Smith’s Early Life and Education
Vernon L. Smith (b. 1927) was born in Wichita, Kansas. The Smith family owned a farm on which the boy often worked while growing up during the Great Depression—experiences which shaped his outlook on life and economics for the rest of his life.
Smith has stated that he became especially intrigued by the way machinery and other things work while doing manual labor on his family’s farm.
Smith received his bachelor’s degree in electrical engineering in 1949 from the California Institute of Technology (Caltech) in the Los Angeles suburb of Pasadena.
He obtained his master’s degree in economics in 1952 from the University of Kansas in Lawrence, Kansas, and his PhD in economics in 1955 from Harvard University in Cambridge, Massachusetts.
Smith’s Career
Smith obtained his first teaching position in 1955 with the Krannert School of Management at Purdue University, in West Lafayette, Indiana. He taught there until 1967, eventually rising to the rank of full professor.
During his time at Purdue, Smith spent the 1961–1962 academic year as a visiting professor at Stanford University.
In 1967, Smith relocated to New England, teaching first for a year at Brown University in Providence, Rhode Island, and then at the University of Massachusetts at Amherst from 1968 until 1972).
Smith spent the 1972–1973 academic year as a fellow with the Center for Advanced Study in the Behavioral Sciences back at Stanford. He then spent the next two years, 1973–1975, as a professor back at his alma mater, Caltech.
In 1976, Smith was hired by the University of Arizona in Tucson, where he taught for the next quarter century, until 2001.
Next, Smith spent two years, 2001–2003, at George Mason University in Fairfax, Virginia.
After that, Smith taught for the next three years, 2003–2006, at the University of Alaska at Anchorage, where he occupied the Rasmuson Chair of Economics.
Finally, in 2008—at the age of 81—Smith founded the Economic Science Institute at Chapman University in Orange, California. He is currently a professor of business economics and law at Chapman.
In 2002, Smith was awarded the Nobel Memorial Prize in Economic Sciences. His Nobel lecture, “Constructivist and Ecological Rationality in Economics,” was published the following year, 2003, in the American Economic Review (see “Works Authored or Co-authored by Vernon L. Smith” below).
Smith’s Ideas
Smith is known as the father of “experimental economics.” He has stated that he invented the technique in 1955 at Purdue to help teach his undergraduate students the fundamental principles of microeconomics.
Building on earlier work by Leonid Hurwicz, Smith developed explicit “toy-model” economic systems—that is, simple rules embodying the basic principles of economics as understood by mainstream classical economists of the day.
With the participation of his undergraduate students, Smith then ran experiments on real-life exchanges among the students, carefully observing the rules specified by the model system being employed.
In this way, Smith was able to demonstrate from predictive failures in his experiments that classical economics fails to specify all of the causal interactions entering into real-world market behavior.
More specifically, by adjusting his experimental parameters, Smith was able to demonstrate the importance of the influence of different institutional arrangements upon economic outcomes.
Later in his career, Smith turned his attention to the methodology of experimental economics itself, exploring its presuppositions and refining its techniques.
Selected Works by Vernon L. Smith
1. Works Authored or Co-authored by Smith
Economics: An Analytical Approach, with Ralph K. Davidson and Jay W. Wiley (1958).
“An Experimental Study of Competitive Market Behavior,” Journal of Political Economy, 70: 111–137 (1962).
“Experimental Auction Markets and the Walrasian Hypothesis,” Journal of Political Economy, 70: 387–393 (1965).
Investment and Production: A Study in the Theory of the Capital-Using Enterprise (1966).
“Experimental Economics: Induced Value Theory,” American Economic Review, 66: 274–279 (1976).
Research in Experimental Economics (1979).
“Relevance of Laboratory Experiments to Testing Resource Allocation Theory,” in Jan Kmenta and James B. Ramsey, eds., Evaluation of Econometric Models. Cambridge, MA: Academic Press; pp. 345–377 (1980).
“Microeconomic Systems as an Experimental Science,” American Economic Review, 72: 923–955 (1982).
Papers in Experimental Economics (1991).
Bargaining and Market Behavior: Essays in Experimental Economics (2000).
“Constructivist and Ecological Rationality in Economics,” American Economic Review, 93: 465–508 (2003).
The Law and Economics of Irrational Behavior, with Francesco Parisi (2005).
Rationality in Economics: Constructivist and Ecological Forms (2007).
Discovery—A Memoir (2008).
“Balance Sheet Crises: Causes, Consequences, and Responses,” with Steven D. Gjerstad, Cato Journal, 33: 437–470 (2013).
Rethinking with Housing Bubbles: The Role of Household and Bank Balance Sheets in Modeling Economic Cycles, with Steven D. Gjerstad (2014).
The Evidence of Things Not Seen: Reflections on Faith, Science, and Economics (2017).
A Life of Experimental Economics, Volume I: Forty Years of Discovery (2018).
A Life of Experimental Economics, Volume II: The Next Fifty Years (2018).
Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century, with Bart J. Wilson (2019).
2. Books Edited or Co-edited by Smith
Experimental Economics (1990).
Handbook of Experimental Economics Results, Volume 1, with Charles R. Plott (volume 2 never released) (2008).
Economics of Natural and Environmental Resources (2013).
Selected Works About Vernon L. Smith and Experimental Economics
Blokdyk, Gerardus, ed., Experimental Economics: The Definitive Handbook (2018).
Cassar, Alessandra and Dan Friedman, Economics Lab: An Intensive Course in Experimental Economics (2004).
Charness, Gary and Mark Pingle, eds., The Art of Experimental Economics (2021).
Fréchette, Guillaume R. and Andrew Schotter, eds., Handbook of Experimental Economic Methodology(2015).
Holt, Charles A., Markets, Games, and Strategic Behavior: An Introduction to Experimental Economics, second edition (2019).
Isaac, R. Mark and Carl Kitchens, eds., Experimental Law and Economics (2022).
Jacquemet, Nicholas and Olivier L’Haridon, eds., Experimental Economics: Method and Applications (2019).
Kagel, John H. and Alvin E. Roth, eds., The Handbook of Experimental Economics (1995).
Kagel, John H. and Alvin E. Roth, eds., The Handbook of Experimental Economics, Volume 2 (2016).
Paganelli, Maria Pia, “The Same Face of the Two Smiths: Adam Smith and Vernon Smith,” Journal of Economic Behavior & Organization, 78: 246–255 (2011).
Schram, Arthur Aljaz Ule, eds., Handbook of Research Methods and Applications in Experimental Economics (2019).