Becker, Gary S.

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Becker, Gary S. 1930-

MODELS: HUMAN CAPITAL, HUMAN BEHAVIOR, FAMILY BEHAVIOR

Born in Pottsville, Pennsylvania, Gary Becker obtained his undergraduate education at Princeton University. He did his graduate work in the economics department at the University of Chicago, where his interest in social issues was reinforced by the intellectual prowess and encouragement of his mentors, foremost Milton Friedman, but Gregg Lewis and T. W. Shultz as well. There he wrote his dissertation on the economics of discrimination in 1957.

After serving a few years as assistant professor, he moved to Columbia University in New York City, where he spent twelve years combining teaching with research at the National Bureau of Economic Research. During this period Becker produced perhaps his most influential work, Human Capital (1964), and published his seminal papers on fertility in 1960, the allocation of time in 1965, and crime and punishment in 1968. He returned to Chicago in 1969, where he produced his Treatise on the Family (1981, expanded in 1991), and has continued to develop his economic way of looking at behavior.

Becker received the John Bates Clark Medal in 1967. His contributions won him the Nobel Prize in economic sciences in 1992. His professional and public contributions include serving as President of the American Economic Association in 1987, writing the Economics Viewpoint column in BusinessWeek from 1985 to 2004, and co-authoring the popular Becker-Posner Internet Blog with Richard Posner.

METHODOLOGY

Becker remains one of the most creative and influential economists in the early-twenty-first century. To characterize his vast theoretical contributions is a daunting task, which is helped by Becker’s own characterization of his work, as well as by attempts by others, including Sherwin Rosen, Agnar Sandmo, Ramon Febrero and Pedro Shwartz, and the Nobel Committee, to assess it. All recognize at least four areas of impact: discrimination, crime and punishment, human capital, and the family, to which should be added Becker’s work on economic growth. Another way to characterize Becker’s impact is by the methodological features that unite his work. For example, he applies the basic principle of rational behavior—preference maximization subject to objective opportunities or constraints—to all human behavior rather than merely behavior in the marketplace. Becker facilitates such applications by enriching the specification and interpretation of relevant opportunities and preferences, including explicit and implicit markets in which economic agents interact. He expanded both the opportunity set to incorporate time as a major scarce resource, and the structure of preferences to allow for material self-interest, as well as altruism, hate, discrimination, and moral values, emphasizing also the role of past experiences and social interactions in shaping these preferences.

Armed with these methodological innovations Becker expanded the boundaries of economics into areas that were traditionally the domain of sociology and political science. He pursues human behavior from cradle to old age, more or less in that order: discrimination, fertility, investment in human capital, time allocation, illegal behavior, self-protection, family behavior, politics, addiction, demographic change and economic growth, and social economics. More recently, Becker shifted his interest to health and aging issues.

MODELS: HUMAN CAPITAL, HUMAN BEHAVIOR, FAMILY BEHAVIOR

Another feature of Becker’s work is the formulation of models that produce empirically testable implications, in the tradition of Friedman’s positive economics. He explains variations in human behavior by focusing on the role of varying opportunities and market conditions rather than shifting tastes or deviations from rationality.

Becker’s work on discrimination was his first undertaking of an important social problem. By its economic definition, discrimination in the marketplace exists when employers, employees, or consumers are willing to incur costs in order to refrain from entering into transactions with other agents because of their race, gender, or religion. Such behavior yields private utility to those with a taste for discrimination but creates misallocation of resources and lowers economic efficiency. The theory explains not only why discrimination exists but also the variations in its prevalence and impact on segregation and wage disparity over time and space based on varying production technologies, competition, population shares of the discriminating and discriminated groups, distribution of tastes for discrimination, government intervention, and economic growth.

The literature on human capital did not begin with Becker. However, he formulated and formalized the basic micro foundations and equilibrium analysis that transformed it into a theory of investment in various forms of human capital, wage differentials, and earning distribution. Becker’s model, bolstered by the parallel development of Jacob Mincer’s human-capital-earnings functions, has had a profound impact on the measurement of private and social rates of return to schooling and training and offered important insights concerning general and specific training, bonding between employers and employees, optimal wage contracts, and the sources of inequality in the distribution of labor income. The overarching importance of human capital has made the work relevant in virtually all areas of economic inquiry.

Crime and punishment was an area of inquiry of classical economists such as Cesare Beccaria, William Paley, and Jeremy Bentham, but Becker offered a systematic treatment of crime and public law enforcement, using optimization analysis and welfare theory. Taking offenders to be responsive to incentives, he applied the basic principles of rational behavior to specify their reaction to probability and severity of punishment. The main thrust of the work has been to derive propositions about optimal enforcement strategies concerning the balance between probability and severity of punishment, imprisonment and fines, compensations in civil litigations, and private enforcement, based on maximization of social income. Becker’s work led to the development of a vast literature on the economics of crime, and influenced the law and economics movement.

