Vernon Lomax Smith (born January 1, 1927) is an American

economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...

who is currently a professor of economics and law at

Chapman University Chapman University is a private research university in Orange, California, United States. Encompassing eleven colleges, the university is classified among "R2: Doctoral Universities – High research activity". The school maintains its foundi ...

. He was formerly the McLellan/Regent's Professor of Economics at the

University of Arizona The University of Arizona (Arizona, U of A, UArizona, or UA) is a Public university, public Land-grant university, land-grant research university in Tucson, Arizona, United States. Founded in 1885 by the 13th Arizona Territorial Legislature, it ...

, a professor of economics and law at

George Mason University George Mason University (GMU) is a Public university, public research university in Fairfax County, Virginia, United States. Located in Northern Virginia near Washington, D.C., the university is named in honor of George Mason, a Founding Father ...

, and a board member of the

Mercatus Center The Mercatus Center is an American libertarian, free-market-oriented non-profit think tank. The Mercatus Center is located at the George Mason University campus, but it is privately funded and its employees are independent of the university. It ...

. Along with

Daniel Kahneman Daniel Kahneman (; ; March 5, 1934 – March 27, 2024) was an Israeli-American psychologist best known for his work on the psychology of judgment and decision-making as well as behavioral economics, for which he was awarded the 2002 Nobel Memor ...

, Smith won the 2002

Nobel Memorial Prize in Economic Sciences The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (), commonly referred to as the Nobel Prize in Economics(), is an award in the field of economic sciences adminis ...

for his contributions to

behavioral economics Behavioral economics is the study of the psychological (e.g. cognitive, behavioral, affective, social) factors involved in the decisions of individuals or institutions, and how these decisions deviate from those implied by traditional economi ...

and his work in the field of

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 expe ...

, which helped establish “laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms”. Smith is the founder and president of the International Foundation for Research in Experimental Economics (IFREEE), a member of the

Independent Institute The Independent Institute is an American libertarian think tank founded in 1986 by David J. Theroux and based in Oakland, California. The institute has more than 140 research fellows and is organized into seven centers addressing a range of pol ...

’s board of advisors, and a senior fellow at the

Cato Institute The Cato Institute is an American libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Ed Crane, Murray Rothbard, and Charles Koch, chairman of the board and chief executive officer of Koch Industries.Koch ...

Washington D.C. Washington, D.C., formally the District of Columbia and commonly known as Washington or D.C., is the capital city and federal district of the United States. The city is on the Potomac River, across from Virginia, and shares land borders with ...

He was elected a

Fellow A fellow is a title and form of address for distinguished, learned, or skilled individuals in academia, medicine, research, and industry. The exact meaning of the term differs in each field. In learned society, learned or professional society, p ...

of the

Econometric Society The Econometric Society is an international society of academic economists interested in applying statistical tools in the practice of econometrics. It is an independent organization with no connections to societies of professional mathematicians o ...

in 1987, and was elected to the

National Academy of Sciences The National Academy of Sciences (NAS) is a United States nonprofit, NGO, non-governmental organization. NAS is part of the National Academies of Sciences, Engineering, and Medicine, along with the National Academy of Engineering (NAE) and the ...

in 1995. In 2004, Smith was awarded an

honorary doctorate An honorary degree is an academic degree for which a university (or other degree-awarding institution) has waived all of the usual requirements. It is also known by the Latin phrases ''honoris causa'' ("for the sake of the honour") or '' ad hon ...

by the

Universidad Francisco Marroquín Francisco Marroquín University ( Spanish: ''Universidad Francisco Marroquín''), also known by the abbreviation UFM, is a private, secular university in Guatemala City, Guatemala. It describes its mission as "to teach and disseminate the ethical, ...

, where the Vernon Smith Center for Experimental Economics Research is named for him. He was also a founding board member of the Center for Growth and Opportunity at Utah State University. As of 2023, Smith also sits on the advisory board of the Madden Center for Value Creation at

Florida Atlantic University Florida Atlantic University (Florida Atlantic or FAU) is a Public university, public research university with its main campus in Boca Raton, Florida, United States. The university is a member of the State University System of Florida and has s ...

Early life and education

Smith was born in

Wichita, Kansas Wichita ( ) is the List of cities in Kansas, most populous city in the U.S. state of Kansas and the county seat of Sedgwick County, Kansas, Sedgwick County. As of the 2020 United States census, 2020 census, the population of the city was 397, ...

, where he attended Wichita North High School and

Friends University Friends University is a Private university, private Nondenominational Christianity, nondenominational Christian university in Wichita, Kansas, United States. It was founded in 1898. The main building was originally built in 1886 for Garfield Uni ...

