Vernon L. Smith quotes
Vernon L. Smith is an American economist renowned for his pioneering work in experimental economics. His innovative experiments transformed the way economists understand market dynamics and decision-making. He was awarded the Nobel Prize in Economic Sciences for his groundbreaking contributions to the field. Here are 29 of his quotes:
Rules emerge as a spontaneous order–they are found–not deliberately designed by one calculating mind. Initially constructivist institutions undergo evolutionary change adapting beyond the circumstances that gave them birth. What emerges is a form of "social mind” that solves complex organization problems without conscious cognition.
Vernon L. Smith
Economics as currently learned and taught in graduate school and practiced afterward is more theory-intensive and less observation-intensive than perhaps any other science. I think the statement that "no mere fact ever was a match in economics for a consistent theory" accurately describes the prevailing attitude in the profession.
Vernon L. Smith
Microeconomics, including the study of individual choice and of group choice in market and nonmarket processes, has generally been considered a field science as distinct from an experimental science. Hence microeconomics has sometimes been classified as "non-experimental" and closer methodologically to meteorology and astronomy than to physics and experimental psychology (Marschak, 1950, p. 3; Samuelson, 1973, p. 7). But the question of using experimental or nonexperimental techniques is largely a matter of cost, and generally the cost of conducting the most ambitious and informative experiments in astronomy, meteorology, and economics varies from prohibitive down to considerable. The cost of experimenting with different solar system planetary arrangements, different atmospheric conditions, and different national unemployment rates, each under suitable controls, must be regarded as prohibitive.
Vernon L. Smith
In defining a microeconomic system two distinct component elements will be identified: an environment and an institution. The environment consists of a list of N economic agents {l,..., N}, a list of K + 1 commodities (including resources) {O, l,..., K}, and certain characteristics of each agent ... Hence, a microeconomic environment is defined by the collection of characteristics e.
Vernon L. Smith
Complexity. In general individual decision makers must be assumed to have multidimensional values which attach nonmonetary subjective cost or value to (1) the process of making and executing individual or group decisions, (2) the end result of such decisions, and (3) the rewards (and perhaps behavior) of other individuals involved in the decision process.
Vernon L. Smith
One of the most intriguing discoveries of experimental economics is that (1) as we have seen, people invariably behave non-cooperatively in small and large group ‘impersonal' market exchange institutions; (2) many (up to half in single play; over 90% in repeat play) cooperate in ‘personal' exchange (two-person extensive form games); (3) yet in both economic environments all interactions are between anonymous players.
Vernon L. Smith
It is important to remove artificial barriers–stumbling stones, often local in origin and coming from incumbent opposition to entry–and to not burden businesses with taxes that reduce their internally generated funds for reinvestment, growth and striving to overcome market challenges.
Vernon L. Smith
In the Autumn semester, 1955, I taught Principles of Economics, and found it a challenge to convey basic microeconomic theory to students. Why/how could any market approximate a competitive equilibrium? I resolved that on the first day of class the following semester, I would try running a market experiment that would give the students an opportunity to experience an actual market, and me the opportunity to observe one in which I knew, but they did not know what were the alleged driving conditions of supply and demand in that market.
Vernon L. Smith
I can switch out and go into a concentrated mode and the world is completely shut out. If I'm writing something, nothing else exists... Perhaps even more importantly, I don't have any trouble thinking outside the box. I don't feel any social pressure to do things the way other people are doing them, professionally. And so I have been more open to different ways of looking at a lot of the problems in economics.
Vernon L. Smith
Ecological rationality uses reason – rational reconstruction – to examine the behavior of individuals based on their experience and folk knowledge, who are ‘naïve' 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. People follow rules without being able to articulate them, but they can be discovered.
Vernon L. Smith
Nonsatiation (Smith, 1976a). Given a costless choice be ween two alternatives which differ only in that the first yields more of the reward medium (e. g., currency) than the second, the first will always be chosen (preferred) over the second by an autonomous individual, i. e., utility U(M) is a monotone increasing function of the reward medium.
Vernon L. Smith
When the theory performs well you also think, "Are there parallel results in naturally occurring field data?” You look for coherence across different data sets because theories are not specific to particular data sources. Such extensions are important because theories often make specific assumptions about information and institutions which can be controlled in the laboratory, but which may not accurately represent field data generating situations. Testing theories on the domain of their assumptions is sterile unless it is part of a research program concerned with extending the domain of applications of theory to field environments.
Vernon L. Smith
Even though Hayek, in my view, is the leading economic thinker of the 20th century who saw what must be the mainsprings of the extended order, Mises was the choice technician, and no one was better at articulating the primacy of the individual and the need to define and nurture individual rights.
Vernon L. Smith