Gary Becker

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Gary Becker
GaryBecker-May24-2008.jpg
Gary Becker speaking in Chicago, May 24, 2008
Born (1930-12-02) December 2, 1930 (age 83)
Pottsville, Pennsylvania
Nationality American
Institution University of Chicago
(1968–present)
Columbia University
(1957–1968)
Field Social economics
School/tradition Chicago School of Economics
Alma mater Princeton University
University of Chicago
Influences Milton Friedman
Influenced Reuben Gronau
Contributions Analysis of human capital
Rotten kid theorem
Awards 1967 John Bates Clark Medal
1992 Nobel Memorial Prize in Economic Sciences
1997 Pontifical Academy of Sciences
2004 John von Neumann Award
2007 Presidential Medal of Freedom
Information at IDEAS/RePEc

Gary Stanley Becker (born December 2, 1930) is an American economist. He is a professor of economics and sociology at the University of Chicago and a professor at the Booth School of Business. He has important contributions to the family economics branch of economics. Neoclassical analysis of family within the family economics is also called new home economics. He was awarded the Nobel Memorial Prize in Economic Sciences in 1992 and received the United States Presidential Medal of Freedom in 2007.[1] He is currently a Rose-Marie and Jack R. Anderson senior fellow at the conservative[2] Hoover Institution, located at Stanford University.

Becker was one of the first economists to branch into what were traditionally considered topics belonging to sociology, including racial discrimination, crime, family organization, and drug addiction (see rational addiction). He is known for arguing that many different types of human behavior can be seen as rational and utility maximizing. His approach can include altruistic behavior by defining individuals' utility appropriately. He is also among the foremost exponents of the study of human capital. Becker is also credited with the "rotten kid theorem." He is married to Guity Nashat, a historian of the Middle East whose research interests overlap his own.[3]

Biography[edit]

Born in Pottsville, Pennsylvania, Becker earned a B.A. at Princeton University in 1951 and a Ph.D. at the University of Chicago in 1955 with thesis titled The economics of racial discrimination. He taught at Columbia University from 1957 to 1968, and then returned to the University of Chicago. Becker is a founding partner of The Greatest Good, a business and philanthropy consulting company. Becker won the John Bates Clark Medal in 1967. He was elected a Fellow of the American Academy of Arts and Sciences in 1972.[4] Becker also received the National Medal of Science in 2000.

A political conservative,[5] he wrote a monthly column for Business Week from 1985 to 2004, alternating with liberal Princeton economist Alan Blinder. In December 2004, Becker started a joint weblog with Judge Richard Posner entitled The Becker-Posner Blog.

Nobel Memorial Prize[edit]

According to the Prize in Economic Sciences citation, his work can be categorized into four areas:

  • investments in human capital
  • behavior of the family (or household), including distribution of work and allocation of time in the family
  • crime and punishment
  • discrimination on the markets for labor and goods.

Becker's lecture, "Nobel Lecture: The Economic Way of Looking at Behavior," subsequently published in the Journal of Political Economy, reviews his four key areas of research. He explains that his framework of analysis is not a traditional self-interested motivation but an analysis based on a set of assumptions and individual preferences. Agents are maximizing welfare, which is based on individual conception constrained by income, time, and imperfect memory and calculation capabilities. Much of his research focuses on the impact of the rising value of time as a result of economic growth.

Discrimination[edit]

Discrimination as defined by Kenneth Arrow is "the valuation in the market place of personal characteristics of the worker that are unrelated to worker productivity."[6] Personal characteristics can be physical features such as sex or race, or other characteristics such as a person's religion, caste, or national origin.[6]

Becker often includes a variable of taste for discrimination in explaining behavior. He believes that people often mentally increase the cost of a transaction if it is with a minority against which they discriminate. His theory held that competition decreases discrimination.[7] If firms were able to specialize in employing mainly minorities and offer a better product or service, such a firm could bypass discrepancy in wages between equally productive blacks and whites or equally productive females and males.