Becker’s fascination with the economics of the household and the family started with the economics of fertility and the allocation of time, and evolved into a wide range of family issues involving marriage, divorce, allocation of tasks within the family, parental altruism, inheritance, and investment in children, culminating in his expanded edition of A Treatise on the Family (1991). Becker also considered the long-term effects of human capital investments within the family. Following Robert Lucas’s 1988 work on endogenous growth, in which human capital is identified as the engine of long-term sustainable growth of an infinitely lived agent, Becker and his colleagues offered a dynastic framework where altruistic parents make investments in children by partly trading off fertility and human capital investments. The work explains the process of development as a transition between stages of economic development, from a Malthusian Trap to a steady state of perpetual growth, over which period fertility declines.

IMPACT BEYOND ECONOMICS

Becker’s influence transcends economics. At the outset, his work was met with skepticism and distrust, to some extent inside economics, as in Sandmo (1993), but mainly outside the profession where the controversy centered largely on the applicability of the rigorous economic methodology to complex social issues. Some even found the now universally established term human capital to be offensive, on the grounds that it likened humans to machines. Despite this, Becker persevered in his research and gradually gained wide acceptance among economists, as judged by the frequency with which his work is cited in, and augmented by, the research of others. Specific aspects of demography and health economics constitute one example, the economics of crime and law constitute another, and the literature on labor issues has been dominated by Becker’s work on discrimination, time allocation within households, and human capital. But Becker also made inroads into other social sciences where sociologists and political scientists more frequently work with models based on rational choice. His belief in the widest applicability of economics as a social science links Becker, perhaps more than any other modern economist, with major classical economists who also adopted an all-embracing approach to social issues. His quest for a truly general science of society is continuing.

SEE ALSO Bentham, Jeremy; Crime and Criminology; Discrimination, Racial; Economic Growth; Economics, Nobel Prize in; Family; Fertility, Human; Friedman, Milton; Human Capital; Law and Economics; Optimizing Behavior; Punishment; Rational Choice Theory; Rationality; Time Allocation

BIBLIOGRAPHY

PRIMARY WORKS

Becker, Gary S. 1960. An Economic Analysis of Fertility. In Demographic and Economic Change in Developed Countries, Conference of the Universities-National Bureau Committee for Economic Research, a Report of the National Bureau of Economic Research, 209–240. Princeton, N.J.: Princeton University Press.

Becker, Gary S. [1957] 1971. The Economics of Discrimination, 2nd ed. Chicago: University of Chicago Press.

Becker, Gary S. [1964] 1993. Human Capital. 3rd ed. New York: Columbia University Press.

Becker, Gary S. 1965. A Theory of the Allocation of Time. Economic Journal 73 (299): 493–517.

Becker, Gary S. 1968. Crime and Punishment: An Economic Approach. Journal of Political Economy 76 (2): 169–217.

Becker, Gary S. [1981] 1991. A Treatise on the Family. Expanded ed. Cambridge, MA: Harvard University Press.

Becker, Gary S. 1983. A Theory of Competition Among Pressure Groups for Political Influence. Quarterly Journal of Economics 98 (3): 371–400.

Becker, Gary S. 1993. Nobel Lecture: The Economic Way of Looking at Behavior. Journal of Political Economy 101 (3): 385–409.

Becker, Gary S. 1996. Accounting for Tastes. Cambridge, MA: Harvard University Press.

Becker, Gary S., and Robert J. Barro. 1988. A Reformulation of the Economic Theory of Fertility. Quarterly Journal of Economics 103 (1): 1–25.

Becker, Gary S., and Kevin M. Murphy. 1988. A Theory of Rational Addiction. Journal of Political Economy 96 (4): 675–700.

Becker, Gary S., and Kevin M. Murphy. 2000. Social Economics: Market Behavior in a Social Environment. Cambridge, MA: Harvard University Press.

Becker, Gary S., and Guity Nashet-Becker. 1996. The Economics of Life. New York: McGraw-Hill.

Becker, Gary S., and George J. Stigler. 1974. Law Enforcement, Malfeasance, and Compensation of Enforcers. Journal of Legal Studies 3 (1): 1–18.

Becker, Gary S., and Nigel Tomes. 1986. Human Capital and the Rise and Fall of Families. Journal of Labor Economics 4 (3, pt. 2): S1-S39.

Becker, Gary S., Michael Grossman, and Kevin M. Murphy. 1994. An Empirical Analysis of Cigarette Addiction. American Economic Review 84 (3): 396–418.

Becker, Gary S., Kevin M. Murphy, and Robert Tamura. 1990. Human Capital, Fertility, and Economic Growth. Journal of Political Economy 98 (5, pt. 2): S12-S70.

Becker, Gary S., Tomas J. Philipson, and Rodrigo R. Soares. 2005. The Quantity and Quality of Life and the Evolution of World Inequality. American Economic Review 95 (1): 277–291.

Ehrlich, Isaac, and Gary S. Becker. 1972. Market Insurance, Self-Insurance and Self-Protection. Journal of Political Economy 80 (4): 623–648.