From Personnel Economics To People Analytics - LinkedIn

06/02/2023 15:18 (53) From Personnel Economics to People Analytics | LinkedIn
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Edward Lazear. Photo credit with thanks to the Stanford Graduate School of Business
From Personnel
Economics to People
Analytics
Amit Mohindra
8 articles Follow
Analytics leader, advisor, and coach
December 27, 2020
As we count the days to the end of a momentous yet

eminently forgettable year and turn our thoughts to a
brighter future, let's pause to remember Edward Lazear,
who passed away from pancreatic cancer last month, and
celebrate his immense but unheralded contributions to
people analytics.
https://www.linkedin.com/pulse/from-personnel-economics-people-analytics-amit-mohindra/ 1/9
Lazear’s 1995 book Personnel Economics founded a labor

economics subfield. Personnel economics examines how
firms attract, motivate, and retain employees. Lazear
brought economics to bear on the analysis of human
resource management, which had been the domain of
industrial psychologists and organizational development
specialists. Lazear collaborated with Gary Becker, who
introduced the economic notion of human capital with his
1964 book Human Capital: A Theoretical and Empirical
Analysis, with Special Reference to Education.
Personnel economics applies the economist's heavily

quantitative toolkit to the improvement of the HR function.
I gravitated naturally toward Lazear's work when I found
myself working in HR at Lehman Brothers after stints as a
World Bank development economist and Towers Perrin
compensation consultant. As an applied labor micro-
econometrician, I was interested in empirical work rather
than theory and the workings of the firm rather than the
economy. I was also well versed in econometrics.
As a newcomer to HR, I instinctively relied on my

economics graduate school training. I carefully observed
the organization and characterized its constituent parts:
business units, functions, geographies, hierarchies, roles,
programs, policies. I worked hard to understand the
economics of the business. How did the organization make
money and grow? Were there any inefficiencies in the way
employees were hired, onboarded, organized, developed,
evaluated, motivated, and rewarded that might impact
customer and financial outcomes? It was a target-rich
environment for a self-styled personnel economist.
Personnel economics was a pre-cursor of people analytics,

and there are several parallels in the emergence of each
field.
They had shared goals. People analytics, "the systematic

identification and quantification of the people-drivers of
business outcomes, with the purpose of making better
decisions," as succinctly defined by van den Heuvel and
Bondarouk, owes its intellectual underpinnings to
personnel economics and industrial-organizational
psychology. Lazear's 1998 book, Personnel Economics for
Managers, spoke to the importance of evidence-based and
data-driven decision making for organizations, teams, and
individual workers—arguably the same goal of people
analytics.
The increasing availability of data was critical early in their

evolution. Lazear ascribed the emergence of personnel
economics to several factors, including developments in
economic theory (such as agency and contract theory),
advancements in econometrics (solutions to sample
selection and omitted variable biases and endogeneity),
and the increasing availability of firm-level panel data sets.
With all these tools, economists were able to apply the
rigor of economic analysis—including formulating and
testing models—to the practice of HR. The emergence of
people analytics was similarly influenced by the advent of
big data and its associated technologies and the
application of decision science, data science, and people

sciences to the practice of HR.
The rise of finance (as modern finance in economics and

as a strategic function in organizations) served as a model
for their emergence. Lazear also ascribed the emergence of
modern finance as a model for the rise of personnel
economics. According to him, finance was primarily an
institutional field lacking theoretical and empirical
underpinnings until the work of Nobel laureates Miller,
Markowitz, Sharpe, Fama, Scholes, Merton, and others. They
transformed finance into a sub-field of economics by
identifying principles with general applicability, such as
arbitrage theory. It is not a giant leap to ascribe HR's
transformation into a strategic function akin to corporate
finance and marketing to people analytics's influence.
The academic press’s early recognition spurred their