Becker's research found that when minorities are a very small percentage the cost of discrimination mainly falls on the minorities. However, when minorities represent a larger percentage of society, the cost of discrimination falls on both the minorities and the majority. He also pioneered research on the impact of self-fulfilling prophecies of teachers and employers on minorities. Such attitudes often lead to less investment in productive skills and education of minorities.[citation needed]

Gary Becker recognized that people (employers, customers, and employees) sometimes do not want to work with minorities because they have preference against the disadvantaged groups. He goes on to say that discrimination increases the cost of the firm because in discriminating against certain workers, the employer would have to pay more so that work can proceed without them. If the employer employs the minority, low wages can be provided, but more people can be employed, and productivity can be increased.[8]

Crime and punishment[edit]

Becker's interest in criminology arose when he was rushed for time one day. He had to weigh the cost and benefits of legally parking in an inconvenient garage versus in an illegal but convenient spot. After roughly calculating the probability of getting caught and potential punishment, Becker rationally opted for the crime. Becker surmised that other criminals make such rational decisions. However, such a premise went against conventional thought that crime was a result of mental illness and social oppression.

While Becker acknowledged that many people operate under a high moral and ethical constraint, criminals rationally see that the benefits of their crime outweigh the cost such as the probability of apprehension, conviction, and punishment, and their current set of opportunities. From the public policy perspective, since the cost of increasing the fine is trivial in comparison to the cost of increasing surveillance, one can conclude that the best policy is to maximize the fine and minimize surveillance. However, this conclusion has limits, not the least of which include ethical considerations.

One of the main differences between this theory and Jeremy Bentham's rational choice theory, which had been abandoned in criminology, is that if Bentham considered it possible to annihilate crime completely (through the panopticon), Becker's theory acknowledged that a society could not eradicate crime beneath a certain level. For example, if 25% of a supermarket's products were stolen, it would be very easy to reduce this rate to 15%, quite easy to reduce it until 5%, difficult to reduce it under 3%, and nearly impossible to reduce it to 0% (a feat that would be so costly to the supermarket that it would outweigh the benefit, if it is even possible).

Human capital[edit]

Becker's research was fundamental in arguing for the augmentability of human capital. When his research was first introduced it was considered very controversial as some considered it debasing. However, he was able to convince many that individuals make choices of investing in human capital based on rational benefits and cost that include a return on investment as well as a cultural aspect.

His research included the impact of positive and negative habits such as punctuality and alcoholism on human capital. He explored the different rates of return for different people and the resulting macroeconomic implications. He also distinguished between general to specific education and their influence on job-lock and promotions.

Families[edit]

Becker has done research on the family, including analyses of marriage, divorce, fertility, and social security. He first analyzed fertility starting in 1960.[9] In the 1960s he and Jacob Mincer developed the New Home Economics, of which Becker's theory of allocation of time is a centerpiece.[10] Becker argued that such decisions are made in a marginal-cost and marginal-benefit framework and that marriage markets affect allocation into couples and individual well-being. His research examined the impact of higher real wages in increasing the value of time and therefore the cost of home production such as childrearing. As women increase investment in human capital and enter the workforce, the opportunity cost of childcare rises. Additionally, the increased rate of return to education raises the desire to provide children with formal and costly education. Coupled together, the impact is to lower fertility rates. His theory of marriage was published in 1973 and 1974. Among its many insights are that (1) sex ratios (the ratio of men to women in marriage markets) are positively related with wives' relative access to consumption in marriages[11] and (2) men with higher incomes are more likely to be polygamous. He then published a paper on divorce in 1977, with his students Robert T. Michael and Elizabeth Landes in which it is hypothesized that divorces are more likely when there are unexpected changes in income.[12] Many of these insights on fertility, marriage, and divorce were included in Becker's A Treatise on the Family, first published in 1981 by Harvard University Press.

