William Spencer Vickrey (21 June 1914 – 11 October 1996) was a Canadian-American professor of economics and
Nobel Laureate. Vickrey was awarded the 1996
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...
with
James Mirrlees
Sir James Alexander Mirrlees (5 July 1936 – 29 August 2018) was a British economist and winner of the 1996 Nobel Memorial Prize in Economic Sciences. He was knighted in the 1997 Birthday Honours.
Early life and education
Born in Minnigaf ...
for their research into the economic theory of
incentives
In general, incentives are anything that persuade a person to alter their behaviour. It is emphasised that incentives matter by the basic law of economists and the laws of behaviour, which state that higher incentives amount to greater levels of ...
under
asymmetric information, becoming the only Nobel laureate born in
British Columbia
British Columbia (commonly abbreviated as BC) is the westernmost province of Canada, situated between the Pacific Ocean and the Rocky Mountains. It has a diverse geography, with rugged landscapes that include rocky coastlines, sandy beaches, ...
.
The announcement of his Nobel Prize was made just three days prior to his death. Vickrey died while traveling to a conference of
Georgist academics that he helped found and never missed once in 20 years. His
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
economics department colleague
C. Lowell Harriss accepted the posthumous prize on his behalf. There are only three other cases where a Nobel Prize has been presented posthumously.
Early years
Vickrey was born in
Victoria, British Columbia
Victoria is the capital city of the Canadian province of British Columbia, on the southern tip of Vancouver Island off Canada's Pacific coast. The city has a population of 91,867, and the Greater Victoria area has a population of 397,237. The ...
and attended high school at
Phillips Academy
("Not for Self") la, Finis Origine Pendet ("The End Depends Upon the Beginning") Youth From Every Quarter Knowledge and Goodness
, address = 180 Main Street
, city = Andover
, state = Ma ...
in
Andover, Massachusetts
Andover is a town in Essex County, Massachusetts, United States. It was settled in 1642 and incorporated in 1646."Andover" in ''The New Encyclopædia Britannica''. Chicago: Encyclopædia Britannica Inc., 15th ed., 1992, Vol. 1, p. 387. As of th ...
. After obtaining his
B.S.
A Bachelor of Science (BS, BSc, SB, or ScB; from the Latin ') is a bachelor's degree awarded for programs that generally last three to five years.
The first university to admit a student to the degree of Bachelor of Science was the University ...
in Mathematics at
Yale University
Yale University is a private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the third-oldest institution of higher education in the United States and among the most prestigious in the wo ...
in 1935, he went on to complete his M.A. in 1937 and
PhD in 1948 at
Columbia University
Columbia University (also known as Columbia, and officially as Columbia University in the City of New York) is a private research university in New York City. Established in 1754 as King's College on the grounds of Trinity Church in Manhatt ...
, where he remained for most of his career.
Career
Vickrey was the first to use the tools of
game theory
Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has appli ...
to explain the
dynamics of auctions.
[Vickrey, 1961] In his seminal paper, Vickrey derived several auction equilibria, and provided an early revenue-equivalence result. The
revenue equivalence theorem
Revenue equivalence is a concept in auction theory that states that given certain conditions, any mechanism that results in the same outcomes (i.e. allocates items to the same bidders) also has the same expected revenue.
Notation
There is a set ...
remains the centrepiece of modern auction theory. The
Vickrey auction
A Vickrey auction or sealed-bid second-price auction (SBSPA) is a type of sealed-bid auction. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price paid is the second-highest ...
is named after him.
[
Vickrey worked on ]congestion pricing
Congestion pricing or congestion charges is a system of surcharging users of public goods that are subject to congestion through excess demand, such as through higher peak charges for use of bus services, electricity, metros, railways, tele ...
, the notion that roads and other services should be priced so that users see the costs that arise from the service being fully used when there is still demand. Congestion pricing gives a signal to users to adjust their behavior or to investors to expand the service in order to remove the constraint. The theory was later partially put into action in London.
In public economics
Public economics ''(or economics of the public sector)'' is the study of government policy through the lens of economic efficiency and equity. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve ...
, Vickrey extended the Georgist marginal cost pricing
In economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it r ...
approach of Harold Hotelling and showed how public goods should be provided at marginal cost and capital investment outlays financed with land value tax
A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...
