January, 2017

A Celebration of Vernon Smith's 90th Birthday and Lifetime Contributions to Economics

Southern Economic Association, 2016
  • Daniel Houser

    Professor and Chairman, Department of Economics at George Mason University
  • Peter J. Boettke

    Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Catherine Eckel

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Vernon Smith was born on January 1, 1927, and will celebrate his 90th birthday in 2017. He received a bachelor's degree in electrical engineering from Caltech in 1949. He tells of his decision to become an economist: He began his studies as a physics major at Caltech, and then switched to engineering. He decided to take an economics course, and was impressed by it, and spent some time in the library reading the economics books that he found there. These books taught him that in some respects economics is like physics (which he learned from Paul Samuelson's book) and in some respects it is not (which he learned from reading Mises). This intrigued him.

He decided then to do a master's degree in economics at the University of Kansas (1952) to discover whether economics was what he wanted to study. The answer must have been “yes,” because the next phase of his career was in the PhD program in economics at Harvard. Harvard, he says, was easy after Caltech, and he received A's for his coursework and earned a PhD in 1955. Harvard is also where Vernon experienced his first “experiment.” He tells of participating in one of Chamberlin's classroom experiments on competitive markets. Subjects received “costs” (for buyers) and “values” (for buyers), and circulated around the classroom to find each other and negotiate a price. The prices were recorded on the board. Chamberlin apparently used this exercise to show that markets don't work, and that price and quantity don't magically converge to competitive equilibrium.

Vernon then joined the faculty at Purdue, where he stayed until 1967. This was where Vernon conducted his first double auction market experiments, which altered the Chamberlin setup to be more like a stock market, with both buyers and sellers calling out prices to a central auctioneer. The costs and values were the same, but the “institution” was different. He tells of his surprise when the first market converged to competitive equilibrium, and of his efforts to stress-test the environment to see if he could get a more reasonable result. However, as he might say, the darned thing continued to converge to equilibrium. Little did he know at the time that the double auction would prove to be the most powerful of market institutions, ensuring convergence with or without incentives, and with as few as three buyers and sellers.

While at Purdue, Vernon visited Caltech, where he met Sydney Segal, who Vernon notes was one of the most important influences on his thinking about experiments (Svorenčík 2016). Smith moved to Brown University in 1967, then to the University of Massachusetts (1968–1972). In 1975, Vernon made a move to the University of Arizona, which was to become a major center for experimental economics over the following 26 years. There he recruited an excellent research group, developed many students who became leaders in experimental research, and designed and built a lab that became the model for many future labs around the world. In 2001, he moved to George Mason, where he established the Interdisciplinary Center for Economic Science and developed the research and educational track in experimental economics within the PhD program, as well as a certificate program in economic systems design. Since 2008, Vernon has been at Chapman University, where he founded the Economic Science Institute.

Vernon has held many leadership positions in the profession. Notably, he served as Vice President of the Southern Economic Association in 1985–1986, though it seems he was never president. He was founding president of the Economic Science Association (the organization of experimental economists) in 1986–1987, but it seems he was subsequently demoted to Vice President for the next two years. Vernon also was president of the Public Choice Society (1988–1990), the Western Economic Association (1990–1991), and the Association for Private Enterprise Education (1997). He is the founder and president of the International Foundation for Research in Experimental Economics.

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