. Grover Bougher, Vernon's mother's first husband, who worked as a fireman on the Santa Fe railroad, died in an accident. The life insurance money provided by the Santa Fe railroad was invested in a farm which became the sole means of survival for Vernon's family during the tough years of the

Great Depression The Great Depression was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty, drastic reductions in industrial production and international trade, and widespread bank and ...

. His future interests were influenced by his childhood at the farm. Smith received his bachelor's degree in

electrical engineering Electrical engineering is an engineering discipline concerned with the study, design, and application of equipment, devices, and systems that use electricity, electronics, and electromagnetism. It emerged as an identifiable occupation in the l ...

from

Caltech The California Institute of Technology (branded as Caltech) is a private university, private research university in Pasadena, California, United States. The university is responsible for many modern scientific advancements and is among a small g ...

in 1949, an M.A. in economics from the

University of Kansas The University of Kansas (KU) is a public research university with its main campus in Lawrence, Kansas, United States. Two branch campuses are in the Kansas City metropolitan area on the Kansas side: the university's medical school and hospital ...

in 1952, and his Ph.D. in economics from

Harvard University Harvard University is a Private university, private Ivy League research university in Cambridge, Massachusetts, United States. Founded in 1636 and named for its first benefactor, the History of the Puritans in North America, Puritan clergyma ...

in 1955. His Ph.D. thesis title was ''A theoretical and empirical inquiry into the economic replacement of capital equipment''.

Academic career

Smith's first teaching post was at the

Krannert School of Management The Purdue University Daniels School of Business (formerly known as Krannert School of Management) is the school of business at Purdue University, a Public university, public research university in West Lafayette, Indiana. It offers instruction ...

Purdue University Purdue University is a Public university#United States, public Land-grant university, land-grant research university in West Lafayette, Indiana, United States, and the flagship campus of the Purdue University system. The university was founded ...

, which he held from 1955 until 1967, attaining the rank of full professor. Smith also taught as a visiting associate professor at

Stanford University Leland Stanford Junior University, commonly referred to as Stanford University, is a Private university, private research university in Stanford, California, United States. It was founded in 1885 by railroad magnate Leland Stanford (the eighth ...

(1961–1962) and there made contact with

Sidney Siegel Sidney Siegel (4 January 1916 in New York City – 29 November 1961) was an American psychologist who became especially well known for his work in popularizing non-parametric statistics for use in the behavioral sciences. He was a co-developer of ...

, who was also doing work in

. Smith moved with his family to

Massachusetts Massachusetts ( ; ), officially the Commonwealth of Massachusetts, is a U.S. state, state in the New England region of the Northeastern United States. It borders the Atlantic Ocean and the Gulf of Maine to its east, Connecticut and Rhode ...

and got a position first at

Brown University Brown University is a Private university, private Ivy League research university in Providence, Rhode Island, United States. It is the List of colonial colleges, seventh-oldest institution of higher education in the US, founded in 1764 as the ' ...

(1967–1968) and then at the

University of Massachusetts The University of Massachusetts is the Public university, public university system of the Massachusetts, Commonwealth of Massachusetts. The university system includes six campuses (Amherst, Boston, Dartmouth, University of Massachusetts Lowell ...

(1968–1972). Smith also received appointments at the

Center for Advanced Study in the Behavioral Sciences The Center for Advanced Study in the Behavioral Sciences (CASBS) is an interdisciplinary research institution at Stanford University designed to advance the frontiers of knowledge about human behavior and society, and contribute to the resoluti ...

(1972–1973) and

(1973–1975). Much of the research that earned Smith the

was conducted at the

between 1976 and 2001. In 2001, Smith left Arizona for

. From 2003 to 2006, he held the Rasmuson Chair of Economics at the University of Alaska Anchorage. In 2008, Smith founded the Economic Science Institute at

Orange, California Orange is a city located in northern Orange County, California, United States. It is approximately north of the county seat, Santa Ana, California, Santa Ana. Orange is unusual in this region because many of the homes in its Old Town District ...

. Smith has served on the board of editors of the ''

American Economic Review The ''American Economic Review'' is a monthly peer-reviewed academic journal first published by the American Economic Association in 1911. The current editor-in-chief is Erzo FP Luttmer, a professor of economics at Dartmouth College. The journal is ...

'', the '' Cato Journal'', '' Journal of Economic Behavior and Organization'', ''Science'', ''

Economic Theory Economics () is a behavioral science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...