In April 2013, in response to data of a lack of progress in women rising to top positions in the United States, Becker told Wall Street Journal reporter David Wessel, "A lot of barriers [to women and blacks] have been broken down. That's all for the good. It's much less clear what we see today is the result of such artificial barriers. Going home to take care of the kids when the man doesn't: Is that a waste of a woman's time? There's no evidence that it is." This view that paternal neglect has no economic effect, or that a woman's investment in a child is worthwhile in the presence of it, was then criticized by Charles Jones: "There are still men holding jobs that women would do better."[13]

Organ markets[edit]

An article by Gary Becker and Julio Elias on "Introducing Incentives in the market for Live and Cadaveric Organ Donations"[14] said that a free market could help solve the problem of a scarcity in organ transplants. Their economic modeling was able to estimate the price tag for human kidneys ($15,000) and human livers ($32,000). It is argued by critics that this particular market would exploit the underprivileged donors from the developing world.[15] This view was endorsed by the National Kidney Foundation in a testimony to the US Congress where Dr Francis Delmonico argued that "a US congressional endorsement for payment would propel other countries to sanction unethical and unjust standards...." Another concern is that if a market for organ donations were introduced, then organs would often go to the patients most able to afford them rather than patients who may have more need for them medically.

Politics[edit]

Becker is also famous for his economic analysis of democracy. He asked what determines the extent to which an interest group can exploit another. The basis of his analysis was the concept of deadweight loss.

Becker's insight was to recognize that deadweight losses put an exponential break on predation. He took the well-known insight that deadweight losses are proportional to the square of the tax, and used it to argue that a linear increase in takings by a predatory interest group will provoke a non-linear increase in the deadweight losses its victim suffers. These rapidly increasing losses will prod victims to invest equivalent sums in resisting attempts on their wealth.

He is also noted for his advocacy of immigration tariffs, and for his staunch defense of the consequences of neoliberalism in Latin America.

Quotations[edit]

  • "My teachers taught me that economics was not a game played by clever academics, but a serious subject that helped us understand the real world we lived in. You can do economics and do it in a rigorous way and nevertheless talk about important problems."[citation needed]
  • "So I had this little idea. I saw a way of taking the prejudices of workers and employers and customers and all groups, even governments, and sort of putting that through an economic analysis with competition and the goals of employers, opportunities for black and white employees to choose among different firms. So it becomes a complicated problem, using all the tools of economics."[16]

Notable students[edit]

Becker took few Ph.D. students. In this respect he was similar to Stigler. Some of his prominent students include Michael Grossman (Ph.D. 1970), Robert Tamura (Ph.D. 1988), John Matsusaka (Ph.D. 1991), Russ Roberts, Isaac Ehrlich and Walter Block.

Selected publications[edit]

