By Robert Gibbons
Last week personnel economics lost its founder, Edward Lazear. This sad news was made even more shocking by the rapid pace of Eddie’s disease.
As far as I know, Eddie never attended a SIOE conference. Nonetheless, I will explain why I am—and I think many SIOE members will be—grateful for what he gave us.
Before founding personnel economics, Eddie was already one of the leading labor economists of his generation. In those days, labor economics analyzed workers in much the same way that the rest of economics considered other goods and services: as quantities that could be priced. Gary Becker, Jacob Mincer, and others provided path-breaking theory and evidence in this price-theoretic vein.
Eddie brought modern theory—incentives, information, and games—into labor economics. Importantly, he did so as more than just methodological innovation: he used these tools to explain and predict things that labor economists cared about, thus making it safe for younger labor economists to attempt similar projects (myself definitely included).
And Eddie led a substantive innovation as well: whereas much of the price-theoretic research in labor economics could be interpreted in terms of one-worker firms, Eddie studied issues that happen inside real organizations—incentives, promotions, supervisors, industrial politics, and more. Indeed, personnel economics might be defined as taking labor economics inside the firm.
Given the “O” that now appears in our Society’s name, it is not surprising that Eddie’s substantive innovation has had clear impacts on a subset of SIOE papers and presenters for almost a decade. But I see his methodological innovation—broadening labor economics beyond price theory—as important for SIOE more generally, as follows.
I hope that bells go off for any SIOE member reading that labor economists used to consider workers as “quantities that could be priced.” In my view, Edward Lazear’s role in the outgrowth of personnel economics from labor economics paralleled Oliver Williamson’s role in the outgrowth of organizational economics from industrial organization. After all, before Williamson focused our attention on “haggling” between firms, didn’t IO (like labor) typically assume that transactions “could be priced”?
Indeed, I see a similar analogy to Douglass North: like labor and IO, much research in economic history utilizes price-theoretic conceptions of markets, whereas North (like Lazear and Williamson) again focused our attention beyond price theory—in North’s case, on institutions as “rules of the game.” In sum, I see both the history of ISNIE and the prospects of SIOE as centered on departures from price theory such as those by Williamson and North, making Lazear an important fellow traveler (if not an active participant) in our journey.
To end on a personal note, as hinted above, Eddie played several important roles in shaping my own path forward: he published my first paper (JOLE, 1987), even though it conflicted with one of his own; he invited me to the Chicago labor seminar, where I met other stars of that field; he coached me on writing for a broader audience than just theorists, suggesting that one might put intuition before proofs (!); and perhaps most importantly, he built an NBER group in personnel economics that has been an inspiration for the group in organizational economics that I have tried to build. For all this and more, I am very grateful; I will miss him very much.
Robert Gibbons, MIT and NBER, November, 2020