By Rebekah Jampole
Arizona Daily Wildcat
Thursday October 10, 2002
25-years of economic research at UA pay off 1 year after relocating
For nearly five decades, Vernon Smith's colleagues paid little attention to his idea of experimental economics, but his patience paid off yesterday when the very same concept won him the Nobel Prize for Economics.
Smith, a former UA professor who now teaches economics and law at George Mason University and Daniel Kahneman, director of public affairs at Princeton University, will share a the $1 million award for their work in behavioral economics ๗ the integration of psychology and economics.
Using the two areas of research, they analyzed human judgement and decision-making under uncertainty, the Royal Academy of Sciences that awards the Nobel Prize said in its citation.
Smith taught at UA from 1975-2001 and founded the Economic Science Laboratory on campus. But he left UA last year after George Mason University offered more space and funding for his research.
The research developed "wind-tunnel" tests in which trials of new, alternative market designs, such as a deregulated electricity market, are done in a lab before being implemented. Scientists can now rely more on controlled laboratory experiments rather than observation of actual economies.
Smith's theories prove that markets do not need many buyers and sellers to operate effectively.
"He has been the lone pioneer for a long time. It (the prize) is very well-deserved ๗he's a very creative guy," said Mark Walker, head of the economics department.
Smith first got the "germ" of the idea in the '1950's, when he was a graduate student at Harvard University.
At the time, other economists were skeptical of the concept of experimental economics, Walker said. It was not until Smith came to the UA that he truly began to establish a research foundation.
Smith plans to donate his award money to the International Foundation for Research in Experimental Economics, which he founded in 1997.
The Bank of Sweden established the Prize in Economic Sciences in Memory of Alfred Nobel in 1968.
Since the prize was first awarded in 1969, 34 of the 51 recipients have been from the United States.
The Nobel Prize in chemistry was also awarded yesterday. The award for literature will be announced today, followed by the Nobel Prize for peace on Friday.
Smith will receive his award on Dec. 10, the 106th anniversary of Alfred Nobel's death.