Vernon Smith at Caltech

I've been fascinated by economist Vernon Smith since participating in paid economics experiments as a student at Caltech. Smith was the pioneer in this type of research. From the 2002 Nobel report on his prize:

Human decision-making deviates in one way or another from the standard assumptions of the rationalistic paradigm in economics. If such deviations from rationality and self-interest were small and purely idiosyncratic, they would on average cancel out, and economic theory would not be too wide off the mark when predicting outcomes for large aggregates of agents. Following the lead of Vernon Smith, early studies of alternative market mechanisms by experimental economists can be viewed as tests of the hypothesis of idiosyncratic deviations from standard economic theory. If deviations from rationality and self-interest were systematic, however, this would call for a revision of economic theory itself.

It's amusing that Smith, who is autistic, played a major role in promoting more realistic ideas about human behavior among economists! See article and video interview, MSNBC:

...now Nobel Laureate Vernon Smith has decided to speak openly about what he calls the deficiencies and the selective advantages of Asperger's.

“I can switch out and go into a concentrated mode and the world is completely shut out,” he said in a recent interview. “If I'm writing something, nothing else exists.”

Smith says his capacity for deep concentration contributed to his ability to win the Nobel Prize.

“Perhaps even more importantly, I don't have any trouble thinking outside the box,” he said. “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."

CNBC: Did you feel like you seemed strange in the eyes of other people?

SMITH: Oh, yes.

CNBC: How so?

SMITH: Sometimes I'm described as "not there" in a social situation. You know, a social situation that lasts for a couple of hours I find it to be a tremendous amount of strain, so I've been known just to go to bed and read.

Perhaps most interesting to me, Smith was an undergraduate physics major at Caltech. The excerpt below is from Smith's Nobel autobiography. See also his recently published memoir, and this podcast interview on Econtalk.

...neither I, nor my parents, or anyone in my family, or any neighbor or friend, had any idea how to go about choosing a college. So, I went to the city library, found a book on choosing a college, and learned among other things that the 'best' college in the United States was Caltech. Being naïve and impetuous I decided that I should prepare myself to enter Caltech, as, without preparation, my 'C' average in High School would not even qualify me to take the entrance exam. A serious Quaker College, Friend's University, was located near my home in West Wichita. I enrolled in physics, chemistry, calculus, astronomy and literature courses for one year, earned top grades, and sat for the entrance exams for Caltech.

...Caltech was a meat grinder like I could never have imagined. I studied night, day, weekends and survived hundreds of problems, but what a joy to take freshman chemistry from Linus Pauling, hear physics lectures by J. Robert Oppenheimer on his frequent visits to Caltech, attend a visiting lecture by Bertrand Russell, and regularly see von Karman, Anderson, Zwicky, Tolman, Millikan and other legendary figures of that time, on campus.

I was majoring in physics, but switched to electrical engineering, which was in the same division (Mathematics, Physics and EE) as a senior. In this way I did not have to take the dreaded "Smyth's course," required for physics majors, but not EE, and received my BS on schedule in 1949. At the time I relished the unbending facts and mathematics of physics/engineering. Then, as a senior, I took an economics course and found it very intriguing - you could actually learn something about the economic principles underlying the claims of socialism, capitalism and other such 'isms.' Curious about advanced economics, I went to the Caltech library, stumbled upon two books, Samuelson's Foundations, and von Mises' Human Action. From the former, it was clear that economics could be done like physics, but from the latter there seemed to be much in the way of reasoning that was not like physics. I also subscribed to the Quarterly Journal of Economics, and one of the first issues had a paper by Hollis Chenery on Engineering Production Functions. So, economics was also like engineering! I had not a hint then as to how much those first impressions would be changed in my thinking over the decades to follow. ...

For micro I supplemented with courses Samuelson taught down the Charles River at MIT. After Caltech, Harvard seemed easy, and I got virtually straight A's. ...Graduate school is an endurance test, but was not that demanding for me after having survived the undergraduate meat grinder.

In his memoir he adds the following interesting comments (p. 123-124):

The first thing to which one has to adapt is the fact that no matter how high people might sample in the right tail of the distribution for "intelligence," ... that sample is still normally distributed in performing on the materials in the Caltech curriculum. The second thing you learn, if you were reared with my naive background, is the incredible arrogance that develops in conjunction with the acquisition of what you ultimately come to realize is a really very, very small bit of knowledge compared with our vast human ignorance. ... the difference between Harvard and Caltech: "At Harvard they believe they are the best in the world; at Caltech they know they are the best in the world."