Vernon L. Smith
Encyclopedia
Vernon Lomax Smith is professor of economics
at Chapman University's
Argyros School of Business and Economics
and School of Law in Orange, California
, a research scholar at George Mason University
Interdisciplinary Center for Economic Science, and a Fellow of the Mercatus Center
, all in Arlington, Virginia. Smith shared the 2002 Nobel Memorial Prize in Economic Sciences
with Daniel Kahneman
. He is the founder and president of the International Foundation for Research in Experimental Economics and 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
, the institution that named the Vernon Smith Center for Experimental Economics Research, after him.
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.
, Purdue University
, which he held from 1955 until 1967, attaining the rank of full professor. It was there that his work in experimental economics
began. As Smith describes it:
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), 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). At Caltech, Charlie 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). This 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 neatly adapts the principles of a microeconomic system developed by Leonid Hurwicz
- a recent winner of the Nobel Memorial Prize in Economic Sciences
- to the development of economic experiments. In Hurwicz' formulation, a microeconomic system consists of a 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. Mechanism design provide a formal means for tests of the performance of an economic institution, while experimental economics - as developed by Smith - provided a means for formal empirical assessment of the performance of economic institutions. There is a second key contribution of his influential paper Microeconomic Systems as an Experimental Science" though that goes beyond adaptation of the concepts of mechanism design developed by Hurwicz. In his paper, Smith describes the technique of induced values. This is the method used in controlled laboratory experiments in economics, political science, and psychology. This technique is what 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 earn the difference between the value of the commodity to them and its price. Using this technique, Smith and his coauthors have examined the performance of alternative trading mechanisms in resource allocation.
Much of the research that earned Smith the Nobel Memorial Prize in Economic Sciences
was conducted at the University of Arizona
between 1976 and 2002. In 2002 Smith left Arizona for George Mason University. In 2008, Smith founded the Economic Science Institute at Chapman University
in Orange, California. In February 2011, Smith participated in the "Visiting Scholars Series" at the Nicholas Academic Centers in Santa Ana, CA., conducted in collaboration with Chapman University. Smith and his colleague, Bart Wilson, conducted experiments designed to expose the high school students from under-served neighborhoods to market dynamics and how concepts such as altruism influence economic behavior. The Nicholas Academic Centers conduct after-school tutoring and mentoring programs, which in three years have helped more than 100 graduating seniors gain admission to top U.S. colleges and universities.
Smith has authored or co-authored over 200 articles and books on capital theory, finance
, natural resource economics
and experimental economics
. He was also one of the first to propose combinatorial auction
, with Stephen J. Rassenti and Robert L. Bulfin in 1982.
Smith serves or has served on the board of editors of the American Economic Review
, The Cato Journal, Journal of Economic Behavior and Organization, the Journal of Risk and Uncertainty, Science, Economic Theory, Economic Design, Games and Economic Behavior, and the Journal of Economic Methodology. He also served as an expert for the Copenhagen Consensus
.
Smith's papers have been published by Cambridge University Press: Papers in Experimental Economics (1991) and Bargaining and Market Behavior: Essays in Experimental Economics (2000).
In February 2005 Smith spoke out publicly about his Asperger syndrome
, which is part of the autism spectrum
.
In January 2009 Smith signed a public paper opposing the passage of the American Recovery and Reinvestment Act In a 2010 Econ Journal Watch study, Smith was found to be one of the most active petition signers among US economists.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
at Chapman University's
Chapman University
Chapman University is a private, non-profit university located in Orange, California affiliated with the Christian Church . Known for its blend of liberal arts and professional programs, Chapman University encompasses seven schools and colleges: Lawrence and Kristina Dodge College of Film and Media...
Argyros School of Business and Economics
Chapman University, Argyros School of Business and Economics
The Chapman University Argyros School of Business and Economics is a private research and academic institution at Chapman University in Southern California...
and School of Law in Orange, California
Orange, California
Southern California is well-known for year-round pleasant weather: - On average, the warmest month is August. - The highest recorded temperature was in 1985. - On average, the coolest month is December. - The lowest recorded temperature was in 1950...
, a research scholar at George Mason University
George Mason University
George Mason University is a public university based in unincorporated Fairfax County, Virginia, United States, south of and adjacent to the city of Fairfax. Additional campuses are located nearby in Arlington County, Prince William County, and Loudoun County...
