Armin Frank#
Short laudatio by Johannes Siegrist#
Armin Falk is Professor at the University of Bonn (Department of Economics) and Director of the Bonn Econ Lab. He is also Director of the newly founded Center for Economics and Neurosciences. Armin Falk is affiliated with several networks: He is Program Director at the Institute for the Study of Labor (IZA), Fellow at the Centre for Economic Policy (CEPR), Fellow at the Center for Economic Studies (CESifo) and Research Professor at the German Institute for Economic Research (DIW).
Falk’s research generally aims at increasing the explanatory power of economics by providing it with a more realistic psychological and biological foundation. One of his interests concerns how “non-economic" aspects of human motivation, such as social norms, fairness and reciprocity affect labor markets and labor relations. In his labor market experiments he shows, e.g., that in the presence of fairness, competitive markets don’t converge to the equilibrium predicted by standard theory. Fairness gives rise to wage rigidities that can potentially explain important labor market phenomena, such as involuntary unemployment. Falk also explores how non-standard preferences affect labor relations. In his research on the "psychology of incentives", he investigates the interaction between psychological factors and economic incentives. Phenomena such as trust, social comparison and intrinsic motivation explain why explicit incentives may backfire and why incentive theory must take psychological effects into account. For example, in a recent fMRI study he shows that relative wages affect reward processing in the brain. For a given absolute income, activity in the ventral striatum was strongly reduced if the own wage was below that of a co-worker’s. Falk also studies fonnation and consequences of cognitive and non-cognitive skills.
In a series of papers he has investigated prevalence, determinants, consequences and origins of risk, time, and social preferences. He also studies the interaction of personality (Big-5, locus of control etc.), IQ and preferences. This research is mostly based on large and representative samples using experimentally validated measures. More recently these methods are complemented with genetic and fMRI analyses. Falk’s research is highly innovative and has far reaching consequences for many applied research questions. For example, his work on psychological aspects of economic incentives is important for the design of contracts and organization of fimrs. His research on money illusion helps explaining bubbles and crises such as the current financial crisis. The results can be used to inform macroeconomic models about the distribution of relevant preferences in the population.
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