Edward Lazear

Edward Paul Lazear (, ; August 17, 1948November 23, 2020) was an American economist, the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution at Stanford University and the Davies Family Professor of Economics at Stanford Graduate School of Business.

Lazear was born on August 17, 1948, in New York City.

He grew up in a Jewish family in Brooklyn, New York, before moving to Los Altos, California.

His father was a shipyard worker during World War II, and had also been a janitor at a hospital, while his mother was a salesperson at a jewelry shop.

As a high school student, he worked at a hospital mailroom and was also a member of the school cross-country running team.

Lazear received a Bachelor of Arts and a Master of Arts in economics from the University of California, Los Angeles in 1971.

His wife said he struggled at first, until he took an economics course and did well.

He received a Doctor of Philosophy in economics from Harvard University in 1974.

Lazear began his career in 1974 at the University of Chicago School of Business as an assistant professor.

He had also been a research associate at the National Bureau of Economic Research since 1974.

He had also been a visiting professor at the Center for the Study of New Institutional Economics at the University of the Saarland in Germany, the Institut d'Etudes Politiques in Paris, and at the Institutes for Advanced Study in Vienna and Jerusalem.

He had delivered lectures across Australia, England, India, Finland, the Netherlands, Norway, and Spain.

Since leaving his post as chairman of the Bush Council of Economic Advisors, Lazear made regular appearances on CNBC and Fox Business News.

He was a frequent contributor to the Wall Street Journal op-ed pages.

Lazear was considered one of the pioneers of labor economics, and personnel economics, branches of economics that studies market dynamics between wages and labor.

In a paper earlier in his career in 1979 in the Journal of Political Economy, titled, "Why is there Mandatory Retirement?," he had explored the driving motivations behind mandatory retirement.

In this paper he argued that companies should adjust the payout structures to pay less during workers' younger days when their productivity is presumably higher and they are worth more to businesses, and pay more to workers in their older days.

He goes on to say that while this would mean that employees would hold on to their jobs, mandatory retirement would help solve this problem.

In a paper titled "Rank-Order Tournaments as Optimum Labor Contracts" in Journal of Political Economy in 1981, Lazear and Rosen analyzed compensation schemes in which workers' compensations are determined not by their output, but by their rank in their organization.

They go on to show that in certain conditions compensation based on rank can result in efficient allocation of resources and also serve as an incentive for workers as they look to advancing through the ranks.

He went on to be the Gladys J. Brown Professor of Urban and Labor Economics from 1985 to 1992.

During his time at the University of Chicago, he collaborated with Gary Becker in applying economic tools to alternate domains.

He worked here for twenty years before joining the faculty of the Stanford Graduate School of Business.

He had also been the Morris A. Cox Senior Fellow at the Hoover Institution since 1985.

During his time here, he was the founding editor of the Journal of Labor Economics, and the founder of the Society of Labor Economists.

He served as a research fellow at the Stanford Institute for Economic Policy Research, Center for Corporate Performance at the Copenhagen Business School in Copenhagen, Denmark, and the IZA Institute for the Study of Labor in Bonn, Germany.

The Congress outlawed this practice in 1986.

Lazear built on the lifetime payout thinking, and working with Professor Sherwin Rosen from the University of Chicago, introduced tournament theory as a way to allocate wages and compensation where wage differences are based not on marginal productivity but instead upon relative differences between the individuals.

He was the Astra-Erikkson Lecturer and the 1993 Wicksell Lecturer in Stockholm, Sweden.

At Stanford University, he was the Jack Steele Parker Professor of Human Resources Management and Economics from 1995 to 2017, and he went on to be the Davies Family Professor of Economics in 2017.

His 1995 book, Personnel Economics, was a seminal work that in addition to introducing the topic, encouraged a wave of subsequent research into labor and management relations.

In a transformative paper in the American Economic Review, in 2000, he studied the relationship between incentive-based pay and productivity and concluded that a shift towards incentive-based attracted more efficient workers and contributed to an increased worker output.

In a case study that examined management and workers at Safelight Glass Company, he noted that when the company moved towards a variable and incentive based pay from the earlier hourly pay, the company saw an increase in worker output and productivity by about 44%.

He argued that this increase in productivity and output was not driven by workers just working harder, but, it also included substitution of the labor force, with the company attracting and holding on to more efficient workers.

Lazear served as chairman of the Council of Economic Advisers from 2006 to 2009.

As chairman, he was the chief economic advisor to President George W. Bush, holding a cabinet-level post as part of the White House team that led the response to the 2007-2008 financial crisis.

Lazear has been called the founder of personnel economics a field of economics that applies economic models to the study of the management of human resources in the firm.

His research advanced new models of employee incentives, promotions, compensation and productivity in firms.

He is also credited with developing a theory of entrepreneurship and leadership that emphasizes skill acquisition.

In addition to personnel economics, Lazear was a labor economist known for his work on the educational production function, and the importance of culture and language in explaining the rise of multiculturalism.