Gary Becker

Gary Becker
Gary Becker speaking in Chicago, May 24, 2008
Born	Gary Stanley Becker (1930-12-02)December 2, 1930 Pottsville, Pennsylvania, U.S.
Died	Chicago, Illinois, U.S.
Institution	University of Chicago (1968–2014) Columbia University (1957–1968)
Field	Social economics
School or tradition	Chicago School of Economics
Alma mater	Princeton University University of Chicago
Influences	Milton Friedman H. Gregg Lewis Theodore Schultz
Influenced	Reuben Gronau Roland G. Fryer, Jr. David O. Meltzer
Contributions	Analysis of human capital Rotten kid theorem
Awards	John Bates Clark Medal (1967) Nobel Memorial Prize in Economic Sciences (1992) Pontifical Academy of Sciences (1997) National Medal of Science (2000) John von Neumann Award (2004) Presidential Medal of Freedom (2007)
Information at IDEAS / RePEc

Gary Stanley Becker (December 2, 1930 – May 3, 2014) was an American economist. He was professor of economics and sociology at the University of Chicago and at the Booth School of Business. He made 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. He was a Rose-Marie and Jack R. Anderson senior fellow at the conservative 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 was known for arguing that many different types of human behavior can be seen as rational and utility maximizing. His approach included altruistic behavior of human behavior by defining individuals' utility appropriately. He was also among the foremost exponents of the study of human capital. Becker was also credited with the "rotten kid theorem."

Biography

Born to a Jewish family 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. At Chicago, Becker was influenced by Milton Friedman, whom Becker called "by far the greatest living teacher I have ever had" He taught at Columbia University from 1957 to 1968, and then returned to the University of Chicago. Becker was a founding partner of TGG Group, 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, and was a member (and for a time the President) of the Mont Pelerin Society. Becker also received the National Medal of Science in 2000.

A political conservative, 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.

Becker's first wife was Doria Slote, from 1954 until her death in 1970. The marriage produced two daughters, Catherine Becker and Judy Becker. In 1980 Becker married Guity Nashat, a historian of the Middle East whose research interests overlapped his own. Becker had two stepsons, Cyrus Claffey and Michael Claffey, from his second marriage.

Becker died in Chicago, Illinois, aged 83, on May 3, 2014, after complications from surgery at Northwestern Memorial Hospital. He was survived by his second wife, two daughters, two stepsons, and four grandchildren.

Nobel Memorial Prize

Becker received the Nobel Prize in 1992 "for having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including nonmarket behaviour".

Discrimination

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." Personal characteristics can be physical features such as sex or race, or other characteristics such as a person's religion, caste, or national origin.

Becker often included 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. 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. His 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.

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.

Politics

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. As Palda (2013) explains "According to Becker, political equilibrium exists even in non-democratic societies. It arises out of a simple calculation that predatory interest groups and their taxpaying victims make: what return on my investment can I get by lobbying government? Becker’s insight is that the gains to predators are linear, but the losses to prey are exponential, thereby stiffening the resistance of victims as the aggression of predators plods on without similarly increased vigor. Think of a gang of robbers taking half the crop from peasants. They then return for the second half. The gain to the gang of the second half cut is the same as in their first extortion. Yet for peasants to lose the last half of their crops means possible starvation and the certain loss of seed corn. They can be expected to resist violently, as they did in the Hollywood movie The Magnificent Seven and in the Japanese movie on which it was based, The Seven Samurai."

Becker's insight was to recognize that deadweight losses put a brake 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. The advance of predators, fueled by linear incentives slows before the stiffening resistance of prey outraged by non-linear damages.

Crime and punishment

Jurist Richard Posner has stressed the enormous influence of Becker's work "has turned out to be a fount of economic writing on crime and its control."

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

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

Main article: New Home Economics

Becker has done research on the family, including analyses of marriage, divorce, fertility, and social security. He first analyzed fertility starting in 1960.

In the 1960s he and Jacob Mincer developed the New Home Economics, of which Becker's theory of allocation of time is a centerpiece. 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 and (2) men with higher incomes are more likely to be polygamous. He published a paper on divorce in 1977, with his students Robert T. Michael and Elizabeth Landes, hypothesizing that divorces are more likely when there are unexpected changes in income. 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 was then criticized by economist Charles Jones: "There are still men holding jobs that women would do better."

Organ markets

An article by Gary Becker and Julio Elias entitled "Introducing Incentives in the market for Live and Cadaveric Organ Donations" posited 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.

Quotations

• "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."
• "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."

Selected publications

• Gary S. Becker (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, NJ: Princeton University Press.
• Gary S. Becker. The Economic Approach to Human Behavior. Links to chapter previews, University of Chicago Press: 1976
• Gary S. Becker, Elizabeth Landes, and Robert T. Michael (1977), "An Economic Analysis of Marital Instability", Journal of Political Economy 85: 1141–88.
• 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
• Gary S. Becker and Guity Nashat Becker (1997). The Economics of Life, McGraw-Hill
• Gary S. Becker and Kevin M. Murphy, (2001), Social Economics: Market Behavior in a Social Environment, Harvard University Press.
• Gary S. Becker, 'When Illegals Stop Crossing the Border', in The 4% Solution: Unleashing the Economic Growth America Needs, edited by Brendan Miniter. New York: Crown Business. 2012.

See also

• Economics imperialism
• Household production function
• Social capital
• List of economists

External links

• Becker-Posner Blog, uchicagolaw.typepad.com; accessed May 4, 2014
• Iedological profile from Econ Journal Watch, http://econjwatch.org/; accessed October 3, 2014
• Conversations with History: Interview with Gary Becker on YouTube by Harry Kreisler
• Lecture Series on Human Capital on YouTube (~25 hours)
• Profile in the Financial Times, June 2006; accessed May 4, 2014
• Interview by the Minneapolis Fed, minneapolisfed.org; accessed May 4, 2014
• The Becker Center on Chicago Price Theory, pricetheory.uchicago.edu; accessed May 4, 2014
• Gary S. Becker's autobiography, nobelprize.org; accessed May 4, 2014
• Appearances on C-SPAN
• Gary Becker's opinion/editorials/comments for Project Syndicate, project-syndicate.org; accessed May 4, 2014
• Selected Bibliography for Gary S. Becker, University of Chicago Library; accessed May 4, 2014

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