Photo: Bryan Birdwell, BMO/SFU
Economist and Nobel Laureate Vernon Lomax Smith is coming to Vancouver next week to speak at a free event put on by Simon Fraser University and Bank of Montreal (BMO). With record real estate prices and a depressed mining market, the bubble-themed event is well timed for a Vancouver business audience. The talk should be of interest to CEO.ca readers, and we hope to see many of you there.
What: BMO Public Lecture: Rethinking Housing Bubbles (Vernon Lomax Smith)
When: Thu, 13 Nov 2014 5:30 PM - 8:30 PM
Where: Goldcorp Centre for the Arts, 149 West Hastings Street
More details.
Nobel Laureate Vernon L. Smith
Vernon Lomax Smith received the 2002 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, which is probably the highest recognition possible for an economist. Smith has come to Vancouver to promote his new book, Rethinking Housing Bubbles: The Role of Household and Bank Balance Sheets in Modeling Economic Cycles. The book starts with a review of the research that helped Smith win the Nobel Prize.
Smith’s work in the 1950’s showed that people are very good at finding ‘equilibrium’ for non-durable (consumable) goods, but are prone to creating bubbles when trading durable (capital) goods. Since the largest durable good most North Americans will ever own is their house, you can see how this result motivates the existence of nation-wide housing bubbles.
Smith’s work from the 1980s showed people get ‘less bad’ at trading durable assets with experience. Specifically, experiencing the full cycle of boom-bust helps reduce our tendency to create bubbles. This result is secondary for the book, but it is of primary importance for natural resource investors who are plagued by the ills of the current market. Smith’s work here emphasizes the value of being a survivor: if you can survive several cycles, then you can learn to spot and exploit extreme behaviour.
You and I cannot relive past market cycles, but we can learn to be survivors by studying our business community. The community is the ultimate survivor and it contains folk wisdom that reflects valuable evolutionary pressures.
“People follow rules without being able to articulate them, but they can be discovered,” Smith said in his prize acceptance speech. There is value for speculators in discovering rules that other people follow, and it’s all the more reason to join us at next Thursday’s free and sure to be fun event.
Smith has an inspiring ability to riff on the most important ideas in the science of human action. I encourage you to read his speech to the Austrian Legislature, published as “Hayek and Experimental Economics” in The Review of Austrian Economics. Smith ends with the comment “I don’t know if you have recorded this but if you have I’d like to have a copy because I haven’t written any of this down, except for the quotes from Hayek.” At the event next Thursday, I personally plan on taking notes.
All that to say this: Vancouver is a world-class business community. Smith’s message is relevant to us and can help raise the level of discourse in our community. If you are around the city next Thursday, and would enjoy an eye opening night (and potentially meet some new and interesting people), we would love to see you there.
The event is free, but REGISTRATION is required.
Hello all, thanks for reading and voting.
One comment that I’d like to add. I talked briefly with Morgan Poliquin at the Sprott Symposium this summer and he told me about reading the Austrians while growing up at camp. Very neat story, provided part of the inspiration for me to write this article and promote the event.
Morgan, in case you read this, I will say that there may be some good potential to get Vernon Smith involved with http://liberty.me/.
Best regards to you all. Goodbye, from Peter.