Vernon L. Smith is an economist best known for his groundbreaking work in experimental economics. His work has dramatically revolutionized the way economists think about human behavior and has transformed the study of economics from a purely theoretical discipline to one that is grounded in empirical evidence.
Early Life and Education
Vernon Smith was born in Wichita, Kansas in 1927 to a family of farmers. Growing up, he watched his father struggle to make ends meet during the Great Depression, an experience that instilled in him a deep understanding of the value of hard work and the importance of economic stability.
After serving in the United States Army during World War II, Smith attended the University of Kansas, where he earned a Bachelor’s degree in Electrical Engineering in 1949. He later went on to earn a Master’s degree in Economics from the University of Kansas in 1952 and a Ph.D. in Economics from Harvard University in 1955.
Following completion of his advanced degree, Smith embarked on a career teaching economics at various institutions around the United States. Over the years, he served as a professor at Purdue University, Stanford University, the University of Massachusetts Amherst, and George Mason University.
However, it was during his time at the University of Massachusetts Amherst that Smith began to explore new ways of looking at economic problems. While teaching a course on market behavior, he became fascinated by the idea of using experimentation to better understand how markets work.
This interest eventually led him to develop a new field of study known as experimental economics, in which researchers use laboratory experiments to test economic theories and study the behavior of human subjects in controlled environments.
In the early 1960s, Smith conducted a series of famous experiments that challenged traditional economic theory. In these experiments, he created a laboratory market that allowed subjects to trade with one another, and then recorded the resulting prices and quantities. He found that the market’s price evolved in a way that was difficult to explain using traditional economic theory. Rather than reaching a stable equilibrium as predicted by traditional theory, prices in Smith’s market oscillated wildly.
Smith’s work helped to demonstrate that traditional economic models failed to capture important aspects of human behavior, and suggested that experimental methods could be used to more accurately understand how markets operate.
Impacts and Accolades
In recognition of his pioneering work in experimental economics, Smith has been honored with numerous awards and accolades over the years. In 2002, he was awarded the Nobel Memorial Prize in Economic Sciences alongside Daniel Kahneman for “having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms.”
In addition to the Nobel Prize, Smith has been awarded the National Medal of Science, the George H. W. Bush Award for Excellence in Public Service, and the Adam Smith Award from the National Association for Business Economics.
Beyond his work in economics, Smith has also been involved in a range of other activities throughout his life. He has served on numerous boards and committees, including the National Science Foundation, the Council for a Competitive Economy, and the Lab School of Washington, a school that specializes in teaching children with learning disabilities.
Today, Vernon Smith’s ideas continue to have a profound impact on the field of economics. Experimental methods have become an important tool for economists seeking to better understand human behavior, and his laboratory experiments serve as a cornerstone of modern economic research.
However, Smith’s legacy extends far beyond the field of economics itself. His work has demonstrated the value of combining theoretical work with empirical evidence, and has highlighted the importance of interdisciplinary collaboration in advancing our understanding of complex social phenomena.
Moreover, Smith’s commitment to using economic research to improve the lives of people around the world has inspired countless generations of economists to take on similar challenges, and his work has helped to lay the foundation for a more just, equitable, and prosperous future.