  • Gary S. Becker (1957, 1971, 2nd ed.). The Economics of Discrimination. Chicago, University of Chicago Press. ISBN 0-226-04115-8.  (Description. Scroll down to chapter-preview links.)
  • Gary S. Becker (1960) "An Economic Analysis of Fertility," In Demographic and Economic Change in Developed Countries, a Conference of the Universities—National Bureau Committee for Economic Research. Princeton, N.J.: Princeton University Press.
  • Gary S. Becker (1964, 1993, 3rd ed.). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. Chicago, University of Chicago Press. ISBN 978-0-226-04120-9.  (UCP descr)
  • Gary S. Becker (1965) “A Theory of the Allocation of Time,” Economic Journal 75 (299), p pp. 493–517.
  • Gary Becker (1968). "Crime and Punishment: An Economic Approach". The Journal of Political Economy 76: pp. 169–217. 
  • Gary Becker and H. Gregg Lewis (1973). "On the Interaction between the Quantity and Quality of Children". The Journal of Political Economy 81: pp. S279–S288. 
  • Gary S. Becker (1974). "A Theory of Social Interactions," Journal of Political Economy, 82(6), pp. 1063–1093.
  • Gary S. Becker and Gilbert Ghez (1975). The Allocation of Time and Goods Over the Life Cycle. New York, Columbia University Press. ISBN 0-87014-514-2. 
  • Gary S. Becker (1976). The Economic Approach to Human Behavior. Links to chapter previews. University of Chicago Press.
  • Gary S. Becker, Elizabeth Landes, and Robert Michael (1977), "An Economic Analysis of Marital Instability." Journal of Political Economy 85: 1141–88.
  • Gary Becker and George J. Stigler (1977). "De Gustibus Non Est Disputandum". The American Economic Review 67 (2): pp. 76–90 (different pagination). 
  • Gary Becker (1983). "A Theory of Competition among Pressure Groups for Political Influence". The Quarterly Journal of Economics 98: pp. 371–400. 
  • Gary Becker and Kevin M. Murphy (1988). "A Theory of Rational Addiction". The Journal of Political Economy. 96(4): pp.675–700. 
  • Gary S. Becker (1981,1991). A Treatise on the Family, Harvard University Press, ISBN 0-674-90698-5
  • Gary S. Becker (1992). "The Economic Way of Looking at Life" (Nobel Prize Lecture).
  • Gary S. Becker, (1996), Accounting for Tastes, Harvard University Press, ISBN 0-674-54356-4. Description & Chapter-preview links.
  • Gary S. Becker and Guity Nashat Becker (1997). The Economics of Life. McGraw-Hill. Popular essays in 9 parts by subject. Preview.
  • Gary S. Becker and Kevin M. Murphy, (2001), Social Economics: Market Behavior in a Social Environment, Harvard University Press.

See also[edit]

References[edit]

  1. ^ President Bush Announces 2007 Medal of Freedom Recipients
  2. ^ Rucker, Philip (07 Dec 2008). "Obama Picks Shinseki to Lead Veterans Affairs". The Washington Post. Retrieved 2013-03-05. "Kori Schake, a fellow at the conservative Hoover Institution..."
  3. ^ Gary S. Becker – Biography
  4. ^ "Book of Members, 1780–2010: Chapter B". American Academy of Arts and Sciences. Retrieved May 29, 2011. 
  5. ^ Steven M. Teles (16 January 2012). The Rise of the Conservative Legal Movement: The Battle for Control of the Law. Princeton University Press. p. 98. ISBN 978-1-4008-2969-9. Retrieved 7 May 2013. 
  6. ^ a b http://tutor2u.net/economics/revision-notes/a2-micro-labour-market-discrimination.html
  7. ^ The Open University: Learning Space.“Economics Explains Discrimination in the Labour Market." Accessed June 29, 2012
  8. ^ http://openlearn.open.ac.uk/mod/oucontent/view.php?id=399032&section=5.2
  9. ^ Becker, Gary S. (1960). "An Economic Analysis of Fertility". Demographic and Economic Change in Developed Countries, a Conference of the Universities – National Bureau Committee for Economic Research. Princeton, N.J.: Princeton University Press. 
  10. ^ Becker, Gary S. (1965). "A Theory of the Allocation of Time". Economic Journal 75 (299): 493–517. doi:10.2307/2228949. 
  11. ^ Becker, Gary S. (1973). "A Theory of Marriage: Part I". Journal of Political Economy 81 (4): 813–846. JSTOR 1831130. 
  12. ^ Becker, Gary S.; Landes, Elizabeth; Michael, Robert (1977). "An Economic Analysis of Marital Instability". Journal of Political Economy 85: 1141–1188. JSTOR 1837421. 
  13. ^ Wessel, David (April 3, 2013). "The Economics of Leaning In". The Wall Street Journal. Retrieved 4 April 2013. 
  14. ^ "Introducing Incentives in the Market for Live and Cadaveric Organ Donations". The New York Times. 
  15. ^ Jha, V.; Chugh, K. S. (2006). "The case against a regulated system of living kidney sales". Nature Clinical Practice Nephrology 2 (9): 466. doi:10.1038/ncpneph0268.  edit
  16. ^ Biography and Video Interview of Gary Becker at Academy of Achievement

External links[edit]