Vernon
L. Smith is Professor of Economics and Law at
The
Quotes from
In my early childhood years I will think …. nothing is
unknowable, you had only to seek it in a book or some source somewhere. I will
know so little and be hungry to know, but I will gradually learn that the
action—all the learning and understanding—will be in the pursuit, not in the
consummation of knowledge and that the questions always grow faster than the
answers. Every answer sprouts multiple questions so that knowledge becomes an
unending quest, but therein lays its charming challenge.
In the autumn of 1932, at age five, I took my place in the
first grade alongside more seasoned farm children for primary education in the
classic rural one-room schoolhouse. …. As I later became aware, this classroom
implemented the original ‘progressive system’, in which you were part of a
single seamless community consisting of all elementary grades. There were of
course only three subjects—reading, writing and arithmetic. Reading seemed to
be the litmus test; if you were less strong in arithmetic, or writing, the next
year you could participate along with those in the row on your left before Mr.
Hemberger got to your row. The whole purpose of this management style was to
move each person along at her own pace of accomplishment, get her through
school and into farm work where she could be useful. I understand that the
earliest achievement tests showed high performance in
In 1934 my father returned to the Bridgeport Machine Company
[iin
… there is an inherent tension between the individual’s
experience in social exchange, and the requirements of freedom in the external
order of impersonal exchange through markets. As I have written in my research,
you can make the case that the collectivist individual impulse is nourished by
the human perceptions and understanding that comes experientially from what the
economic historian and Nobelist, Doug North, calls ‘personal exchange.’
Personal exchange is what was prominent on the farm, and takes the form of
trading favors, and barter, in close nit communities based on trust,
trustworthiness and reputations for being a reliable social exchanger. In this
more intimate environment our individual experience is that good comes from
reciprocity—doing good and receiving good in return—being cooperative, and a
good neighbor. At the level of the family, extended family, and our social
groupings our direct experience is that you produce good by intentional acts of
doing good. In impersonal market
exchange through prices, we do not see that it involves the same reciprocal
benefits for buyer and seller that characterize personal exchange. Neither do
we see that specialization—or task subdivision—derives from and is supported by
markets. We do not experience the fact that millions of people, with differing
cultures, languages, skills and resources, cooperate through long networks of interdependence
connected by prices.
Caltech was a meat grinder like I could never have imagined.
The first thing to which one has to adapt is the fact that no matter how high
people might sample in the right tail of the distribution of ‘intelligence,’ or
whatever it is that measures college performance, that sample is still normally
distributed in performing on the materials in the Caltech curriculum. …. I
studied night, day, weekends and survived hundreds of problems, but what a joy
it was to take freshman chemistry from the inspiring Linus Pauling; … hear
physics lectures by J. Robert Oppenheimer on his frequent visits to Caltech;
attend a visiting lecture by Bertrand Russell; and regularly see von Karman,
Anderson, Zwicky, Tolman, Millikan and other legendary figures of that time, on
campus. I discovered that one kind of great teacher is the kind that simply
thinks out loud, in commonsensical terms of basic principles, and you easily
can read his thought processes.
I relished the unbending rigor of mathematics, physics and
engineering, but then, as a senior, I took an economics course and found it
very intriguing—you could actually learn something about the economic
principles underlying the claims of socialism, capitalism and other such
‘isms?’ Little did I know, but I was intrigued.
Curious about professional economics, I went to the Caltech library,
stumbled upon Samuelson’s Foundations
of Economic Analysis, and later that year, 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.
Selected Links to Vernon
Smith’s Research:
Vernon
Smith home page
What is
Experimental Economics?
The
"Ingredients" of an Economics Experiment
Experimental
Methods in Economics
Methodology and
Function of Experiments in Micoeconomics
Smith's
Nobel Toast (in pdf)
Smith's
Nobel Address (in pdf)
Theodore
Bergstrom on Vernon Smith, The Experimentalist (in pdf)