We didn't really start to get out of the Depression until 1940, and it looks as though government spending got us out. But you see, I now look back on that with a much different perspective. And what I say is, 'Yeah, but that's after 10 years of balance sheet repair. —Nobel Prize winner Vernon Smith
LOGAN — Education is about an attitude of lifelong learning and not just the time spent in a formal academic program, said Vernon Smith, who in 2002 was awarded the Nobel Prize in Economic Sciences.
Smith, the George S. Eccles Distinguished Lecture Series speaker, said he learned far more in the four or five years after he completed his doctorate than he did in the time spent working toward his degree.
"You have to realize when you've finished a college education that it's only the beginning," he told students Wednesday at Utah State University. "It's easy to get the impression that it's an ending rather than a beginning, whether you're talking about finishing an undergraduate degree or an advanced degree."
Human knowledge, Smith said, is based on understanding how and why things happen rather than a series of memorized facts that can be "regurgitated" for exams.
Whether someone is working toward an undergraduate or advanced degree or is an employee in the workforce, it's important to be a good learner, which stems from real-world experiences, Smith said.
"If you want to learn to play the piano, at some point you stop learning about music and you start practicing," he said.
Smith was at Utah State as an invited lecturer for the Jon M. Huntsman School of Business. His address focused on the role the housing markets have played in U.S. economic recessions since 1929.
Smith received his undergraduate degree in electrical engineering from the California Institute of Technology before going on to complete a master's degree at the University of Kansas and a doctorate at Harvard.
“Dr. Smith’s visit represents a remarkable opportunity for not just our students but our faculty and the USU community to hear directly from someone who has done ground-breaking research that has influenced the way we understand economics,” Tyler Bowles, head of USU's Economics and Finance Department, said in a prepared statement. “He has authored or co-authored more than 280 articles and books. His expertise is sought-after and widely respected.”
Smith said he views the recent economic recession, as well as the Great Depression, as "balance-sheet recessions" in the sense that cash and asset flows were behaved atypically due to the damage to household and bank balance sheets. This creates what he described as an economic "black hole" due to people and organizations hunkering down to pay off their debts.
The conventional view is that monetary policy is ineffective in pulling an economy out of a bad recession, he said, and that in the case of the Great Depression, government spending on World War II was in large part responsible for the recovery of the economy.
But Smith added that he doesn't necessarily agree with the conventional view.
"We didn't really start to get out of the Depression until 1940, and it looks as though government spending got us out," he said. "But you see, I now look back on that with a much different perspective. And what I say is, 'Yeah, but that's after 10 years of balance sheet repair.'"
Smith said applying the lessons learned from the Great Depression to the more recent economic downturn is challenging, partly due to the relatively little experience the country has had responding to large-scale recessions.
"The problem is, when you only have one of these every 80 years, you don’t have much experience," he said. "The experts have been wrong over and over. They didn't expect it to be so bad."
Smith also suggested that the U.S. still has a way to go before it truly recovers from the downturn.
"It's 2013. By Depression-clock time, that’s 1935," he said. "In 1934, the (gross national product) grew 7.7 percent. We’re not even close to growing like that."