Gary Becker

Gary Becker

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Gary Stanley Becker is an American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...

. He is a professor of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, sociology
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...

 at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...

 and a professor at the Booth School of Business. He was awarded the Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...

 in 1992, and received the United States' Presidential Medal of Freedom
Presidential Medal of Freedom
The Presidential Medal of Freedom is an award bestowed by the President of the United States and is—along with thecomparable Congressional Gold Medal bestowed by an act of U.S. Congress—the highest civilian award in the United States...

 in 2007. He is currently a Rose-Marie and Jack R. Anderson senior fellow at Stanford University
Stanford University
The Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San...

's Hoover Institution
Hoover Institution
The Hoover Institution on War, Revolution and Peace is a public policy think tank and library founded in 1919 by then future U.S. president, Herbert Hoover, an early alumnus of Stanford....

.

Becker was one of the first economists to branch into what were traditionally considered topics belonging to sociology
Sociology
Sociology is the study of society. It is a social science—a term with which it is sometimes synonymous—which uses various methods of empirical investigation and critical analysis to develop a body of knowledge about human social activity...

, including racial discrimination, crime
Crime
Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...

, family organization, and drug addiction (see Rational addiction
Rational addiction
Rational addiction is the hypothesis that addictions can be usefully modeled as specific kinds of rational, forward-looking, optimal consumption plans. The canonical theory is due to Kevin M. Murphy and Nobel Prize Winner Gary S. Becker...

). 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
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

. Becker is also credited with the "rotten kid theorem
Rotten kid theorem
Gary Becker's theorem of social interaction, colloquially known as the rotten kid theorem, suggests that family members, even if they are selfish, will act to help one another if their financial incentives are properly linked....

". He is married to Guity Nashat, a historian
Historian
A historian is a person who studies and writes about the past and is regarded as an authority on it. Historians are concerned with the continuous, methodical narrative and research of past events as relating to the human race; as well as the study of all history in time. If the individual is...

 of the Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...

 whose research interests overlap his own.

Biography


Born in Pottsville, Pennsylvania
Pottsville, Pennsylvania
Pottsville is the only city in and the county seat of Schuylkill County, Pennsylvania, United States. The population was 15,549 at the 2000 census. The city lies along the west bank of the Schuylkill River, north-west of Philadelphia...

, Becker earned a B.A.
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...

 at Princeton University
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....

 in 1951 and a Ph.D. at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...

 in 1955. He taught at Columbia University
Columbia University
Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...

 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
John Bates Clark Medal
The John Bates Clark Medal is awarded by the American Economic Association to "that American economist under the age of forty who is adjudged to have made a significant contribution to economic thought and knowledge"...

 in 1967. He was elected a Fellow of the American Academy of Arts and Sciences
American Academy of Arts and Sciences
The American Academy of Arts and Sciences is an independent policy research center that conducts multidisciplinary studies of complex and emerging problems. The Academy’s elected members are leaders in the academic disciplines, the arts, business, and public affairs.James Bowdoin, John Adams, and...

 in 1972. Becker also received the National Medal of Science
National Medal of Science
The National Medal of Science is an honor bestowed by the President of the United States to individuals in science and engineering who have made important contributions to the advancement of knowledge in the fields of behavioral and social sciences, biology, chemistry, engineering, mathematics and...

 in 2000.

Usually considered politically conservative
Conservatism
Conservatism is a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism...

, he wrote a monthly column for Business Week from 1985 to 2004, alternating with liberal Princeton economist Alan Blinder
Alan Blinder
Alan Stuart Blinder is an American economist. He serves at Princeton University as the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs in the Economics Department, Vice Chairman of The Observatory Group, and as co-director of Princeton’s Center for Economic Policy Studies,...

. In December 2004, Becker started a joint weblog with Judge Richard Posner
Richard Posner
Richard Allen Posner is an American jurist, legal theorist, and economist who is currently a judge on the United States Court of Appeals for the Seventh Circuit in Chicago and a Senior Lecturer at the University of Chicago Law School...

 entitled The Becker-Posner Blog.

Nobel Memorial Prize


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
Journal of Political Economy
The Journal of Political Economy is an academic journal run by economists at the University of Chicago and published every two months by the University of Chicago Press. The journal publishes articles in both theoretical economics and empirical economics...

, 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.

Discrimination


Discrimination as defined by Kenneth Arrow
Kenneth Arrow
Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51....