Interdisciplinary Center for Economic Science, and a Fellow of the Mercatus Center
Mercatus Center
The Mercatus Center at George Mason University in the United States is a non-profit market-oriented research, education, and outreach think tank affiliated with the Koch family. It works with policy experts, lobbyists, and government officials to connect academic learning and real-world practice...
, all in Arlington, Virginia. Smith shared the 2002 Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
with Daniel Kahneman
Daniel Kahneman
Daniel Kahneman is an Israeli-American psychologist and Nobel laureate. He is notable for his work on the psychology of judgment and decision-making, behavioral economics and hedonic psychology....
. He is the founder and president of the International Foundation for Research in Experimental Economics and a Senior Fellow at the Cato Institute
Cato Institute
The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the largest privately held...
in Washington D.C.. In 2004 Smith was honored with an honorary doctoral degree at Universidad Francisco Marroquín
Universidad Francisco Marroquín
Universidad Francisco Marroquín is a private, secular, university in Guatemala City, Guatemala. According to the school's website, "the mission of Universidad Francisco Marroquín is to teach and disseminate the ethical, legal and economic principles of a sociey of free and responsible persons."...
, the institution that named the Vernon Smith Center for Experimental Economics Research, after him.
Education
Smith was born in Wichita, KansasWichita, Kansas
Wichita is the largest city in the U.S. state of Kansas.As of the 2010 census, the city population was 382,368. Located in south-central Kansas on the Arkansas River, Wichita is the county seat of Sedgwick County and the principal city of the Wichita metropolitan area...
where he attended Wichita North High School
Wichita North High School
Wichita North High School, known locally as North, is a fully accredited high school located in Wichita, Kansas, USA, serving students in grades 9-12. Wichita North was founded in 1929 on the site where the United States government sent Company 'A' of the 10th Division to the forks of the Arkansas...
and Friends University
Friends University
Friends University is a private non-denominational Christian university in Wichita, Kansas.Friends University was founded in 1898. The main building was originally built in 1886 for Garfield University, but was donated in 1898 to the Religious Society of Friends by James Davis, a St. Louis...
. He received his bachelor's degree in electrical engineering
Electrical engineering
Electrical engineering is a field of engineering that generally deals with the study and application of electricity, electronics and electromagnetism. The field first became an identifiable occupation in the late nineteenth century after commercialization of the electric telegraph and electrical...
from Caltech in 1949, an M.A.
Master of Arts (postgraduate)
A Master of Arts from the Latin Magister Artium, is a type of Master's degree awarded by universities in many countries. The M.A. is usually contrasted with the M.S. or M.Sc. degrees...
in economics
Master of Economics
A Master's Degree in Economics is a postgraduate academic program, offering training in economic theory, econometrics and / or applied economics. The degree may be offered as a terminal degree or as additional preparation for doctoral study, and is sometimes offered as a professional degree...
from the University of Kansas
University of Kansas
The University of Kansas is a public research university and the largest university in the state of Kansas. KU campuses are located in Lawrence, Wichita, Overland Park, and Kansas City, Kansas with the main campus being located in Lawrence on Mount Oread, the highest point in Lawrence. The...
in 1952, and his Ph.D.
Doctorate
A doctorate is an academic degree or professional degree that in most countries refers to a class of degrees which qualify the holder to teach in a specific field, A doctorate is an academic degree or professional degree that in most countries refers to a class of degrees which qualify the holder...
in economics from Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
in 1955.
Academic career
Smith's first teaching post was at the Krannert School of ManagementKrannert School of Management
The Krannert School of Management is Purdue University's school of management. The school was established in 1962 as the Krannert School of Industrial Administration with a $2.7 million endowment from Herman & Ellnora Krannert....
, Purdue University
Purdue University
Purdue University, located in West Lafayette, Indiana, U.S., is the flagship university of the six-campus Purdue University system. Purdue was founded on May 6, 1869, as a land-grant university when the Indiana General Assembly, taking advantage of the Morrill Act, accepted a donation of land and...
, which he held from 1955 until 1967, attaining the rank of full professor. It was there that his work in experimental economics
Experimental economics
Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic experiments usually use cash to motivate subjects, in...
began. As Smith describes it:
Smith also taught as a visiting associate professor at Stanford University
Stanford University
The Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San...
