Bruno Frey

Bruno S. Frey (born May 4, 1941 in Basel, Switzerland) is a Swiss economist and permanent visiting professor for Political Economy at University of Basel. Before, he taught for many decades at University of Zürich and the Business School of the University of Warwick (UK). Bruno S. Frey is considered as a Pioneer in the field of Political Economy and Happiness Economics. Frey has written, co-written or edited more than a dozen books and has written more than 350 journal articles, mostly in economics journals, but also in political science, sociology and psychology. In 2011, Frey was criticised for and admitted to self-plagiarism. According to the RePEc ranking (Research Papers in Economics) of August 2014, Frey is ranked 7th among 21,715 European economists. In the ranking of "the most influential economists in Switzerland" produced by the leading Swiss newspaper Neue Zürcher Zeitung in September 2014, which considers scientific performance and public perception in media and politics, Frey ranks on third place. Frey is ranked number 5 among German economists according to the F.A.Z.-Ranking of September 5, 2015.

Bruno Frey's main focus lies on the application of economics to new areas (politics, art, history, terrorism and war, family) and the extension of the model of human behavior to incorporate psychological and sociological elements. He has been among the first economists to deal with: a) empirical models about the relation between the economy and politics, especially politico-economic cycles; b) new concepts of federalism (Functional, Overlapping, Competing Jurisdictions, FOCJ); c) crowding-out and intrinsic motivation; d) orders and awards.

Economics of Awards (orders, medals, further honors):

Bruno S. Frey contributes with dozens of papers and books to the currently evolving field of the Economics of Awards.

Major topics in his research are:

Awards vs. Monetary Incentives:

Together with Susanne Neckermann and others, he identified major differences between monetary incentives and awards in corporate settings, stressing the smaller chance of crowding out intrinsic motivation of employees by applying awards. He considers major differences between monetary incentives and awards in:

1. The material costs of awards, consisting of a certificate or a small trophy, are typically low for the donors, but the value to the recipients may be very high. To some extent this also applies to prizes where, despite their name, the monetary value is often low.
2. Accepting an award establishes a special relationship. The recipient owes some measure of loyalty to the donor. This is not the case when a particular task is carried out in exchange for monetary compensation.
3. Prizes and awards tend to be handed out for a vaguely defined achievement. In these cases, they are more adequate incentive instruments than monetary payments.
4. Prizes and awards are less likely to crowd out the intrinsic motivation of their recipients than monetary compensation because when they are conferred the donor commends the recipients for their performance.
5. Prizes and awards are not taxed, while monetary income is. Due to taxes falling on the giver and the recipient, there typically is a considerable wedge between the sum of money the donor has to spend and the net sum the recipient receives.

Frey analyses the potential determinants making the supply of awards in an organisation more likely. He establishes three determinants:

Firstly, the possibility of using awards as an incentive mechanism (1) although the principal might have little financial resources; and (2) when it is difficult to ex ante formulate and monitor work effort, as it is regularly faced with complex tasks in the service sector and highly specialised markets, today.

Secondly, the principal's actions depend on the effectiveness of awards as incentive mechanisms compared to other instruments. Compared to financial rewards, awards are used less, (3) when the principal is able to control the supply of awards; (4) when the positional externality produced by a particular award is high; and (5) when awards are likely to crowd out intrinsic motivation.

Finally, in order to present a valid alternative to material (financial) compensation, awards must have scarcity value for the recipients. The value of awards will be the higher, (6) when the risk of giving awards to unworthy persons is smaller; (7) when fewer persons refuse awards; and (8) when the principal's time horizon is longer, that is, when the probability of staying in power is greater.

Awards as Value Creation:

Together with Jana Gallus, Bruno S. Frey analyses awards as a valuable strategic resource. They thereby not only take into account the value creation aspects of the use of awards but contrast it with potential value destructing elements.

Value Creation:

1. Motivational crowding-in
2. Role Models: Motivating non awarded members of the organisation
3. Retaining valuable employees by using awards

Value destruction:

1. Unintended motivational effects: a.) Motivation crowding-out especially when substantial amounts of money are part of the award. b.) The award might reinforce overconfidence of the receivers.
2. Social comparison Costs: non-winners may be envious of the awarded colleagues and lower performance.