growth. Almost a decade before the emergence of
personnel economics, the Journal of Labor Economics
published a 1987 special edition on "the new economics of
personnel," presaging personnel economics' eventual
arrival as a formal sub-field of labor economics. Similarly,
HR journals are publishing special issues on people
analytics: People & Strategy (2011 and 2018), The Journal of
Organizational Effectiveness (2017), Human Resource
Management (2018 and 2021), and the International Journal
of Human Resource Management (2021). A Journal of People
Analytics and an authoritative People Analytics textbook
cannot be far away.
"Ed was a pioneering labor economist, a gifted teacher, an

accomplished public servant and an extraordinary
colleague," according to Condoleezza Rice, director of the
Hoover Institution at Stanford University, where Lazear was
the Morris Arnold and Nona Jean Cox Senior Fellow and the
Davies Family Professor of Economics at the Stanford
Graduate School of Business (GSB).
One of the foremost labor economists in the world, Lazear

founded the Society of Labor Economists and served as the
Journal of Labor Economics' founding editor. Labor
economics studies the interaction of employers and
employees in the production of goods and services within
the contexts of economies, markets, and organizations.
Lazear also founded the working group on Personnel

Economics at the National Bureau of Economic Research.
Lazear was a gifted and widely admired teacher. Jonathan

Levin, the dean of Stanford's GSB, said that "Eddie brought
a love of economics to generations of students and
colleagues. His classes invariably were oversubscribed, and
Stanford GSB students recognized him with both the MBA
and Ph.D. teaching awards. His infectious enthusiasm for
ideas made him an all-time great seminar participant and
an active convener of his colleagues.
Lazear also served his country as a dedicated public

servant, chairing the Council of Economic Advisers from
2006 to 2009. In this cabinet-level post, Lazear was a
member of the White House economics team that devised
a response to the global financial crisis. Prior to this, Lazear
was a member of the President's Advisory Panel for Federal
Tax Reform, charged with developing policy options that
did not reduce revenue collection.
As I’ve reflected on Lazear’s work and its impact on my

career, I can thank him for yet another inspiration. One of
my New Year’s resolutions is to add a segment on
personnel economics to my people analytics courses,
starting with the January-March online Stanford
Continuing Studies course and assign one of Lazear's
seminal personnel economics/people analytics papers,
"Performance Pay and Productivity," as an optional reading.
I hope you will look at it, too, as well as his other work, be
inspired, and welcome Ed Lazear into the people analytics
pantheon.
Be safe and be well, and best wishes for a safe, healthy, and
prosperous New Year.
Note: the Venn diagram image is adapted from Grund et al.

(2017).
References
Grund, C., Bryson, A., Dur, R., Harbring, C., Koch, A.K., &
Lazear, E. P. (2017). Personnel economics: A research
field comes of age. German Journal of Human Resource
Management: Zeitschrift für Personalforschung, 31, 101–
107.
Lazear, E. P. (1995). Personnel economics. MIT Press.
Lazear, E. P. (1998). Personnel economics for managers.

John Wiley & Sons.
Lazear, E. P., & Shaw, K. L. (2007). Personnel economics:

The economist's view of human resources. Journal of
Economic Perspectives, 21(4), 91–114.
Lazear E. P. (1999). Personnel economics: Past lessons

and future directions presidential address to the
Society of Labor Economists, San Francisco, May 1,
1998. Journal of Labor Economics. 17(2), 199–236.
Lazear, E. P. (2000). Performance pay and productivity.

American Economic Review. 90(5), 1346–1361.
Lazear, E. P. & Gibbs, M. (2009). Personnel Economics in

Practice (4th ed.). Wiley.
Porter, E. (2020, November 20). Edward P. Lazear,

economist and presidential adviser, dies at 72. New
York Times.
School News. (2020, November 25). Trailblazing

economist and presidential adviser Edward Lazear dies
at 72. Stanford Graduate School of Business.
https://www.gsb.stanford.edu/newsroom/school-
news/trailblazing-economist-presidential-adviser-
edward-lazear-dies-72
van den Heuvel, S., & Bondarouk, T. (2017). The rise

(and fall?) of HR analytics: A study into the future
application, value, structure, and system support.
Journal of Organizational Effectiveness, 4(2), 157–178.
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Published by
Amit Mohindra 8 articles Follow
Published • 2y
A tribute to Ed Lazear, pioneering labor economist and early people analyst.

