The University of Tennessee at Chattanooga

Nobel Laureate at UTC

Dr. Vernon Smith, Nobel Laureate Dr. Vernon Smith, Mrs. Smith and Dr. Gay

Nobel Laureate speaks at UTC

 Nobel Laureate Vernon L. Smith addressed a capacity crowd on the UTC campus with the lecture "Freedom, Economic Theory and Experiment."  Smith’s visit to campus coincided with his attendance of the The Mont Pélerin Society conference, where he spoke to a gathering of 200 of the world’s top classical liberal scholars. The Mont Pélerin Society's 2003 conference examined the prospects for freedom and entrepreneurship, and their potential contribution to prosperity in the 21st Century and was held in Chattanooga.

Smith said he generally does not endorse economic sanctions imposed by the United States on foreign countries.  Following his UTC lecture, Smith, who received the Nobel Prize in 2002 for Economic Science, was asked how he felt about sanctions imposed by the Bush administration.

"By and large I do not like them.  It is not the best way to come to a resolution of some sort of political problem.  I think it is detrimental to trade," Smith said.

Smith, known for his pioneering work in Experimental Economics, is currently a professor of economics and law at George Mason University, a research scholar in the Interdisciplinary Center for Economic Science, and a Fellow of the Mercatus Center in Arlington, Virginia.   He holds a Ph.D. in Economics from Harvard, and has authored or co-authored over 200 articles and books on capital theory, finance, natural resource economics and experimental economics. Cambridge University Press published his Papers in Experimental Economics in 1991 and Bargaining and Market Behavior in 2000.

Smith pioneered the use of laboratory experiments in evaluating the performance and function of markets. Before 1956, when Smith completed his first experiment, economic theory assumed that markets are efficient only with a large number of buyers and sellers. Experimental methods were the first to test such theories. These tests have demonstrated that markets can be efficient even with very few participants. These tests also have revealed that market efficiency depends crucially on the institutions that govern markets-"rules of the game" that affect both individual behavior and overall market outcomes.

Results of experiments have given economists a deeper understanding of the actual workings of real-world markets and have helped guide public policy in the design and testing of a pollution permit trading system and electric power and water markets.

Smith's work in Experimental Economics has made a marked difference in the classroom of David E. R. Gay, an economist at the University of Arkansas. Gay also spoke at UTC of the practical classroom applications his students enjoy.  Gay said he discusses buying and selling, and  engages his students in negotiations with each other.

"They are good at negotiating.  Even the introverts begin to speak louder and louder, they get so carried away.  They discover that a market is cooperative; there are benefits to both parties.  They realize that if they are searching for good deals as purposeful individuals, they will usually find them," Gay said.

Gay said when his students make these discoveries, they understand and retain the economics lessons learned.

Smith's visit to UTC was made possible by the Scott L. Probasco Jr. Chair of Free Enterprise Burkett Miller Distinguished Lecture Series.