Contribution to Behavioural Economics

Motivation Crowding Effects

Bruno S. Frey bases his works on motivational crowding effects in the research of social psychologists like Deci, Ryan or Kruglanski. They empirically identified that external intervention in the form of a reward, reduces individuals’ intrinsic motivation. This relationship is termed as “undermining effect”, “overjustification effect”, or “the hidden cost of reward”. Frey starts off the not clear cur definition of Deci: “One is said to be intrinsically motivated to perform an activity when one receives no apparent reward except the activity itself”.

Motivational Crowding Theory in conventional Economics

Bruno S. Frey together with Reto Jegen translates the motivational crowding effects originally researched in social psychology into economics theory.

Frey indicates that the concept of price effects, on which micro economics is founded, is not valid under all conditions and circumstances, and that the relationship between a monetary reward offered and supply must be analysed taking into account the research on motivational crowding effects.

Frey generalises the concept of “hidden costs of rewards” form social psychology for economic theorising in the concept or Crowding effects:

1. Intrinsic motivation is potentially affected by all kinds of intervention coming from outside the person considered. Thus, not only rewards, but also commands, may crowd out intrinsic motivation.
2. Intrinsic motivation may be reduced or raised (crowding-out and crowding-in). Thus, there may not only be hidden 'costs' but also hidden 'gains'.
3. External intervention affects the internally-held values of individuals. Hence, they do not only affect narrowly defined intrinsic motivation, but also norms internalised by individuals. Moreover, external intervention may induce a shift from other-regarding or group-regarding to more selfish preferences and behaviour.

Frey compares Crowding Effects with the conventional economic theory of “prizing”.

He finds that taking motivational crowding out effects into account, the supply curve shifts to the right, reducing the quantity supplied as prices rise until all intrinsic motivation is crowded out. Only after that a positive linear supply curve holds.

Frey points out that this shows that extrinsic and intrinsic motivation are not additive as suggested in conventional economic theory. He considers this economic theorising not as an alternative to conventional economics, but rather as an extension, which moreover only holds under certain circumstances. He provides examples where the crowding-out effect is more pronounced: a.) the more personal the relationship between a principal, and bis or her agent, the larger the agent' s participation possibilities. b.) the more uniform the external intervention is; that is, the less individual differences in intrinsic motivation are acknowledged by the principal. c.) the more the external intervention (in particular the rewards extended) are
contingent on specific performance, instead of being directed at general
behaviour.

Motivational Crowding Theory and work motivation

Frey, Osterloh and others find in several econometric studies that crowing theory is particularly relevant for work motivation.

They found for example that motivational crowding-out is more likely when principal and agent (employer and employee) have a personal relationship. If in these personalised relations material rewards are applied, intrinsic motivation fades due to the agent not perceiving to be acknowledged for its competences.

Another field where Frey and Osterloh see an increased likelihood to crowd out intrinsic motivation are organisations and companies where highly specialised and complex tasks are done and tacit knowledge is of crucial importance. In these environments pay for performance is counterproductive.

Motivational Crowding Effects and Taxation:

In various studies Frey and others have investigated the effect of participation in the political processes and individual tax morale. They found that the intrinsic motivation to pay taxes (tax morale) depends strongly on the extent of trust of citizens in the political system and the possibility to participate the political process. In an empirical case for Switzerland they could show that cantons with direct democratic participation ceteris paribus had a better tax morale then cantons with only representative participation possibilities.

Contributions to Political Economics

Democracy and Federalism

In this area, Bruno Frey puts a special emphasis on the analysis of the role of direct democracy. Together with Reiner Eichenberger, he developed a functionally oriented form of federalism called FOCJ (Functional, Overlapping, Competing Jurisdictions). He regards direct democracy as well as federalism as guiding institutions of the future.