'', ''Economic Design'', and the ''

Journal of Economic Methodology The ''Journal of Economic Methodology'' is a peer-reviewed academic journal in the field of economic methodology Economic methodology is the study of methods, especially the scientific method, in relation to economics, including principles u ...

''. He also served as an expert for the

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, using cost–benefit analysis. It was conceived and organized around 2004 by Bjørn ...

Academic work

Smith began his work in

. As Smith describes it: In framing the experiment, Smith varied certain institutional parameters seen in the first classroom economics experiments as conducted by

Edward Chamberlin Edward Hastings Chamberlin (May 18, 1899 – July 16, 1967) was an American economist. He was born in La Conner, Washington, and died in Cambridge, Massachusetts. Chamberlin studied first at the University of Iowa (where he was influenced by ...

: in particular, he ran the experiments for several trading periods, to give the student subjects time to train. At Caltech,

Charles Plott Charles Raymond Plott (born July 8, 1938) is an American economist. He is the William D. Hacker Professor of Economics and Political Science, Emeritus, at the California Institute of Technology, the former Director of the Laboratory for Experiment ...

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). It 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 adapts the principles of

mechanism design Mechanism design (sometimes implementation theory or institution design) is a branch of economics and game theory. It studies how to construct rules—called Game form, mechanisms or institutions—that produce good outcomes according to Social ...

, a microeconomic system developed by

Leonid Hurwicz Leonid Hurwicz (; August 21, 1917 – June 24, 2008) was a Polish–American economist and mathematician, known for his work in game theory and mechanism design. He originated the concept of incentive compatibility, and showed how desired outcom ...

, to the development of economic experiments. In Hurwicz's formulation, a microeconomic system consists of an 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. The mechanism design provides a formal means for tests of the performance of an economic institution, and

, as developed by Smith, provided a means for formal empirical assessment of the performance of economic institutions. The second main contribution of the paper is to the technique of induced values, the method used in controlled laboratory experiments in economics, political science, and psychology, which 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 they earn the difference between the value of the commodity to them and its price. Using the technique, Smith and his coauthors have examined the performance of alternative trading mechanisms in resource allocation. In February 2011, Smith participated in the "Visiting Scholars Series" at the Nicholas Academic Centers in

Santa Ana, California Santa Ana (Spanish language, Spanish for ) is a city in and the county seat of Orange County, California, United States. Located in the Greater Los Angeles region of Southern California, the city's population was 310,227 at the 2020 census. As ...

, conducted in collaboration with Chapman University. Smith and his colleague Bart Wilson conducted experiments designed to expose high school students from underserved neighborhoods to market dynamics and how concepts such as altruism influence economic behavior. Smith has authored or coauthored articles and books on capital theory,

finance Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...

natural resource economics Natural resource economics deals with the supply, demand, and allocation of the Earth's natural resources. One main objective of natural resource economics is to better understand the role of natural resources in the economy in order to devel ...

and

. He was also one of the first to propose the combinatorial auction design, with Stephen J. Rassenti and Robert L. Bulfin in 1982. In January 2009, Smith signed a public petition opposing the passage of the

American Recovery and Reinvestment Act The American Recovery and Reinvestment Act of 2009 (ARRA) (), nicknamed the Recovery Act, was a stimulus package enacted by the 111th U.S. Congress and signed into law by President Barack Obama in February 2009. Developed in response to the G ...

. In a 2010 Econ Journal Watch study, Smith was found to be one of the most active petition-signers among US economists. The Vernon Smith Prize for the Advancement of

Austrian Economics The Austrian school is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with thei ...

is named after him and is sponsored by the European Center of Austrian Economics. Vernon Smith is renowned for his seminal contributions to the elucidation of

spontaneous order Spontaneous order, also named self-organization in the hard sciences, is the spontaneous emergence of order out of seeming chaos. The term "self-organization" is more often used for physical changes and biological processes, while "spontaneous ...

within the field of economics. He posits spontaneous order as the organic emergence of structure and coherence from apparent disorder, a phenomenon ubiquitously observed in both social and economic contexts. His work on this has even extended out to using methods of

self-organization Self-organization, also called spontaneous order in the social sciences, is a process where some form of overall order and disorder, order arises from local interactions between parts of an initially disordered system. The process can be spont ...

from the physical sciences to model sociability. Smith has expounded upon the notion of spontaneous order in the context of his pedagogical endeavors as well. In his instructive course titled "Spontaneous Order and the Law" at the Fowler School of Law, Chapman University, he illuminates how social norms and legal frameworks emerge organically through human interaction, gradually coalescing from apparent chaos into structured societal systems. In recent years, Vernon L. Smith's research has expanded to include the study of

