Vernon L. Smith
What it is:
Vernon L. Smith is an American economist who won the Nobel Prize for in 2002.
How it works (Example):
Born in 1927 in Wichita, Kansas, Vernon L. Smith earned an engineering degree from Cal Tech in 1949 and a master's degree in economics from Harvard in 1955. He was an economics professor for several decades at Purdue University, Brown University, University of Massachusetts, Caltech, University of Arizona and George Mason University.from the University of Kansas in 1952. He earned a Ph.D. in
Why it Matters:
Smith is most famous for his work in developing the "induced-value method," which is now a standard tool in economics. Until then, most economists believed that economists were not able to perform controlled laboratory experiments of human economic motivation.
Smith’s experiments, published in 1962, involved randomly giving buyers and sellers different ideas about the value of a commodity. In the experiments, Smith showed that the theoretical " prices" were close to the real-world prices. Many of the experiments focused on public auctions, illustrating how bidding affected selling prices. Smith also devised “wind-tunnel tests,” which tested the effects of deregulation.