Gary Becker

Gary Stanley Becker (December 2, 1930 – May 3, 2014)^[1] 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.^[2] He was a Rose-Marie and Jack R. Anderson senior fellow at the free-market-oriented^[3] 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^[4] 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.^[5] At Chicago, Becker was influenced by Milton Friedman, whom Becker called "by far the greatest living teacher I have ever had"^[6] 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,^[7] and was a member (and for a time the President) of the Mont Pelerin Society.^[8] Becker also received the National Medal of Science in 2000.^[9]

A political conservative,^[10] 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."The Becker-Posner Blog". uchicagolaw. University of Chicago Law School. 

Becker's first wife was Doria Slote, from 1954 until her death in 1970.^[11][12] The marriage produced two daughters, Catherine Becker and Judy Becker.^[12] In 1980^[11] Becker married Guity Nashat, a historian of the Middle East whose research interests overlapped his own.^[13] Becker had two stepsons, Cyrus Claffey and Michael Claffey, from his second marriage.^[11][12]

Becker died in Chicago, Illinois, aged 83, on May 3, 2014,^[14][15] after complications from surgery at Northwestern Memorial Hospital.^[16] He was survived by his second wife, two daughters, two stepsons, and four grandchildren.^[12]

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".^[17]

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."^[18] Personal characteristics can be physical features such as sex or race, or other characteristics such as a person's religion, caste, or national origin.^[18]

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.^[19] 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.^[20]

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."^[21]

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.^[22]

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."^[23][24]

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.^[25]

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.^[26]

In the 1960s he and Jacob Mincer developed the New Home Economics, of which Becker's theory of allocation of time is a centerpiece.^[27] 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^[28] 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.^[29] 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.^[30]

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."^[31]

Organ markets

An article by Gary Becker and Julio Elias entitled "Introducing Incentives in the market for Live and Cadaveric Organ Donations"^[32] 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.^[33]

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."^[34]

Selected publications

• Becker, Gary (1993) [1964]. Human capital: a theoretical and empirical analysis, with special reference to education (3rd ed.). Chicago: The University of Chicago Press. ISBN 9780226041209. 
• Becker, Gary S. (September 1965). "A theory of the allocation of time". The Economic Journal (Chicago Journals) 75 (299): 493–517. doi:10.2307/2228949. JSTOR 2228949. 

Reprinted as Becker, Gary S. (1995), "A theory of the allocation of time", in Humphries, Jane, Gender and economics, Aldershot, England Brookfield, Vermont, USA: Edward Elgar, pp. 113–137, ISBN 9781852788438. 

• Becker, Gary S. (1968), "Discrimination, economic", in Sills, David L., International Encyclopedia of Social Sciences, Vol. 4 Cumu to Elas, New York, New York: Macmillan, pp. 208–210, OCLC 256379373. 

Reprinted as Becker, Gary S. (1995), "Discrimination, economic", in Humphries, Jane, Gender and economics, Aldershot, England Brookfield, Vermont, USA: Edward Elgar, pp. 385–387, ISBN 9781852788438. 

• Becker, Gary S. (March–April 1968). "Crime and punishment: an economic approach". Journal of Political Economy (Chicago Journals) 76 (2): 169–217. doi:10.1086/259394. JSTOR 1830482. 
• Becker, Gary S. (1969), "An economic analysis of fertility", in National Bureau of Economic Research, Demographic and economic change in developed countries, a conference of the universities, New York: Columbia University Press, pp. 209–240, ISBN 9780870143021.  Pdf.
• Becker, Gary S. (1971). The economics of discrimination. Chicago: University of Chicago Press. ISBN 9780226041049.  Details.
• Becker, Gary S. (1971) [1957]. The economics of discrimination. Chicago: University of Chicago Press. ISBN 9780226041155. 
• Becker, Gary S.; Lewis, H. Gregg (March–April 1973). "On the interaction between the quantity and quality of children". Journal of Political Economy, special issue: New Economic Approaches to Fertility (part 2) (Chicago Journals) 81 (2): s279–s288. doi:10.1086/260166. JSTOR 1840425. 
• Becker, Gary S. (July–August 1973). "A theory of marriage: part I". Journal of Political Economy (Chicago Journals) 81 (4): 813–846. doi:10.1086/260084. JSTOR 1831130.  Pdf.
• Becker, Gary S. (1974). Essays in the economics of crime and punishment. New York: National Bureau of Economic Research distributed by Columbia University Press. ISBN 9780870142635. 
• Becker, Gary S. (March–April 1974). "A theory of marriage: part II". Journal of Political Economy, special issue: Marriage, Family Human Capital, and Fertility (part 2) (Chicago Journals) 82 (2): s11–s26. doi:10.1086/260287. JSTOR 1829987.  Pdf.
• Becker, Gary S. (November–December 1974). "A theory of social interactions". Journal of Political Economy (Chicago Journals) 82 (6): 1063–1093. doi:10.1086/260265. JSTOR 1830662.  Pdf.
• Becker, Gary S.; Ghez, Gilbert (1975). The allocation of time and goods over the life cycle. New York: National Bureau of Economic Research Distributed by Columbia University Press. ISBN 9780870145148. 
• Becker, Gary S. (1976), "Pride and prejudice", in Becker, Gary S., The economic approach to human behavior, Chicago: University of Chicago Press, pp. 15–17, ISBN 9780226041124.  Chapter preview.
• Becker, Gary S.; Stigler, George J. (March 1977). "De gustibus non est disputandum". The American Economic Review (American Economic Association) 67 (2): 76–90. JSTOR 1807222. 
• Becker, Gary S.; Landes, Elizabeth; Michael, Robert T. (December 1977). "An economic analysis of marital instability". Journal of Political Economy (Chicago Journals) 85 (6): 1147–1187. doi:10.1086/260631. JSTOR 1837421. 
• Becker, Gary S. (1991) [1981]. A treatise on the family. Cambridge, Massachusetts: Harvard University Press. ISBN 9780674906983.  Details.
• Becker, Gary S. (August 1983). "A theory of competition among pressure groups for political influence". Quarterly Journal of Economics (Oxford Journals) 98 (3): 371–400. doi:10.2307/1886017. JSTOR 1886017. 
• Becker, Gary S. (January 1985). "Human capital, effort, and the sexual division of labor". Journal of Labor Economics, special issue: Trends in Women's Work, Education, and Family Building (part 2) (Chicago Journals) 3 (1): s33–s58. doi:10.1086/298075. JSTOR 2534997. 

