2oo2 winner

Vernon L. Smith

Born: 1-1-1927 Vernon L. Smith

Born In: Wichita, Kansas, United States Died on: Father: Vernon Chessman Smith Mother: Lulu Belle Lomax Bougher Wife: Joyce Harkleroad Nationality: United States Education: Bachelor's degree in electrical engineering from Caltech (1949) M.A. in economics from the University of Kansas (1952) Ph.D. in economics from Harvard University (1955)

Academic Interests: Behavioral Economics. Experimental Economics

Major Books (Works):

The Law and Economics of Irrational Behavior (2005) Experimental Economics: How We Can Build Better Financial Markets (2002) Bargaining and Market Behavior: Essays in Experimental Economics (2000)

Experiments in Decision, Organization and Exchange (1993) Papers in Experimental Economics (1991) Economics of Natural and Environmental Resources (1977) Investment and Production (1961)

Nobel Prize for: Establishing laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms. Prize received date:

Awards and Accolades:

Miembro Academico Honorario, Universidad Adolfo Ibanez Chile (2012) Alumni Distinguished Achievement Award, College of Liberal Arts & Sciences (CLAS) University of Kansas (2011) Annual award in the proliferation of classical liberal thinking and making ideas of liberty come true (2010) Smith Experimental Economics Research Center (SEERC) (2009) Shanghai Jiao tong University Friedrich August-vonHayek-Gesellschaft e.V. Award (2008) Vernon Smith Experimental Economics Laboratory Purdue University (2003) Nobel Prize Winner in Economic Science (2002) Kansan of the Year, Topeka Gazette (2002) Distinguished Alumni Award, California Institute of Technology (1996) Adam Smith Award, Association of Private Enterprise Education (1995) Best Economic Inquiry Article, Western Economic Association (1993) Professor of the Year, Anderson Consulting (1993) Distinguished Fellow, American Economic Association (1992) Visiting Distinguished Lecturer, Western Michigan University (1992) Honorary Doctor of Management, Purdue University (1989) Best Economic Inquiry Article (1980, 1982)

Childhood:

Vernon Lomax Smith was born in Wichita, Kansas in January 1, 1927, time leading to Great Depression. His Childhood was full of scarcity as he recalls that his household was fueled by cow dung's. He started his primary school at age of six in an inferior school. He reminded it as a 'classic rural one-room schoolhouse'. In his words- Each morning my teacher/neighbor faced six rows of desks. The first row on his right, where I sat, was grade 1, the second row to his left, grade 2 and so on for all six grades. After some first row recitation, and left with an assignment, I had the opportunity to listen in on the second and third grade recitation lessons - the grades seated closest to me. As I later became aware, this classroom implemented the original progressive system, in which you were part of a single seamless community consisting of six grades. Although, he showed his ability to see an opportunity in challenges i.e. remaining in class one, he was benefited by teaching of class six. His mother helped him to do his homework especially in English. He found that his education deteriorated from grade 8 to 12 due to uninspiring experiences. When he was in grade 9, at age 13, he began his first wage work for the West Side Drug store delivering prescriptions and sundries on my bicycle to customers. At age 16, he started his work for entry level job in Boeing Aircraft and attended Summer School at North High and graduated in 1944.

Career:
Professor of Economics and Law; 2008-Present, Chapman University Professor of Economics and Law; 2001 2008, George Mason University Visiting Rasmuson Chair in Economics; 2003-Present, University of Alaska-Anchorage McClelland/Regents Professor of Economics; 1998 -2001, University of Arizona Research Director, Economic Science Laboratory; 1986-2001 Professor of Economics, University of Arizona; 1975-2001 Professor of Economics, University of Massachusetts; 1968-1975 Professor of Economics, Brown University; 1967-1968 Professor, Purdue University; 1961-1967 Visiting Professor, Stanford University; 1961-1962 Instructor of Economics, University of Kansas; 1951-1952

Education &Contribution:

Smith completed his undergraduate degree in electrical engineering at the California Institute of Technology. Despite his poor grade and background, he chooses Caltech is quite interesting. Neither I, nor my parents, or anyone in my family, or any neighbor or friend, had any idea how to go about choosing a college. So, I went to the city library, found a book on choosing a college, and learned among other things that the 'best' college in the United States was Caltech. Being nave and impetuous I decided that I should prepare myself to enter Caltech, as, without preparation, my 'C' average in High School would not even qualify me to take the entrance exam. A serious Quaker College, Friend's University, was located near my home in West Wichita. I enrolled in physics, chemistry, calculus, astronomy and literature courses for one year, earned top grades, and sat for the entrance exams for Caltech. He found Caltech was a meat grinder as he never imagined. He studied day and night, weekends and endured hundreds of problems. However, he was enthralled by the lecture from Linus Pauling in chemistry, and chance to see regularly von Karman, Anderson, Zwicky, Tolman, Millikan and other legendary figures of that time. Similarly, he was attending visiting lectures from J. Robert Oppenheimer, Bertrand Russell. While he was in Caltech, found economics a very intriguing subject and, perhaps, inspired by Samuelson's (Foundations of Economics) and Von Mises' (Human Action). After graduating in electrical engineering he went to the University of Kansas to get his master's degree in order to continue in economics. He did his Ph.D. in economics from Harvard University. Most of his research was conducted at the University of Arizona between 1976 and 2001. His article "Experimental Economics: Induced Value Theory" was published in the American Economic Review, which was the initial principle behind economic experiments. After six years, the expanded principle was published in "Microeconomic Systems as an Experimental Science," in the same journal. He founded the 'International Foundation for Research in Experimental Economics' in 1997. The method is used in controlled laboratory experiments in the field of Economics, Political science, and Psychology. This technique allows experimental economists to create a model of market in a laboratory. In 2001 Smith left Arizona University and went to George Mason University. In year 2002, he won the Nobel Memorial Prize shared with Daniel Kahneman. Vernon's research involved in Perfect Competition, theoretical equilibrium and wind tunnel tests for market research before the product release. In the year 2008, Dr. 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, 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 in collaboration with Chapman University. His research has explored capital theory, finance, natural resource economics, industrial organization, property rights economics and neuroeconomics.

