Gary Becker

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 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."

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. 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. 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.

Crime and punishment

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

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 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 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 (1957, 1971, 2nd ed.). The Economics of Discrimination. Chicago, University of Chicago Press. ISBN 0-226-04115-8.
• 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 (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.
• Gary S. Becker (1965) “A Theory of the Allocation of Time”, Economic Journal 75 (299), pp. 493-517
• Gary Becker (1968). "Crime and Punishment: An Economic Approach". The Journal of Political Economy 76: 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: 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. Columbia University Press. ISBN 0-87014-514-2.
• 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 Becker and George J. Stigler (1977). "De Gustibus Non Est Disputandum". The American Economic Review 67 (2): 76–90.
• Gary Becker (1983). "A Theory of Competition among Pressure Groups for Political Influence". The Quarterly Journal of Economics 98: 371–400].
• Gary Becker and Kevin M. Murphy (1988). "A Theory of Rational Addiction". Journal of Political Economy. 96 (4): 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
• 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.