. Vickrey wrote that replacing taxes on production and labor ("including property taxes on improvements") with fees for holding valuable land sites "would substantially improve the economic efficiency of the jurisdiction". Vickrey further argued that land value tax had no adverse effects and that replacing existing taxes in this way would increase local productivity enough that land prices would rise instead of fall. He also made an ethical argument for Georgist value capture Value capture is a type of public financing that recovers some or all of the value that public infrastructure generates for private landowners.
In many countries, the public sector is responsible for the infrastructure required to support urban dev ...
, noting that owners of valuable locations still take (exclude others from) local public goods, even if they choose not to use them, so without land value tax, land users have to pay twice for those public services (once in tax to government and once in rent to holders of land title).
Vickrey's economic
An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
philosophy was influenced by John Maynard Keynes
John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...
and Henry George
Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the eco ...
. He was sharply critical of the Chicago school of economics and was vocal in opposing the political focus on achieving balanced budgets
A balanced budget (particularly that of a government) is a budget in which revenues are equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budget ...
and fighting inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
, especially in times of high unemployment
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...
. Working under General MacArthur
Douglas MacArthur (26 January 18805 April 1964) was an American military leader who served as General of the Army for the United States, as well as a field marshal to the Philippine Army. He had served with distinction in World War I, was C ...
, Vickrey helped accomplish radical land reform in Japan.
Vickrey had many graduate students and protegés at Columbia University, including the economists Jacques Drèze
Jacques H. Drèze (5 August 1929 – 25 September 2022) was a Belgian economist noted for his contributions to economic theory, econometrics, and economic policy as well as for his leadership in the economics profession. Drèze was the first P ...
, Harvey J. Levin
Harvey Joshua Levin (July 1, 1924 – April 30, 1992) was an American economist. He was university research professor in the Department of Economics at Hofstra University (1989–92), Augustus B. Weller Professor of Economics at Hofstra (1964– ...
, and Lynn Turgeon.
Personal life
Vickrey married Cecile Thompson in 1951. He was a Quaker
Quakers are people who belong to a historically Protestant Christian set of Christian denomination, denominations known formally as the Religious Society of Friends. Members of these movements ("theFriends") are generally united by a belie ...
and a member of Scarsdale Friends Meeting
A Friends meeting house is a meeting house of the Religious Society of Friends (Quakers), where meeting for worship is usually held.
Typically, Friends meeting houses are simple and resemble local residential buildings. Steeples, spires, and ...
. He died in Harrison, New York in 1996 from heart failure.
Selected works
*
Counterspeculation, Auctions, and Competitive Sealed Tenders
, ''Journal of Finance
''The Journal of Finance'' is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the American Finance Association. It was established in 1946 and is considered to be one of the premier finance journals. The editor-in-chief ...
'', 1961. The paper originated auction theory
Auction theory is an applied branch of economics which deals with how bidders act in auction markets and researches how the features of auction markets incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-w ...
, a subfield of game theory
Game theory is the study of mathematical models of strategic interactions among rational agents. Myerson, Roger B. (1991). ''Game Theory: Analysis of Conflict,'' Harvard University Press, p.&nbs1 Chapter-preview links, ppvii–xi It has appli ...
.
*
*
*
*
See also
* Electricity market
In a broad sense, an electricity market is a system that facilitates the exchange of electricity-related goods and services. During more than a century of evolution of the electric power industry, the economics of the electricity markets had un ...
* London congestion charge
* Road pricing
Road pricing (also road user charges) are direct charges levied for the use of roads, including road tolls, distance or time-based fees, congestion charges and charges designed to discourage the use of certain classes of vehicle, fuel sour ...
* Vickrey auction
A Vickrey auction or sealed-bid second-price auction (SBSPA) is a type of sealed-bid auction. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price paid is the second-highest ...
References
Further reading
*
*
External links
*
IDEAS/RePEc
*
*
Jacques H. Dreze, "William S. Vickrey", Biographical Memoirs of the National Academy of Sciences (1998)
{{DEFAULTSORT:Vickrey, William
1914 births
1996 deaths
Economists from New York (state)
Georgist economists
American Quakers
American Protestants
Canadian economists
Canadian emigrants to the United States
Nobel laureates in Economics
Columbia University faculty
Columbia University alumni
Yale College alumni
People from Victoria, British Columbia
Canadian Nobel laureates
Posthumous Nobel laureates
People from Hastings-on-Hudson, New York
20th-century American economists
20th-century Quakers
Fellows of the Econometric Society
Presidents of the American Economic Association
Distinguished Fellows of the American Economic Association
Members of the United States National Academy of Sciences