He is the founder and president of the International Foundation for Research in Experimental Economics and a Senior Fellow at the Cato Institute in Washington D.C.
Vernon Lomax Smith was born on January 1, 1927 in Wichita, Kansas where he attended Wichita North High School and Friends University. He received his bachelor's degree in electrical engineering from Caltech in 1949, an M.A.in economics from the University of Kansas in 1952, and his Ph.D. in economics from Harvard University in 1955.He is a professor of economics at Chapman University's Argyros School of Business and Economics and School of Law in Orange, California, a research scholar at George Mason University Interdisciplinary Center for Economic Science, and a Fellow of the Mercatus Center, all in Arlington, Virginia.
He developed methods for laboratory experiments in economics, which has helped understanding of economic behavior. Smith formalized the methodology of experimental economics. His book "Experimental Economics: Induced Value Theory" was the first articulation of the principle behind economic experiments. Later he expanded this principles and adapted them to the development of economic experiments. Mechanism design provide a formal means for tests of the performance of an economic institution, while experimental economics provided a means for formal empirical assessment of the performance of economic institutions. Smith describes the technique of induced values. This is the method used in controlled laboratory experiments in economics, political science, and psychology. This technique is what 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 earn the difference between the value of the commodity to them and its price. Using this technique, Smith and his coauthors have examined the performance of alternative trading mechanisms in resource allocation.
Smith shared the 2002 Nobel Memorial Prize in Economic Sciences with Daniel Kahneman.
"Bargaining and Market Behavior", 2000
"Papers in Experimental Economics", 2006
"Rationality in Economics", 2008
Investment and production; a study in the theory of the capital-using enterprise, 1961
The law and economics of irrational behavior, 2005
"Transparency, Efficiency and the Distribution of Economic Welfare in Pass-Through Investment Trust Games," with Thomas A. Rietz & Roman M. Sheremeta & Timothy W. Shields, 2011
"Double Bubbles in Assets Markets with Multiple Generations" with Cary Deck & David Porter, 2011
"The Effect of Bidding Information in Ascending Auctions" with Mun Chuia & David Porter & Stephen Rassenti, 2011
"The Endowment Effect" with Praveen Kujal, 2003
"Economics of Wilderness Resources?? 1975
"Experimental Economics: Theory and Results", 1975
"An Optimistic Theory of Exhaustible Resources"
"Optimal Costly Firm Entry in General Equilibrium"