Vernon L. Smith facts for kids

Quick facts for kids Vernon L. Smith
Smith in January 2011
Born	Vernon Lomax Smith (1927-01-01) January 1, 1927 (age 98) Wichita, Kansas, U.S.
Field	Experimental economics
School or tradition	New classical economics
Doctoral advisor	Wassily Leontief
Influences	Friedrich Hayek Richard S. Howey
Contributions	Combinatorial auction Experimental economics
Awards	Nobel Memorial Prize in Economic Sciences (2002)
Information at IDEAS / RePEc

Vernon Lomax Smith, born on January 1, 1927, is an American economist. He is a professor of economics and law at Chapman University.

In 2002, Smith won the Nobel Memorial Prize in Economic Sciences. He shared this award with Daniel Kahneman. They were recognized for their work in experimental economics. This field uses "laboratory experiments as a tool in economic analysis." It helps us understand how different market systems work.

Smith also founded the International Foundation for Research in Experimental Economics (IFREEE). He is a member of the Independent Institute’s board of advisors. He is also a senior fellow at the Cato Institute in Washington D.C.. In 1995, he was elected to the National Academy of Sciences. In 2004, he received an honorary doctorate from Universidad Francisco Marroquín. The Vernon Smith Center for Experimental Economics Research is named after him there.

Early Life and Learning

Smith was born in Wichita, Kansas. He went to Wichita North High School and Friends University. His family faced tough times during the Great Depression. Money from his mother's first husband's life insurance helped them survive. This money was invested in a farm. Growing up on the farm influenced his later interests.

Smith earned his first degree in electrical engineering from Caltech in 1949. He then got a master's degree in economics from the University of Kansas in 1952. He finished his studies with a Ph.D. in economics from Harvard University in 1955. His Ph.D. paper was about how businesses replace old equipment.

His Career in Academia

Smith's first teaching job was at Purdue University. He taught there from 1955 to 1967. He became a full professor during this time.

He also taught at Stanford University from 1961 to 1962. There, he met Sidney Siegel, who also worked in experimental economics. Smith then taught at Brown University (1967–1968) and the University of Massachusetts (1968–1972). He also had positions at the Center for Advanced Study in the Behavioral Sciences (1972–1973) and Caltech (1973–1975).

Much of the research that earned Smith his Nobel Prize was done at the University of Arizona. He worked there from 1976 to 2001. In 2001, Smith moved to George Mason University. In 2008, he started the Economic Science Institute at Chapman University in Orange, California.

Smith has been on the board of editors for several important journals. These include the American Economic Review and Science.

How He Studied Economics

Smith started his work in experimental economics at Purdue University. He explained his idea:

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.

To make his experiments better, Smith changed some things from earlier studies. He ran his experiments for several trading periods. This gave students time to learn how the market worked.

At Caltech, Charles Plott encouraged Smith to make his experimental methods more formal. He did this in two important articles. In 1976, "Experimental Economics: Induced Value Theory" was published. This paper explained the main idea behind economic experiments. Six years later, he expanded on these ideas in "Microeconomic Systems as an Experimental Science."

This paper used ideas from mechanism design, a system developed by Leonid Hurwicz. In Hurwicz's idea, a microeconomic system has an economic environment, an economic institution (like a market), and an economic outcome. The key idea is that the economic outcome can change based on the economic institution. Smith's work helped test how well these institutions performed.

Another big contribution was the "induced values" technique. This method is used in controlled lab experiments in economics. It lets researchers create a mini-market in a lab. People in the experiment are told they can make a "commodity" at a certain cost. They then sell it to buyers. Sellers earn money based on the price they get and their cost. Buyers are told the commodity has a value to them. They earn money based on this value and the price they pay. Using this method, Smith and others have studied how different trading systems work.

In 2011, Smith worked with high school students in California. He and his colleague Bart Wilson did experiments to show students how markets work. They also explored how things like being helpful (altruism) affect economic choices.

Smith has written many articles and books. His topics include how money works, how to manage natural resources, and experimental economics. He was also one of the first to suggest the combinatorial auction design in 1982. This is a special type of auction where people can bid on groups of items at once.

In 2009, Smith signed a public letter against the American Recovery and Reinvestment Act. This act was a plan to boost the economy.

The Vernon Smith Prize for the Advancement of Austrian Economics is named after him. It is sponsored by the European Center of Austrian Economics.

Vernon Smith is well-known for explaining spontaneous order in economics. Spontaneous order means that structure and organization can appear naturally from what seems like disorder. This happens in both social and economic situations. Smith has taught about this idea in his course "Spontaneous Order and the Law." He shows how social rules and laws develop naturally from human interactions.

Recently, Vernon L. Smith has also studied Neuroeconomics. This field combines economic ideas with brain science. It helps us understand how our brains make economic decisions. Smith's work in this area has given new insights into how brain activity affects choices. He also supports using experiments to teach economics. He believes in a hands-on way to learn economic ideas.

Personal Life

In 2005, Smith publicly shared that he believes he has Asperger syndrome. He came to this conclusion after thinking about his own personality traits.

Works

• Plott, Charles R., and Vernon L. Smith, ed. (2008). Handbook of Experimental Economics Results, v. 1, Elsevier.
• _____ (1991). Papers in Experimental Economics [1962–88], Cambridge.
• _____ (2000). Bargaining and Market Behavior: Essays in Experimental Economics [1990–98], Cambridge.
• _____ ([1987] 2008a). "experimental methods in economics." The New Palgrave Dictionary of Economics, 2nd Edition.
• _____ (2008b). "experimental economics," The New Palgrave Dictionary of Economics, 2nd Edition.
• Chorvat, T., McCabe, K., & Smith, V. (2005). Law and Neuroeconomics. Supreme Court Economic Review

See also

• List of economists