Economics of Terrorism

Frey argues that, where possible, terrorists should be reintegrated into the civil society. To achieve this goal, they should be engaged in a debate where their concerns are heard. According to Frey, the decentralization of the economy and of politics is a useful tool against terrorism. In his view, deterrence is rarely useful. To advance his arguments, Frey relies on historical experiences.

New Democratic and Participatory Concepts:

From a public choice perspective Bruno S. Frey proposes various new ideas how to use democratic concepts and participation rights in political as well as corporate contexts:

1. Companies may apply voting right not only to share holders, but also to employees and other stakeholders, which might be more closely connected and better informed about the operational business and respective markets of the firm.
2. Following the basic concept of democracy, that only people who are affected by a policy have a say, Frey proposes that variable voting rights should be given to citizens according to their time of residency inside the country.
   1. For instance non-nationals could receive a vote weight of 20% after two years of residency, 50% after five years and full voting rights after 10 years.
   2. Respectively, nationals living abroad would be giving a declining vote weight as they are less affected by the policies of their former country of residency.
   3. Commuters would receive half of the vote weight in both countries of work/residency.
3. Contrary, to the claim that young people should have a higher vote weight, because they have a longer personal future to take into account, Frey purposes to consider old people to give a higher vote weight when it comes to constitutional decisions. His rationale points at old people having a lower degree of personal interest in their decision schemes and therefore are better consulted when it comes to deciding upon the “rules of the game” e.g. constitutional changes.
4. Tackling the issue of close majorities in popular referenda, which necessarily leave large parts of the population’s interests unrepresented, Bruno S. Frey proposes a constitutionally sanctioned procedure, in which the opposition needs to find a new consensus which subsequently is again voted upon.
5. Frey also purposes to make use of random or aleatoric procedures in democracies. He sees major advantages of randomised choices in the guarantee of equal chances, fairness and concise representation of the respective population.
   1. Popular referenda can be decided by a lot with the weights given by the vote shares
   2. Members of the parliament my be partly assigned by random draws of the underlying population

Contributions to Behavioral Economics

Motivation and crowding-out

Economists have long since assumed that higher monetary compensation will lead agents to work more. According to Frey, though, monetary incentives can also have a counterproductive effects, namely, if they crowd out intrinsic motivation to work.

Contributions to Happiness Research

Frey was one of the first to apply economic tools to the phenomenon of happiness. In particular, he showed that not only demographic and economic factors such as income or unemployment affect happiness, but that institutional factors like democracy and political decentralization are also important.

Contributions to Corporate Governance

Frey vehemently argues against pay for performance and sees advantages in a fixed pay. He suggests a random selection from a firm's stakeholders to determine the composition of its supervisory board. The latter, which comprise clients, employees and the wider public, cannot secure their investments by means of contracts.

Contributions to the Economics of Art and Culture

In his research, Frey deals with the organization of theaters, operas and museums, as well as with the yield of investments in pieces of art. He argues that – in comparison to other investments – the latter are financially less worthwhile. Such investments are nevertheless made because of the mental yield that accrues.

Frey studied economics at the University of Basel and at the University of Cambridge, obtaining a doctorate in economics in 1965. In 1969 he was appointed associate professor of economics at the University of Basel. From 1970 to 2010, he was associate professor at the University of Basel. From 1970 to 1977, he was a full professor of public finance at the University of Konstanz in Germany. Frey was appointed as a full professor of economics at the Institute for Empirical Research in Economics (IEW) of the University of Zurich (UZH) in 1977.

His first book, Umweltökonomie (Environmental Economics), was published in Göttingen in 1972. During his career, he has been a prolific author, publishing hundreds of articles in economics as well as in a number of different fields including sociology, political science, and psychology. Some of his work has reached the top journals of the economics profession, such as The Journal of Political Economy and the American Economic Review. He is one of the most cited researchers according to the Institute for Scientific Information (ISI) and one of the most cited authors in economics according to Research Papers in Economics. Since its inception, Frey has been heading the Handelsblatt ranking of researchers at universities in Germany, Austria and Switzerland with respect to their lifework.

