Vernon L. Smith: Theory

“In the Autumn semester, 1955, I taught Principles of Economics, and found it a challenge to convey basic microeconomic theory to students. Why/how could any market approximate a competitive equilibrium? I resolved that on the first day of class the following semester, I would try running a market experiment that would give the students an opportunity to experience an actual market, and me the opportunity to observe one in which I knew, but they did not know what were the alleged driving conditions of supply and demand in that market”

Vernon L. Smith

Vernon L. Smith (2002) in: " Vernon L. Smith - Biographical http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2002/smith-bio.html". Nobelprize.org. Nobel Media AB 2013. Web. 13 Jun 2014.

Autumn

“Theory should be ever more demanding of our empirical resources. Simultaneously, data should be ever more demanding of the empirical relevance of theory and of the theorist's expertise in working imaginatively on problems of the world, rather than on stylized problems of the imagination.”

Vernon L. Smith

Source: "Theory, experiment and economics," 1989, p. 168.

World , Imagination , Problem

“Economics as currently learned and taught in graduate school and practiced afterward is more theory-intensive and less observation-intensive than perhaps any other science. I think the statement that "no mere fact ever was a match in economics for a consistent theory" accurately describes the prevailing attitude in the profession”

Vernon L. Smith

Milgrom and Roberts, 1987, p. 185
Source: "Theory, experiment and economics," 1989, p. 151.

School , Thinking , Learning , Science

“In economics the tendency of theory to lag behind observation seems to be endemic, and, as theorists, few of us consider this to be a "terrible state." But as noted by Lakatos (1978, p. 6), "where theory lags behind the facts, we are dealing with miserable degenerating research programmes."”

Vernon L. Smith

Source: "Theory, experiment and economics," 1989, p. 168.

“When the theory performs well you also think, “Are there parallel results in naturally occurring field data?” You look for coherence across different data sets because theories are not specific to particular data sources. Such extensions are important because theories often make specific assumptions about information and institutions which can be controlled in the laboratory, but which may not accurately represent field data generating situations. Testing theories on the domain of their assumptions is sterile unless it is part of a research program concerned with extending the domain of applications of theory to field environments”

Vernon L. Smith

Source: "Theory, experiment and economics," 1989, p. 151.

Nature , Thinking , Parting