(1961–1962) and there made contact with Sidney Siegel
Sidney Siegel
Sidney Siegel was an American psychologist who became especially well-known for his work in popularising non-parametric statistics for use in the behavioural sciences. He was a co-developer of the statistical test known as the Siegel–Tukey test.Siegel completed a Ph.D. in Psychology in 1953 at...
, who was also doing work in experimental economics
Experimental economics
Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic experiments usually use cash to motivate subjects, in...
. Smith moved with his family to Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
and got a position first at Brown University
Brown University
Brown University is a private, Ivy League university located in Providence, Rhode Island, United States. Founded in 1764 prior to American independence from the British Empire as the College in the English Colony of Rhode Island and Providence Plantations early in the reign of King George III ,...
(1967–1968), then at the University of Massachusetts
University of Massachusetts Amherst
The University of Massachusetts Amherst is a public research and land-grant university in Amherst, Massachusetts, United States and the flagship of the University of Massachusetts system...
(1968–1972). Smith also received appointments at the Center for Advanced Study in the Behavioral Sciences
Center for Advanced Study in the Behavioral Sciences
The Center for Advanced Study in the Behavioral Sciences is an American interdisciplinary research body in Stanford, California focusing on the social sciences and humanities . Fellows are elected in a closed process, to spend a period of residence at the Center, released from other duties...
(1972–1973) and Caltech (1973–1975). At Caltech, Charlie 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). This 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 neatly adapts the principles of a microeconomic system developed by Leonid Hurwicz
Leonid Hurwicz
Leonid "Leo" Hurwicz was a Russian-born American economist and mathematician. His nationality of origin was Polish. He was Jewish. He originated incentive compatibility and mechanism design, which show how desired outcomes are achieved in economics, social science and political science...
- a recent winner of the Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
- to the development of economic experiments. In Hurwicz' formulation, a microeconomic system consists of a 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. Mechanism design provide a formal means for tests of the performance of an economic institution, while experimental economics - as developed by Smith - provided a means for formal empirical assessment of the performance of economic institutions. There is a second key contribution of his influential paper Microeconomic Systems as an Experimental Science" though that goes beyond adaptation of the concepts of mechanism design developed by Hurwicz. In his paper, Smith describes the technique of induced values. This is the method used in controlled laboratory experiments in economics, political science, and psychology. This technique is what 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 earn the difference between the value of the commodity to them and its price. Using this technique, Smith and his coauthors have examined the performance of alternative trading mechanisms in resource allocation.
Much of the research that earned Smith the Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...
was conducted at the University of Arizona
University of Arizona
The University of Arizona is a land-grant and space-grant public institution of higher education and research located in Tucson, Arizona, United States. The University of Arizona was the first university in the state of Arizona, founded in 1885...
between 1976 and 2002. In 2002 Smith left Arizona for George Mason University. In 2008, Smith founded the Economic Science Institute at Chapman University
Chapman University
Chapman University is a private, non-profit university located in Orange, California affiliated with the Christian Church . Known for its blend of liberal arts and professional programs, Chapman University encompasses seven schools and colleges: Lawrence and Kristina Dodge College of Film and Media...
in Orange, California. In February 2011, Smith participated in the "Visiting Scholars Series" at the Nicholas Academic Centers in Santa Ana, CA., conducted in collaboration with Chapman University. Smith and his colleague, Bart Wilson, conducted experiments designed to expose the high school students from under-served neighborhoods to market dynamics and how concepts such as altruism influence economic behavior. The Nicholas Academic Centers conduct after-school tutoring and mentoring programs, which in three years have helped more than 100 graduating seniors gain admission to top U.S. colleges and universities.
Smith has authored or co-authored over 200 articles and books on capital theory, finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, natural resource economics
Natural resource economics
Image:Sustainable development.svg|right|The three pillars of sustainability. Click on image areas for more information.|thumbpoly 138 194 148 219 164 240 182 257 219 277 263 291 261 311 264 331 272 351 283 366 300 383 316 394 287 408 261 417 224 424 182 426 154 423 119 415 87 403 58 385 40 368 24...
and experimental economics
Experimental economics
Experimental economics is the application of experimental methods to study economic questions. Data collected in experiments are used to estimate effect size, test the validity of economic theories, and illuminate market mechanisms. Economic experiments usually use cash to motivate subjects, in...
