Mon. Jan 18th, 2021

U.S. President George W. Bush listens to remarks from Edward Lazear in Washington, March 6, 2006. (Kevin Lamarque/Reuters)

We are deeply saddened to have to report that Edward Lazear, someone we were extremely proud to have included in our roster of authors for Capital Matters, died on Monday.

Stanford News has a full record of his remarkable career here.

An extract:

Described as “perhaps the foremost labor economist of his generation,” economist, White House adviser and Stanford University professor Edward P. Lazear passed away from pancreatic cancer on Nov. 23.

Recognized as the founder of the field of personnel economics, Lazear’s boundless energy and entrepreneurial spirit have led to contributions in many domains. At Stanford University, he served as the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution, the Davies Family Professor of Economics at Stanford Graduate School of Business and senior fellow at the Stanford Institute for Economic Policy Research. . . .

Lazear served at the White House from 2006 to 2009, where he was chairman of President Bush’s Council of Economic Advisers. Lazear was a trusted confidant to President George W. Bush and played a key role in fashioning the response to the financial crisis in 2007 and 2008. Lazear was both an adviser and friend of the president, even earning the nickname “Stork” from the former president for his appearance during their frequent bike rides at Camp David. The two maintained their friendship ever since.

A champion of free-market competition and capitalism, Lazear had a gift for creating simple, original models that cut to the heart of an economic problem. His book Personnel Economics, published in 1995, established a new field in labor economics, focused on human resource practices and incentives in organizations. He made important contributions as well in education, immigration, productivity and entrepreneurship.

A student of and intellectual successor to economist and Nobel Laureate Gary Becker, Lazear founded the Society of Labor Economists and later served as its president. He was the founding editor of the Journal of Labor Economics, and also founded the working group on Personnel Economics at the National Bureau of Economic Research.

Lazear won practically every award labor economics has to offer, including the Leo Melamed Prize, IZA Prize in Labor Economics, the Jacob Mincer Prize, election to the American Academy of Arts and Sciences, and designation as Distinguished Fellow of the American Economic Association.

“Earlier this year, the Society of Labor Economists established the Edward P. Lazear Prize to recognize outstanding contributions to research, the profession and civil society – a fitting encapsulation of Eddie’s own professional accomplishments,” Levin said.

Ed Lazear’s final article for Capital Matters was published on September 9.

An extract:

The evidence that free markets enhance the well-being of the poor is compelling. Define the rich as the uppermost 10 percent and the poor as the lowest 10 percent of a country’s earners. In countries that rank in the top half on the Economic Freedom Index, the rich have incomes that are on average almost three times as high as the rich in countries that rank in the bottom half of the index. But more striking is that in the free-market half of countries, the income of the poor is almost six times higher than in the more restrictive half. What’s more, within the ranks of the wealthiest half of countries, the poor are more than twice as well off in those that are freer and more market-oriented.

General economic growth tends to benefit all. The income data show conclusively that, as President Kennedy was fond of saying, a rising tide lifts all boats. Among the 161 countries studied, periods of high income growth for the rich also tend to be periods of high income growth for the poor. In 82 percent of the ten-year periods during which wages of the rich grew, so too did wages of the poor. Conversely, the wages of the poor tended not to grow during periods when wages of the rich declined. The movement is general. A 1 percent rise in median income is associated with just over a 1 percent rise in income of the poor and just under a 1 percent rise in income of the rich. The historical record suggests that the poor do not get left behind as economies grow.

Despite the strong statistical relationship between wages of the rich and poor, the movement is not in lockstep. Sometimes the incomes of the richest members of an economy increase more rapidly than those of its poorest members. This has led some to conclude, incorrectly, that rising inequality implies falling or stagnant incomes of the poor. Economic development is often marked by increased disparity between incomes of the rich and poor, even as the standard of living of the poor rises substantially. Hong Kong’s rapid growth from 1960 to 2000 is a case in point. In 1960, the rich earned about 20 times as much as the poor. By 2000, that ratio had risen to 33. At the same time, though, the income of the poor increased fivefold, making the Hong Kong poor of 2000 far better off than the poor of the earlier generation. More recently, Vietnam experienced a similar pattern. In 2000, the rich earned 27 times as much as the poor. Vietnam experienced rapid growth after that, and the ratio of rich to poor earnings rose to 33. But the income of the poorest Vietnamese went up two and a half times over those years.

One surprising finding from my study is that changing a country’s name to eliminate the terms “socialist,” “democratic,” or “people’s” is associated with an 18 percent rise in incomes of the poor over the subsequent years. Of course, it is not the name change per se that helps the poor, but the change in the form of government and the adoption of more market-oriented institutions that accompanies the name change. . .

I was never fortunate enough to meet Professor Lazear, but someone who knew him well described him to me as “the sweetest, gentlest soul I have ever seen for someone who entered the arena.”


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