IU professor counts Nobel-winner as friend

Vernon L. Smith, professor of economics and law at George Mason University, who received the Nobel Prize for Economics Wednesday said his "friends, who had been predicting it for 22 years, finally got it right." \nIU's Economics professor Arlington Williams was one of those friends.\n"It wasn't a big surprise," Williams said. "He's 75. It's definitely time."\nWilliams met Smith in 1976 when he was a doctoral student at the University of Arizona, where Smith was teaching at the time. When Williams came to IU in 1979, he and Smith started to collaborate on different papers together.\n"When we worked together, I got involved in utilizing computerized laboratory experiments," Williams said. "He taught me how to design experiments to test if economic theories are true."\nSmith's economic theories paved the way for using economic experiments as a tool for analysis, which was never attempted before his time.\n"Economists don't do experiments. This one does," Smith said, referring to himself at a news conference. "It took me several years to realize that the textbooks were wrong, and the people in my class were correct."\nSmith began his theories on economic experimentation when he was teaching at Purdue University in 1955. At the University of Arizona, his experiments with Williams changed the way people look at many industries including the role of auctions, used for organizing markets for raw materials and deregulation and privatization of public monopolies. Smith's experiments also have proved that markets don't have to have a large number of buyers and sellers to operate efficiently.\n"It's important to bring a human behavior model into the economic market," Williams said. "Economics has room for laboratory experimentation. Not all the data we use has to be collected from market research, but through his experiments we could create a situation to test economic theories and models."\nWilliams, who has taught at IU for the last 24 years, claims that without his relationship with Smith, his economic theories would not be the same.\n"When I met him, it changed the way I think about how well markets work in a lot of different situations, trading rules and types of market outcomes," Williams said.\nSmith, who shared the award with Princeton University professor Daniel Kahneman, said he was "very happy" with the honor. Smith plans on donating his half of the 10 million kronor ($1.07 million) prize to the International Foundation for Research in Experimental Economics, which he founded in 1997. \nWilliams said he is proud of his mentor, but isn't expecting a Nobel Prize in his own future.\n"I think they only will give an award for experimental economics once," Williams said. "But it's just an honor to have worked with him for so many years"