernon L. Smith – Autobiography". Nobelprize.org. Archived from the original on May 27, 2018. Retrieved 2008-04-25.
  8. Steelman, Aaron (Spring 2003). "Interview: Vernon Smith" (PDF). Region Focus. Federal Reserve Bank of Richmond. Retrieved 2017-10-21.
  9. Chapman, Tim (August 2003). "Profile: Vernon L. Smith – Bringing economics into the laboratory". Quantitative Finance. 3 (4): C58–C60. Bibcode:2003QuFin...3C..58C. doi:10.1088/1469-7688/3/4/601.
  10. "UAA celebrates 10th anniversary of Rasmuson Chair of Economics". Green & Gold News. University of Alaska Anchorage. November 27, 2013. Retrieved 2017-10-21.
  11. "About ESI". Chapman University. Retrieved 2017-10-21.
  12. "Experts". Copenhagen Consensus Center. Retrieved 2017-10-21.
  13. Ross Miller (2002). Paving Wall Street: Experimental Economics and the Quest for the Perfect Market. New York: John Wiley & Sons. pp. 73–74. ISBN 978-0-471-12198-5.
  14. Smith 1976
  15. Smith 1982
  16. Mickadeit, Frank (2011-01-30). "Nobelist gives teens Econ 101 lesson". The Orange County Register. Retrieved 2017-10-21.
  17. Rassenti, Smith, and Bulfin 1982
  18. "Cato Institute petition against Obama 2009 stimulus plan" (PDF). Archived from the original (PDF) on 2009-02-03. Retrieved 2018-12-12.
  19. Hedengren, David, Daniel B. Klein, and Carrie Milton. "Economist Petitions: Ideology Revealed", Econ Journal Watch 7[3]: 288–319, Sept 2010.
  20. "Vernon Smith Prize Contest Information".
  21. Herera, Sue (25 February 2005). "Mildest autism has 'selective advantages'". NBC News. Retrieved 2006-03-27.

Articles
Awards
Preceded by
George A. Akerlof
A. Michael Spence
Joseph E. Stiglitz		 Laureate of the Nobel Memorial Prize in Economics
2002
Served alongside: Daniel Kahneman		 Succeeded by
Robert F. Engle III
Clive W.J. Granger
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