Last month Smith, a professor at George Mason University, was awarded this year’s Nobel Prize for economics along with Princeton University psychologist and behavioral finance expert Daniel Kahneman. Smith, who was honored for his pathbreaking work in experimental economics, which studies how people interact in markets, isn’t championing any big market reforms to deal with the recent stock market nuttiness triggered by all that irrationally exuberant behavior. In fact, Smith, 75, believes that manias have their upside. “Out of all these big bubbles and crashes comes long-term value,” he says. “We got it with the railroads; we’re going to get it with the dot-coms -- there’s no question in my mind about it.” First, the excesses must be corrected, and Smith is certain that they will be. “It is risky -- there’s liars out there, and there’s con men out there,” he concedes. But, he adds, “you don’t need any regulation: Once management loses credibility with the public, it is all over. It’s hard, but who can think of a better system?”
