USC University Professor and professor of economics Richard Easterlin has been awarded the 2009 Prize in Labor Economics by the Institute for the Study of Labor (IZA), based in Bonn, Germany.
The IZA Prize, which is endowed with an award of 50,000 euros, is among the most prestigious economics awards worldwide.
“Dick’s work in labor economics is not merely influential — an entire field of economic analysis could not exist without his contributions,” said Howard Gillman, dean of USC College. “He is a valued colleague and a brilliant scientist whose work continues to influence the thinking of both academic economists and policy makers.”
In Easterlin’s perhaps most famous work, he showed that rising material wealth does not necessarily correspond to improved individual well-being. People in societies with higher material wealth are more satisfied than people in poorer ones, but once basic needs are met, neither individual happiness nor societal well-being continues to increase with economic growth.
This apparently contradictory finding, which Easterlin first posited in the 1970s, came to be known as the “Easterlin Paradox.” Well-being is strongly influenced by relative comparisons and changes in consciousness, Easterlin demonstrated. In other words, as income increases, people’s aspirations evolve — they tend to raise their demands and expectations.
Easterlin is also the author of several groundbreaking works on cohort size. Among other influential contributions, the “Easterlin Hypothesis” has had significant influence on understandings of the economic impact of fertility and family decisions on long-term swings in labor markets.
Easterlin showed that the economic and social fortunes of a cohort tend to vary inversely with its overall size. Each member of a larger birth cohort will receive less parental attention. Since education spending is relatively fixed, students in larger birth cohorts also receive fewer resources per person, lowering the average quality of schooling.
“Richard Easterlin’s work of a lifetime is highly impressive.… His work is politically important as well, since it shows that individuals are not only seeking to maximize their wealth in order to satisfy their well-being and be ‘happier.’ Quality of life can also be measured in societal fairness, in good infrastructure, in a welfare state that assists the strong and backs the weak, that consists of demanding and enabling incentives,” said IZA director Klaus F. Zimmerman. “Against the background of the current economic crisis, Easterlin’s findings are today more than ever a hint for social and economic policies worldwide.”
As a founder of two important and growing fields of economic inquiry, Easterlin’s groundbreaking research continues to inspire economists and other social scientists to systematically analyze the relationship between subjective well-being and socio-demographic characteristics, wrote the IZA Prize committee in its nomination statement.
Easterlin is a member of the National Academy of Sciences, a Distinguished Fellow of the American Economic Association, past president of the Population Association of America and the Economic History Association, fellow of the American Academy of Arts and Sciences and the Econometric Society. He also is a former Guggenheim fellow.
The official ceremony will take place on Oct. 22 in Washington, D.C.
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