Personnel economics, a subfield of labor economics founded by Lazear, was a pre-
cursor of people analytics. This article also celebrates the vital contributions of
economists to people analytics. Hopefully, it serves as a clarion call to labor and other
economists since we remain an inexplicable minority in people analytics.
#laboreconomics #personneleconomics #peopleanalytics #peopleanalyticssuccess
#hr #economics #humanresources
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17 Comments
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Add a comment…
Amit Mohindra • 3rd+ 2y

Tagging a few economists in the people analytics field who might also
appreciate the post. Please tag others - I'm keen to discover the
community. And others please self identify, too! Thanks!
Al Adamsen, Alec Levenson, John Boudreau, Gad Levanon, Guru
Sethupathy, RJ Milnor, Serena H. Huang, Ph.D., Tomeka Hill-Thomas, PhD
Like · 1 Reply · 2 Replies
Amit Mohindra • 3rd+ 2y (edited)

Bennet Voorhees Of course - and a very accomplished one at that!

Thanks for the reminder and modeling self-tagging for my
economist people analytics community identification endeavor,
Bennet!
Like Reply
Alec Levenson • 2nd 2y

Economist / Senior Research Scientist at Center for Effective
Organizations, University of Southern California
Amit Mohindra thank you for the post and the tag.
I struggle with how much credit economics should be given here,

and even the label of economist that you apply to individual people.
Here in a post that honors a great contributor to the field of
…see more
Like · 2 Reply
Hilger Pothmann (he/his) • 3rd+ 2y (edited)

Human Capital drives market value ... and more
Very inspiring summary of what has been out there at prestigious

universities taught by great thought leaders! And - now we can start
implementing such aspirations of Human Capital by using #iso30414 :
„Human Capital Reporting Guidelines“ provided by ISO. While all
companies provide transparency around their people data, stakeholders
…see more
Like · 3 Reply
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06/02/2023 15:18 (53) From Personnel Economics to People Analytics | LinkedIn

December 27, 2020

As we count the days to the end of a momentous yet

Lazear’s 1995 book Personnel Economics founded a labor

Personnel economics applies the economist's heavily

As a newcomer to HR, I instinctively relied on my

Personnel economics was a pre-cursor of people analytics,

They had shared goals. People analytics, "the systematic

The increasing availability of data was critical early in their

application of decision science, data science, and people

The rise of finance (as modern finance in economics and

The academic press’s early recognition spurred their

"Ed was a pioneering labor economist, a gifted teacher, an

One of the foremost labor economists in the world, Lazear

Lazear also founded the working group on Personnel

Lazear was a gifted and widely admired teacher. Jonathan

Lazear also served his country as a dedicated public

As I’ve reflected on Lazear’s work and its impact on my

Note: the Venn diagram image is adapted from Grund et al.

Lazear, E. P. (1995). Personnel economics. MIT Press.

Lazear, E. P. (1998). Personnel economics for managers.

Lazear, E. P., & Shaw, K. L. (2007). Personnel economics:

Lazear E. P. (1999). Personnel economics: Past lessons

Lazear, E. P. (2000). Performance pay and productivity.

Lazear, E. P. & Gibbs, M. (2009). Personnel Economics in

Porter, E. (2020, November 20). Edward P. Lazear,

School News. (2020, November 25). Trailblazing

van den Heuvel, S., & Bondarouk, T. (2017). The rise

A tribute to Ed Lazear, pioneering labor economist and early people analyst.

Like Comment Share 164 17 comments

Amit Mohindra • 3rd+ 2y

Like · 1 Reply · 2 Replies

Amit Mohindra • 3rd+ 2y (edited)

Bennet Voorhees Of course - and a very accomplished one at that!

Alec Levenson • 2nd 2y

I struggle with how much credit economics should be given here,

Hilger Pothmann (he/his) • 3rd+ 2y (edited)

Very inspiring summary of what has been out there at prestigious

More from Amit Mohindra

Particle Physics and People My First People Analytics Job

Poetry in People Analytics

See all 8 articles

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