Gary Becker

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Gary Becker

National Science Medal award ceremony, 2000
Born	December 2, 1930 Pottsville, Pennsylvania
Residence	USA
Nationality	American
Field	Economics
Institution	University of Chicago (1970-) Columbia University (1957-69) NBER (1957-79)
Alma Mater	University of Chicago (Ph.D.) Princeton University (B.A.)
Academic Advisor	Milton Friedman
Known for	Analysis of human capital Rotten kid theorem
Notable Prizes	John Bates Clark Medal (1967) Nobel Prize in Economics (1992)

Gary Stanley Becker (born December 2, 1930) is an economist and a Nobel Prize laureaute. 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. He taught at Columbia University from 1957 to 1968, and then returned to Chicago, where he still teaches price theory to new graduate students each year. Becker won the John Bates Clark Medal in 1967 and was awarded the Nobel Prize in Economics in 1992.

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. 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".

According to the Nobel Prize 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 Nobel 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 rather an analysis based on a set of assumptions and individual preferences. Yes, agents are maximizing welfare but it 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.

Becker also received the National Medal of Science in 2000.

[edit] Discrimination

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 they discriminate against. His theory held that competition decreases discrimination. If firms were able to specialize in employing mainly minorities and offer better product or service, such a firm could bypass discrepancy in wages etc. between equally productive blacks and whites or 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 then 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.

[edit] Crime and Punishment

Becker’s interest in crime and punishment 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 out weigh the cost such as the probability of apprehension, conviction, punishment, as well as their current set of opportunities. From the public policy perspective, since the cost of increasing the fine is marginal to that of 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.

[edit] 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.

[edit] Families

Becker’s research on human capital has had many implications for the family such as the marriage market, divorce, fertility. Becker argued that such decisions are made in a marginal cost and marginal benefit framework. For example, he found that wealthier couples have higher cost to divorce and thus a lower divorce rate.

A major focus of Becker’s research was 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 work force the opportunity cost of childcare rises. Additionally, the increased rate of return to education raises the desire to provided children with formal and costly education. Coupled together, the impact is to lower fertility rates.

A more controversial issue was Becker’s conclusion that parents often act altruistically towards selfish children by highly investing in a child in an effort to indirectly save for old age. Becker believed that the rate of return from investing in children was often greater than normal retirement savings. However, parents can not know for sure that child will take care of them. Since they cannot legally bind a child to care for them they often resort to manipulation through instilling a sense of “guilt, obligation, duty and filial love that indirectly, but still very effectively . . . commits children to helping them out.” Becker even went so far as to say that social security can cause families to be less interdependent by removing the motivation of parents to use altruistic behaviors in incentivizing their children to care for them.

Usually considered politically 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.

[edit] Major works

• Gary S. Becker (1957, 1971, 2nd Ed.). The Economics of Discrimination. Chicago, University of Chicago Press. ISBN 0226041158.
• Gary Becker (1968). "Crime and Punishment: An Economic Approach". The Journal of Political Economy 76: 169-217.
• Gary S. Becker (1981, Enlarged ed., 1991). A Treatise on the Family. Cambridge, MA, Harvard University Press. ISBN 0-674-90698-5. (HUP descr.)
• Gary S. Becker (1996). Accounting for Tastes. Cambridge, MA, Harvard University Press. ISBN 0-674-54357-2. (HUP descr)
• 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 and Gilbert Ghez (1975). The Allocation of Time and Goods Over the Life Cycle. New York, Columbia University Press. ISBN 0-870-14514-2.
• Gary Becker and George J. Stigler (1977). "De Gustibus Non Est Disputandum". The American Economic Review 67: 76-90.
• Gary Becker and Kevin M. Murphy (1988). "A Theory of Rational Addiction". The Journal of Political Economy 96: 675-700.

[edit] See also

• List of economists
• Household production function

[edit] External links

• The Becker-Posner Blog
• Homepage at the University of Chicago
• Nobel Prize press release
• Nobel Prize Lecture
• Profile in the Financial Times
• Interview by the Minneapolis Fed
• The Becker Center on Chicago Price Theory
• Gary S. Becker – Autobiography