Family Life & Marriage:

Being born and brought up in unemployment family, his family forced into temporary farm life. His life emerged through one-room school house that leads to graduation from Caltech. He first met his wife, Joyce Harkleroad at University of Kansans and got married in 1950, while he was continuing his Ph.D. After one year Joyce gave birth to twins, Deborah and Eric. In 1955, his second daughter, Torrie, was born. It was his final year of Ph.D. After then, the family moved towards Midwestern plains, at Purdue University, for his first teaching post. He started a demonstrative experiment there to experience a real market which formed the primary citation by the Nobel Foundation. It is said that he has been suffering from Asperger Syndrome in latter part of the life. In February 2005 Smith spoke out publicly about his Asperger syndrome, which is part of the autism spectrum.[9

Source of Inspiration:
I went to the Caltech library, stumbled upon two books, Samuelson's Foundations, and von Mises' Human Action. From the former, it was clear that economics could be done like physics, but from the latter there seemed to be much in the way of reasoning that was not like physics. I also subscribed to the Quarterly Journal of Economics, and one of the first issues had a paper by Hollis Chenery on Engineering Production Functions. So, economics was also like engineering! I had not a hint then as to how much those first impressions would be changed in my thinking over the decades to follow (From Autobiography

Highlights of Nobel Lecture

(CONSTRUCTIVIST AND ECOLOGICAL RATIONALITY IN ECONOMICS )
we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed rules (of caring intervention to do visible good) of thesmall band or troop, orour families to the (extended order of cooperation through markets), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. We have become accustomed to the idea that a natural system like the human body or an ecosystem regulates itself. To explain the regulation, we look for feedback loops rather than a central planning and directing body. But somehow our intuitions about self-regulation do not carry over `to the artificial systems of human society.

Many contemporary scholars, and not only popular writers, have reversed Mandevilles proposition, and argued that the standard socio-economic science model (SSSM) requires, justifies and promotes selfish behavior. Cultures that have evolved markets have enormously expanded resource specialization, created commensurate gains from exchange, and are wealthier than those that have not. The first concept of a rational order derives from the SSSM going back to the seventeenth century. The SSSM is an example of what Hayek has called constructivist rationality (or constructivism), which stems particularly from Descartes (also Bacon and Hobbes), who believed and argued that all worthwhile social institutions were and should be created by conscious deductive processes of human reason. In economics the SSSM leads to rational predictive models of decision that motivate research hypotheses that experimentalists have been testing in the laboratory since mid twentieth century. Technically, the issue is how most productively to model agent types by extending game theory so that types are an integral part of its predictive content, rather than merely imported as an ex post technical explanation of experimental results. In summary, constructivism uses reason to deliberately create rules of action, and create human socioeconomic institutions that yield outcomes deemed preferable, given particular circumstances, to those produced by alternative arrangements. Ecological rationality uses reason rational reconstructionto examine the behavior of individuals based on their experience and folk knowledge, who are nave in their ability to apply constructivist tools to the decisions they make; to understand the emergent order in human cultures; to discover the possible intelligence embodied in the rules, norms and institutions of our cultural and biological heritage that are created from human interactions but not by deliberate human design. More generally, using rational theory, one represents an observed socioeconomic situation with an abstract interactive game tree. There is a sense in which ecological systems, whether cultural or biological, must necessarily be, or are in the process of becoming, rational: they serve the fitness needs of those who unintentionally created them through their interactions.

Note that it is in private information environments, where the market is aggregating information far beyond the reach of what each individual knows, and is able to comprehend, that the solicited opinions are so far off the mark. In bargaining over the exchange price between a buyer and seller, suppose the seller begins by announcing a selling price, the buyer responds with a lower buying price, the seller reduces his asking price, and so on. In this example the emergent rule reduces transaction cost, leaving open the classical question of how equilibrium can be characterized in bilateral bargaining. In each culture one needs to vary the instructions/procedures and observe the sampling distribution of outcomes, then compare the sample distributions across cultures. Neuroeconomics is concerned with studying the connections between how the mind/brain works the internal order of the mindand behavior in (1) individual decision making, (2) social exchange and (3) institutions such as markets. The predicted activations were significantly greater, relative to controls, for cooperators than non cooperators, and are consistent with the reciprocity interpretation of behavior discussed above. We are only at the beginning of this (New brain imaging technologies) enterprise, but its promise suggests a fundamental change in how we think, observe and model decision in all its contexts.

Sources:
http://www.nobelprize.org/nobel_prizes/economics/laureates/2002/smithautobio.html en.wikipedia.org/wiki/Vernon_L._Smith http://www.nobelprize.org/nobel_prizes/economics/laureates/2002/