. He was also one of the first to propose combinatorial auction
Combinatorial auction
A combinatorial auction is a type of smart market in which participants can place bids on combinations of discrete items, or “packages,” rather than just individual items or continuous quantities....
, with Stephen J. Rassenti and Robert L. Bulfin in 1982.
Smith serves or has served on the board of editors of the American Economic Review
American Economic Review
The American Economic Review is a peer-reviewed academic journal of economics publishing seven issues annually by the American Economic Association. First published in 1911, it is considered one of the most prestigious journals in the field. The current editor-in-chief is Penny Goldberg . The...
, The Cato Journal, Journal of Economic Behavior and Organization, the Journal of Risk and Uncertainty, Science, Economic Theory, Economic Design, Games and Economic Behavior, and the Journal of Economic Methodology. He also served as an expert for the Copenhagen Consensus
Copenhagen Consensus
Copenhagen Consensus is a project that seeks to establish priorities for advancing global welfare using methodologies based on the theory of welfare economics. It was conceived and organized by Bjørn Lomborg, the author of The Skeptical Environmentalist and the then director of the Danish...
.
Smith's papers have been published by Cambridge University Press: Papers in Experimental Economics (1991) and Bargaining and Market Behavior: Essays in Experimental Economics (2000).
In February 2005 Smith spoke out publicly about his Asperger syndrome
Asperger syndrome
Asperger's syndrome that is characterized by significant difficulties in social interaction, alongside restricted and repetitive patterns of behavior and interests. It differs from other autism spectrum disorders by its relative preservation of linguistic and cognitive development...
, which is part of the autism spectrum
Autism spectrum
The term "autism spectrum" is often used to describe disorders that are currently classified as pervasive developmental disorders. Pervasive developmental disorders include autism, Asperger syndrome, Childhood disintegrative disorder, Rett syndrome and Pervasive Developmental Disorder Not Otherwise...
.
In January 2009 Smith signed a public paper opposing the passage of the American Recovery and Reinvestment Act In a 2010 Econ Journal Watch study, Smith was found to be one of the most active petition signers among US economists.
External links
- Dr. Vernon L Smith at Chapman University School of LawChapman University School of LawChapman University School of Law, commonly referred to as Chapman Law or Chapman Law School, is a private, non-profit law school located in Orange, California. The school offers the Juris Doctor degree , combined programs offering a JD/MBA and JD/MFA in Film & Television Producing, and LL.M...
- Vernon Smith at George Mason UniversityGeorge Mason UniversityGeorge Mason University is a public university based in unincorporated Fairfax County, Virginia, United States, south of and adjacent to the city of Fairfax. Additional campuses are located nearby in Arlington County, Prince William County, and Loudoun County...
- Senior Fellow at Cato InstituteCato InstituteThe Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the largest privately held...
- Constructivist and Ecological Rationality in Economics 2002 lecture at NobelPrize.org
- Profile and Papers at Research Papers in EconomicsResearch Papers in EconomicsResearch Papers in Economics is a collaborative effort of hundreds of volunteers in 57 countries to enhance the dissemination of research in economics. The heart of the project is a decentralized database of working papers, preprints, journal articles and software components. The project started...
/RePEc - Vernon L. Smith at Econlib
Articles
- Interview with Vernon Smith, Region Focus, Spring 2003
- Reflections On Human Action After 50 Years by Vernon L. Smith, Cato JournalCato JournalThe Cato Journal is a peer-reviewed academic journal published by the Washington, D.C.-based, libertarian think-tank, the Cato Institute, and features articles discussing politics and economy.According to the Cato Institute website, the journal is a...
, Fall 1999 - "Using Experiments to Inform the Privatization/Deregulation Movement in Electricity," by Stephen J.Rassenti, Vernon L.Smith, and Bart J.Wilson, Cato Journal, Winter 2002
- The Clinton Housing Bubble, Vernon L. Smith, The Wall Street JournalThe Wall Street JournalThe Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....
, December 18, 2007 - Human Betterment through Globalization by Vernon L. Smith, December 19, 2008
- From Bubble to Depression?, Steven Gjerstad and Vernon L. Smith, Wall Street Journal, April 6, 2009