Frey was appointed managing editor of Kyklos, a Swiss journal on political economy, in 1969. He maintains that position to this day. Since 2004, he has served as one of four directors of research at the Center for Research in Economics, Management and the Arts (CREMA); besides Reiner Eichenberger (University of Fribourg), René L. Frey and Margit Osterloh (University of Zurich).

In 2004, he was appointed member of the eight-member expert committee of the Copenhagen Consensus, besides four Nobel laureates. The goal consisted in the development of recommendations as to which challenges of humanity (hunger, AIDS, water provision, access to sanitary systems, restrictions on trade, corruption and global warming) to give priority, based on economic cost-benefit analyses.

In July 2011, the University of Zurich decided to set up an ad hoc commission to investigate allegations of publication misconduct by Frey et al. In October of the same year the commission agreed on a report that found Frey guilty of misconduct. In 2012, the University of Zurich declined to renew his contract.
From 2010-2013 Frey worked as a professor at the Business School of the University of Warwick (UK). From 2013-2015 Frey worked as Senior Professor at Zeppelin University, Friedrichshafen, Germany.

In 2012, the government of Bhutan appointed him member of an international group of experts on the subject of Wellbeing and Happiness. The work and recommendations of the panel are scheduled to be presented and discussed in the United Nations General Assembly in 2013 and 2014.

Since August 2015 Frey is Permanent Visiting Professor at the University of Basel, Switzerland, where he is the Co-Founder of the Center for Research in Economics and Well-Being (CREW).

Self-plagiarism

During 2010 and 2011, Bruno Frey, along with coauthors Benno Torgler and David Savage, published five articles concerning the Titanic disaster in five different academic journals. Most peer-reviewed journals have editorial policies prohibiting the publication of work that has already been published in other journals, and requiring that authors make a good faith effort to cite prior works. At the end of April 2011, blogs accused Bruno Frey and his coauthors Benno Torgler and David Savage of "self-plagiarism" and of not having cited works of other scholars on the same issue.

On May 3, 2011, editor of the Journal of Economic Perspectives David Autor wrote a public letter to Bruno Frey stating that "there is very substantial overlap between these articles and your JEP publication. Indeed, to my eye, they are substantively identical." Pointing out that the other articles were not cited, Autor said that "we find your conduct in this matter ethically dubious and disrespectful to the American Economic Association, the Journal of Economic Perspectives and the JEP's readers." Frey accepted the accusations and offered his apologies to David Autor in a public response, saying, "[i]t was a grave mistake on our part for which we deeply apologize. It should never have happened. This is deplorable."

For this offence, Bruno Frey, Benno Torgler, and David Savage were placed on a list of self-plagiarism offenders at Research Papers in Economics. In February 2011, it had been revealed that then German Federal Minister of Defence Karl-Theodor zu Guttenberg had committed plagiarism for his doctoral thesis. Wiki technology was used to show the extent of the academic misbehaviour, and he stepped down. In the months after this, the VroniPlag Wiki was used to reveal more cases of plagiarism in PhD theses. Mimicking this, a project FreyPlag was started in August 2011 to reveal self-plagiarism by Frey and his co-authors, and the Swiss and German press reported. After a report of an ad hoc committee of the University of Zurich found them guilty of misconduct, the university did not renew his contract.

