Vernon L. Smith - Institutions Quotes

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It is not possible to design a laboratory resource allocation experiment without designing an institution in all its detail.

Vernon L. Smith
Rules emerge as a spontaneous order–they are found–not deliberately designed by one calculating mind. Initially constructivist institutions undergo evolutionary change adapting beyond the circumstances that gave them birth. What emerges is a form of social mind that solves complex organization problems without conscious cognition.

Vernon L. Smith
Parallelism: Propositions about the behavior of individuals and the performance of institutions that have been tested in laboratory microeconomies apply also to nonlaboratory environments where similar ceteris paribus conditions prevail.

Vernon L. Smith
Ecological rationality uses reason – rational reconstruction – to examine the behavior of individuals based on their experience and folk knowledge, who are 'naïve' in their ability to apply constructivist tools to the decisions they make; to understand the emergent order in human cultures; to discover the possible intelligence embodied in the rules, norms and institutions of our cultural and biological heritage that are created from human interactions but not by deliberate human design. People follow rules without being able to articulate them, but they can be discovered.

Vernon L. Smith
One of the most intriguing discoveries of experimental economics is that (1) as we have seen, people invariably behave non-cooperatively in small and large group 'impersonal' market exchange institutions; (2) many (up to half in single play; over 90% in repeat play) cooperate in 'personal' exchange (two-person extensive form games); (3) yet in both economic environments all interactions are between anonymous players.

Vernon L. Smith
In defining a microeconomic system two distinct component elements will be identified: an environment and an institution. The environment consists of a list of N economic agents {l,..., N}, a list of K + 1 commodities (including resources) {O, l,..., K}, and certain characteristics of each agent … Hence, a microeconomic environment is defined by the collection of characteristics e = (e',..., e).

Vernon L. Smith
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