William Spencer Vickrey (21 June 1914 – 11 October 1996) was a Canadian-American professor of economics and Nobel Laureate. He was a lifelong faculty member at Columbia University . A theorist who worked on public economics and mechanism design, Vickrey primarily discussed public policy problems. He orginated the Vickrey auction, introduced the concept of congestion pricing in networks, formalized arguments for marginal cost pricing, and contributed to optimal income taxation. James Tobin described him as "an applied economist’s theorist, as well as a theorist’s applied economist.”[1]
Vickrey was born in Victoria, British Columbia to Charles Vernon Vickrey, a Congregationalist minister, and Ada Eliza Spencer. The family moved to New York City in William's childhood, where his father was General Secretary of the American Committee for Armenian and Syrian Relief, one of the nation's first humanitarian assistance organizations.[2]
Vickrey remained at Columbia for his entire career. His students included the economists Jacques Drèze, Harvey J. Levin,[3] and Lynn Turgeon.[4]
Contributions
Vickrey was the first to use the tools of game theory to explain the dynamics of auctions.[5] In his seminal paper, Vickrey derived several auction equilibria, and provided an early revenue-equivalence result. The revenue equivalence theorem remains the centrepiece of modern auction theory. The Vickrey auction is named after him.[5]
Vickrey worked on congestion pricing, 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.[6][7][8][9] 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, Vickrey extended the marginal cost pricing approach of Harold Hotelling and showed how public goods should be provided at marginal cost.[10] He contended that efficient funding for public utilities and transportation systems required short-run marginal pricing, or pricing responsive to current demand.[1]
Alongside marginal cost pricing, Vickrey argued that the land value tax was necessary to efficiently fund city services. He 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".[11] 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 Georgistvalue capture, 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).[12]
Vickrey's Nobel Prize in Economics was announced on October 8, 1996. He became the only Nobel laureate born in British Columbia.
Vickrey died three days later while traveling to a conference of Georgist academics that he helped found.[15][16] His Columbia University 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: Erik Axel Karlfeldt (Literature 1931), Dag Hammarskjöld (Peace 1961) and Ralph Steinman (Physiology or Medicine 2011).[17]
–– (1964). Metastatics and Macroeconomics. Harcourt, Brace & World.
Collected works
Arrow, Kenneth Joseph; Arnott, Richard J.; Atkinson, Anthony A.; Drèze, Jacques, eds. (1997). Public Economics: Selected Papers by William Vickrey. Cambridge, UK: Cambridge University Press. ISBN978-0-521-59763-0.