• Frey, Bruno S., 1972. Umweltökonomie. Vandenhoeck & Ruprecht, Göttingen.
• Frey, Bruno S., 1978. Modern Political Economy. Halsted Press, Wiley, New York.
• Frey, Bruno S., 1983. Democratic Economic Policy. A theoretical introduction. Martin Robertson, Oxford.
• Frey, Bruno S., 1984. International Political Economics. Basil Blackwell, Oxford und New York.
• Frey, Bruno S., 1992. Economics as a Science of Human Behaviour. Towards a New Social Science Paradigm. Kluwer Academic Publishers, Boston/Dordrecht/London.
• Frey, Bruno S., 1997. Not just for the money. An economic theory of personal motivation. E. Elgar, Cheltenham.
• Frey, Bruno S., 2000. Arts & Economics. Analysis & Cultural Policy. Springer Verlag, Berlin, Heidelberg, New York.
• Frey, Bruno S., 2001. Inspiring Economics: Human Motivation in Political Economy. Edward Elgar Publishing Ltd., Cheltenham, UK and Northampton, Mass.
• Frey, Bruno S., 2004. Dealing with Terrorism: Stick or Carrot. Edward Elgar Publishing Ltd., Cheltenham, UK and Nothhampton, Mass.
• Frey, Bruno S., 2008. Happiness: A Revolution in Economics. The MIT Press, Cambridge, MA und London, England 2008.
• Frey, Bruno S. and Reiner Eichenberger, 1999. The New Democratic Federalism for Europe. Functional, Overlapping and Competing Jurisdictions. Edward Elgar Publishing Limited, Cheltenham.
• Bruno S. Frey and Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing 'Conditional Cooperation' in a Field Experiment", American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
• Frey, Bruno S and Felix Oberholzer-Gee, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out", American Economic Review, American Economic Association, vol. 87(4), pages 746-55, September.
• Frey, Bruno S, Felix Oberholzer-Gee and Reiner Eichenberger, 1996. "The Old Lady Visits Your Backyard: A Tale of Morals and Markets", Journal of Political Economy, University of Chicago Press, vol. 104(6), pages 1297-1313, December.
• Frey, Bruno S, Werner W. Pommerehne, Friedrich Schneider and Guy Gilbert, 1984. "Consensus and Dissension among Economists: An Empirical Inquiry", American Economic Review, American Economic Association, vol. 74(5), pages 986-94, December.
• Frey, Bruno S. and Werner W. Pommerehne, 1989. Muses and Markets. Explorations in the Economics of the Arts. Basil Blackwell, Oxford.
• Frey, Bruno S. and Alois Stutzer, 2002. Happiness and economics. How the economy and institutions affect well-being. Princeton University Press, Princeton (N.J.).

Frey, B. S., & Stutzer, A. (2002). What can economists learn from happiness research?. Journal of Economic literature, 40(2), 402-435. - 3077 citations

Frey, B. S., & Stutzer, A. (2010). Happiness and economics: How the economy and institutions affect human well-being. Princeton University Press. - 2801 citations

Frey, B. S. (1997). Not just for the money. Books. - 2503 citations

Frey, B. S., & Jegen, R. (2001). Motivation crowding theory. Journal of economic surveys, 15(5), 589-611. - 2441 citations

Osterloh, M., & Frey, B. S. (2000). Motivation, knowledge transfer, and organizational forms. Organization science, 11(5), 538-550. - 2084 citations

Frey, B. S., & Oberholzer-Gee, F. (1997). The cost of price incentives: An empirical analysis of motivation crowding-out. The American economic review, 87(4), 746-755. - 1406 citations

• 1965: Genossenschaftspreis of the philosophical-historical Faculty of the University of Basle
• 1996: Vernon Prize 1996 of the Association for Public Policy and Management United States of America
• 1998: Fellow of the Public Choice Society
• 2004: Elected Fellow of the European Economic Association
• 2005: Corresponding Fellow of the Royal Society of Edingurgh (FRSE)
• 1998: Honorary doctorate of the University St. Gallen (Switzerland) and the University of Goeteborg (Sweden)
• 2005: Distinguished CESifo Fellow
• 2005: Academic Affiliate, Judge School of Business, Cambridge University (UK)
• 2007: Gustav Stolper Prize, of the Verein für Socialpolitik
• 2008: Friedrich von Wieser-Prize, Prague Conference on Political Economy
• 2009: Honorary doctorate of the Vrije Universiteit Brussel (Belgium)
• 2010: Honorary doctorate of the Université Paul Cézanne Aix-Marseille III (France)
• 2010: Distinguished Fellow of the Association for Cultural Economics, International
• 2011: Honorary doctorate of the University Innsbruck (Austria)
• 2012: Röpke Prize for Civil Society ("Röpke-Preis für Zivilgesellschaft"), bestowed by the Liberal Institute