 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 like gender,color etc. it can also be a person's religion, caste, origin etc

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 a 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.

Gary Becker recognized that people; employers, customers,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. But if he employees the minority, then he can provide low wages, but employ more people and increase productivity.

Crime and punishment


Becker’s interest in criminology
Criminology
Criminology is the scientific study of the nature, extent, causes, and control of criminal behavior in both the individual and in society...

 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, as well as 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
Jeremy Bentham
Jeremy Bentham was an English jurist, philosopher, and legal and social reformer. He became a leading theorist in Anglo-American philosophy of law, and a political radical whose ideas influenced the development of welfarism...

's rational choice theory, which had been abandoned in criminology, is that if Bentham considered it possible to annihilate crime completely (through the panopticon
Panopticon
The Panopticon is a type of building designed by English philosopher and social theorist Jeremy Bentham in the late eighteenth century. The concept of the design is to allow an observer to observe all inmates of an institution without them being able to tell whether or not they are being watched...

), 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 zero (a feat that would cost the supermarket so much in surveillance, etc. that it would outweigh the benefits even if it were possible).

Human capital


Becker’s research was fundamental in arguing for the augmentability of human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...

. 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’s research on human social interactions has had many implications for the family such as for the marriage market, divorce, fertility, and social security. Becker argued that such decisions are made in a marginal-cost and marginal-benefit framework. For example, he concluded 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 provide 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 the 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 motivating their children to care for them.

Organ markets


An article by Gary Becker and Julio Elias on "Introducing Incentives in the market for Live and Cadaveric Organ Donations" 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. 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 oftentimes go to the patients most able to afford them, rather than patients who may have more need for them medically.

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
Deadweight loss
In economics, a deadweight loss is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal...

.

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. The advance of predators, fueled by linear incentives slows before the stiffening resistance of prey outraged by non-linear damages.

He is also noted for his advocacy of immigration tariff
Immigration tariff
An immigration tariff is a charge levied on immigrants wanting permanent residency within a nation. As a means of applying price theory to a nation's immigration policy, it is generally advocated as an alternative to existing bureaucratic procedures as a means of moderating or better regulating the...

s, and for his staunch defense of the consequences of neoliberalism
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...

 in Latin America
Latin America
Latin America is a region of the Americas where Romance languages  – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...

.

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."

Publications

(Description. Scroll down to chapter-preview links.) (UCP descr)
  • Gary S. Becker (1965) “A Theory of the Allocation of Time,” Economic Journal 75 (299), p p. 493-517.
  • Gary S. Becker (1974). "A Theory of Social Interactions," Journal of Political Economy, 82(6), pp. 1063–1093.
  • Gary S. Becker (1976). The Economic Approach to Human Behavior. Links to chapter previews. University of Chicago Press.
  • Gary S. Becker (1991). A Treatise on the Family, Harvard University Press
    Harvard University Press
    Harvard University Press is a publishing house established on January 13, 1913, as a division of Harvard University, and focused on academic publishing. In 2005, it published 220 new titles. It is a member of the Association of American University Presses. Its current director is William P...

    , 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
    Harvard University Press
    Harvard University Press is a publishing house established on January 13, 1913, as a division of Harvard University, and focused on academic publishing. In 2005, it published 220 new titles. It is a member of the Association of American University Presses. Its current director is William P...

    , 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

  • Economic imperialism (economics)
  • Family economics
    Family economics
    The family, although recognized as fundamental from Adam Smith on, received little systematic treatment in economics before the 1950s. A significant exception was Thomas Malthus's model of population growth. The work of Gary Becker and others initiated contemporary research on family economics ...

  • Household production function
    Household production function
    Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function. It is these goods that they value. The idea was originally proposed by Gary Becker, Kelvin Lancaster and Richard Muth in the mid...

  • Social capital
    Social capital
    Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...

  • List of economists
  • A Treatise on the Family
    A Treatise on the Family
    A Treatise on the Family is a book by Nobel-winning economist Gary Becker.-References:Gary S. Becker . A Treatise on the Family. Cambridge, MA: Harvard University Press. ISBN 0-674-90698-5. & chapter-preview...

  • Richard Posner
    Richard Posner
    Richard Allen Posner is an American jurist, legal theorist, and economist who is currently a judge on the United States Court of Appeals for the Seventh Circuit in Chicago and a Senior Lecturer at the University of Chicago Law School...


External links