Reprinted as Becker, Gary S. (1995), "Human capital, effort, and the sexual division of labor", in Humphries, Jane, Gender and economics, Aldershot, England Brookfield, Vermont, USA: Edward Elgar, pp. 153–178, ISBN 9781852788438. 

• Becker, Gary S.; Murphy, Kevin M. (August 1988). "A theory of rational addiction". Journal of Political Economy (Chicago Journals) 96 (4): 675–700. doi:10.1086/261558. JSTOR 1830469. 
• Becker, Gary S. (December 9, 1992). "Nobel prize lecture: the economic way of looking at life". nobelprize.org. Nobel Media AB.  Pdf.
• Becker, Gary S. (1996). Accounting for tastes. Cambridge, Massachusetts: Harvard University Press. ISBN 9780674543560.  Preview.
• Becker, Gary S.; Becker, Guity Nashat (1997). The economics of life: from baseball to affirmative action to immigration, how real-world issues affect our everyday life. New York: McGraw-Hill. ISBN 9780070067097.  Details.
• Becker, Gary S.; Murphy, Kevin M. (2000). Social economics market behavior in a social environment. Cambridge, Massachusetts: Belknap Press of Harvard University Press. ISBN 9780674011212.  Details.
• Becker, Gary S.; Elías, Julio Jorge (Summer 2007). "Introducing incentives in the market for live and cadaveric organ donations". Journal of Economic Perspectives (American Economic Association) 21 (3): 3–24. doi:10.1257/jep.21.3.3. JSTOR 30033732.  Pdf.
• Becker, Gary S. (2012), "When illegals stop crossing the border", in Miniter, Brendan, The 4% solution unleashing the economic growth America needs, New York: Crown Business, ISBN 9780307986153 

See also

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

References

External links

Wikiquote has quotations related to: Gary Becker

• 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
• Roberts, Russ (July 10, 2006). "An Interview with Gary Becker". EconTalk. Library of Economics and Liberty. 
• 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
• Becker, Gary S. (2008). "Human Capital". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis, IN: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267. 
• Gary Stanley Becker (1930–2014). The Concise Encyclopedia of Economics. Library of Economics and Liberty (2nd ed.) (Liberty Fund). 2008. 

Laureates of the Nobel Memorial Prize in Economic Sciences 1969–1975 1969 Ragnar Frisch / Jan Tinbergen 1970 Paul Samuelson 1971 Simon Kuznets 1972 John Hicks / Kenneth Arrow 1973 Wassily Leontief 1974 Gunnar Myrdal / Friedrich Hayek 1975 Leonid Kantorovich / Tjalling Koopmans 1976–2000 1976 Milton Friedman 1977 Bertil Ohlin / James Meade 1978 Herbert A. Simon 1979 Theodore Schultz / Arthur Lewis 1980 Lawrence Klein 1981 James Tobin 1982 George Stigler 1983 Gérard Debreu 1984 Richard Stone 1985 Franco Modigliani 1986 James M. Buchanan 1987 Robert Solow 1988 Maurice Allais 1989 Trygve Haavelmo 1990 Harry Markowitz / Merton Miller / William F. Sharpe 1991 Ronald Coase 1992 Gary Becker 1993 Robert Fogel / Douglass North 1994 John Harsanyi / John Forbes Nash, Jr. / Reinhard Selten 1995 Robert Lucas, Jr. 1996 James Mirrlees / William Vickrey 1997 Robert C. Merton / Myron Scholes 1998 Amartya Sen 1999 Robert Mundell 2000 James Heckman / Daniel McFadden 2001–present 2001 George Akerlof / Michael Spence / Joseph E. Stiglitz 2002 Daniel Kahneman / Vernon L. Smith 2003 Robert F. Engle / Clive Granger 2004 Finn E. Kydland / Edward C. Prescott 2005 Robert Aumann / Thomas Schelling 2006 Edmund Phelps 2007 Leonid Hurwicz / Eric Maskin / Roger Myerson 2008 Paul Krugman 2009 Elinor Ostrom / Oliver E. Williamson 2010 Peter A. Diamond / Dale T. Mortensen / Christopher A. Pissarides 2011 Thomas J. Sargent / Christopher A. Sims 2012 Alvin E. Roth / Lloyd S. Shapley 2013 Eugene Fama / Lars Peter Hansen / Robert J. Shiller 2014 Jean Tirole 2015 Angus Deaton

1992 Nobel Prize laureates Chemistry Rudolph A. Marcus (United States/Canada) Literature Derek Walcott (Saint Lucia) Peace Rigoberta Menchú (Guatemala) Physics Georges Charpak (France/Poland) Physiology or Medicine Edmond H. Fischer (Switzerland/United States) Edwin G. Krebs (United States) Economic Sciences Gary Becker (United States) Nobel Prize recipients 1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15