Neuroeconomics Neuroeconomics is an Interdisciplinarity, interdisciplinary field that seeks to explain human decision-making, the ability to process multiple alternatives and to follow through on a plan of action. It studies how economic behavior can shape our u ...

as seen in Law & Neuroeconomics Smith (2000), where he integrates economic theory with neuroscience to understand decision-making processes. Vernon Smith's work in this area has led to new insights into how brain activity influences economic decisions. Additionally, he has been instrumental in promoting the use of experimental methods in economics education, advocating for a hands-on approach to learning economic concepts. Some of these contributions were used in Neuroeconomics Lab books published by Academic Press (2014).

Personal life

In February 2005, Smith publicly attributed features of his personality to

Asperger syndrome Asperger syndrome (AS), also known as Asperger's syndrome or Asperger's, is a diagnostic label that has historically been used to describe a neurodevelopmental disorder characterized by significant difficulties in social interaction and no ...

after a process of

self-diagnosis Self-diagnosis is the process of diagnosing, or identifying, medical conditions in oneself. It may be assisted by medical dictionaries, books, resources on the Internet, past personal experiences, or recognizing symptoms or medical signs of a cond ...

Works

* * * * Plott, Charles R., and Vernon L. Smith, ed. (2008). ''Handbook of Experimental Economics Results'', v. 1, Elsevier
Description
an
preview
* * * _____ (1976). * * _____ (1982). * _____ (1991). ''Papers in Experimental Economics'' 962–88 Cambridge
Description
and chapter-previe
links
* _____ (2000). ''Bargaining and Market Behavior: Essays in Experimental Economics'' 990–98 Cambridge
Description
and chapter-previe
links.
* _____ (2003). * _____ ( 9872008a). "experimental methods in economics." ''

The New Palgrave Dictionary of Economics ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is a twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Dictio ...

'', 2nd Edition
Abstract.
* _____ (2008b). "experimental economics," ''The New Palgrave Dictionary of Economics'', 2nd Edition
Abstract.
* Reprinted in Timothy N. Cason and Charles Noussair, ed. (2001), ''Advances in Experimental Markets'', pp
15–
32. * Chorvat, T., McCabe, K., & Smith, V. (2005). Law and Neuroeconomics. Supreme Court Economic Review

Notes

External links

Dr. Vernon L Smith
at Chapman University School of Law
Member of the Board of Advisors
at

The Independent Institute The Independent Institute is an American libertarian think tank founded in 1986 by David J. Theroux and based in Oakland, California. The institute has more than 140 research fellows and is organized into seven centers addressing a range of pol ...

Senior Fellow
at

* * * * * * *

Spontaneous Order Spontaneous order, also named self-organization in the hard sciences, is the spontaneous emergence of order out of seeming chaos. The term "self-organization" is more often used for physical changes and biological processes, while "spontaneous ...

Academic Press Academic Press (AP) is an academic book publisher founded in 1941. It launched a British division in the 1950s. Academic Press was acquired by Harcourt, Brace & World in 1969. Reed Elsevier said in 2000 it would buy Harcourt, a deal complete ...

* Neuroeconomics Lab

Articles

"Default is not the end of the world"
Interview with Vernon Smith by Luis Martin (Winter 2011)
Reflections On ''Human Action'' After 50 Years
by Vernon L. Smith, '' Cato Journal'', 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 Journal ''The Wall Street Journal'' (''WSJ''), also referred to simply as the ''Journal,'' is an American newspaper based in New York City. The newspaper provides extensive coverage of news, especially business and finance. It operates on a subscriptio ...

'', December 18, 2007
From Bubble to Depression?
Steven Gjerstad and Vernon L. Smith, ''

'', April 6, 2009 {{DEFAULTSORT:Smith, Vernon L. 1927 births American libertarians American Nobel laureates Brown University faculty California Institute of Technology alumni California Institute of Technology faculty Cato Institute people Fellows of the Earhart Foundation Chapman University faculty Environmental economists Experimental economists Fellows of the Econometric Society American financial economists Friends University alumni George Mason University faculty Harvard University alumni Libertarian economists Members of the United States National Academy of Sciences Nobel laureates in Economics People from Wichita, Kansas Krannert School of Management faculty Stanford University faculty University of Arizona people University of Kansas alumni University of Massachusetts Amherst faculty Center for Advanced Study in the Behavioral Sciences fellows Living people Distinguished fellows of the American Economic Association Mercatus Center Economists from Arizona Economists from Kansas Member of the Mont Pelerin Society