The Encyclopedia of Libertarianism

Becker, Gary S. (1930-2014)

Gary S. Becker is a professor of economics and sociology at the University of Chicago. He was awarded the Nobel Prize in economics in 1992 for “having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior.” Becker received his undergraduate degree in 1951 from Princeton University and his PhD in 1955 from the University of Chicago. He was an assistant professor at Chicago from 1954 to 1957, before moving to Columbia University and the National Bureau of Economic Research. “I felt that I would become intellectually more independent if I left the nest and had to make it on my own,” Becker has written. “I have always believed this was the correct decision, for I developed greater independence and self-confidence than seems likely if I remained at Chicago.” Becker spent 12 fruitful years at Columbia, but ultimately returned to Chicago in 1969, where he has taught ever since.

As the Nobel Prize committee stated, if there is a defining characteristic of Becker’s work, it is method. He has applied rational choice theory rigorously and ingeniously to topics that were once thought beyond the purview of economics. At the heart of Becker’s approach is the idea that people, in all areas of their lives, maximize their utility subject to the constraints with which they are faced. In short, they act purposefully—rationally—not only in choosing a job, but also in choosing a mate. These actions are not always “selfish.” Instead, Becker models behavior in a way that allows individuals to “maximize welfare as they conceive it, whether they be selfish, altruistic, loyal, spiteful, or masochistic.” At first, his work was often viewed with skepticism by economists, who considered his choice of subjects odd and far afield from more well-trodden territory as, say, money and banking, and by sociologists, political scientists, and anthropologists, who viewed him as an interloper or, worse, an “imperialist” aiming to apply methods wholly unsuitable to their disciplines. Over time, however, his work has become widely accepted by economists, and, increasingly, social scientists across related fields have come to appreciate it as well.

Becker’s work has spanned a wide variety of topics, but his influence arguably has been the greatest in four broad areas: racial discrimination, crime, human capital, and the family. When Becker first examined the economics of discrimination in the 1950s, much of American society was still segregated. Becker suggested that this fact implied that the employer who refused to hire African-American workers had a taste for discrimination. However, that taste, as Becker demonstrated, is not necessarily costless. In a competitive market, employers who systematically discriminate against specific racial or ethnic groups may suffer because the more productive workers from those groups will likely be hired by competing firms looking to gain an advantage. The more competitive the market, the more intense is the bidding for skilled workers regardless of their race or ethnicity.

Becker followed this analysis with discussions of individual skill-building or human capital. His conclusions were straightforward: that skills are, in fact, augmentable, and individuals face an economic choice about whether and how to build them. The fundamental issue is opportunity cost. Suppose one goes to college for 4 years to learn new skills and ultimately obtain a degree. There are often obvious costs involved, most significantly tuition. But there are less obvious costs, such as the time spent pursuing education—time that could have been spent in the labor market instead, thus earning wages. Individuals must assess whether the building of such skills will help them enough over their lifetimes—through improved earnings as well as cultural and other nonmonetary gains—to more than offset the time and effort spent acquiring them. This idea is now one of the most standard in labor economics—indeed, all of economics—which was quite novel at the time Becker began his work. Subsequent empirical studies have shown that the building of skills has become increasingly important in modern economies, both at the individual and macro level. High-skilled workers tend to receive a wage premium, and the economies of countries with relatively well-educated workforces tend to grow more quickly than those with relatively poorly educated workforces. As a result, human capital—specifically, how to most efficiently encourage investment in the building of skills—has become an important public policy issue.

Becker’s work on crime overturned some long-held beliefs. As he put it: “In the 1950s and 1960s, intellectual discussions of crime were dominated by the opinion that criminal behavior was caused by mental illness and social oppression, and that criminals were helpless ‘victims.’” Becker was critical of these assumptions. Most criminals, he argued, were rational, just like noncriminals. He acknowledged that, in general, people are constrained by moral and ethical considerations and would not commit crimes even when those crimes could be quite lucrative and the chances of being caught are quite low. But for those who do become criminals, many carefully assess their alternatives. Given the likelihood of being caught, is crime more profitable than pursuing work that is legal? If so, they may choose crime. It is important here to note the linkage with human capital. Those who have spent time improving their skills are less likely to pursue crime because their legal workplace alternatives tend to be better. In addition, they have more to lose, in both future earnings and social status.

Of all of Becker’s research projects, his work on the family is perhaps the most controversial. It also has been the most mentally taxing. “Writing A Treatise on the Family is the most difficult sustained intellectual effort I have undertaken,” Becker wrote. Despite its complexity, there are some key themes that run throughout his work. First is the idea that the household can be modeled as a small factory, where decisions about the distribution of work and the allocation of time are determined by largely economic factors. For instance, as family members’ real wages increase, there is less incentive for home production and greater incentive to work outside the household. This fact explains, in part, the increase in female labor-force participation. Also, more women entering the workforce may have contributed to higher rates of divorce, as they become increasingly able to earn the income necessary to live independently. For those couples that remain married, earnings can have a significant effect on the number of children they have and how much they invest in their offspring’s education. In general, as wages rise, Becker argued, families will tend to have fewer children and to invest more in each child’s human capital. This theory has been borne out by the experience of the United States, Western Europe, and Japan, where fertility has generally fallen as wage rates and per capita incomes have risen.

Becker, like most members of the Chicago School, regards economics as a value-free, positive science. As such, his views on public policy issues are generally determined by empirical results. Still, on most matters, Becker is strongly supportive of the free market and skeptical of government intervention.

From 1985 to 2004, Becker wrote a monthly column for BusinessWeek magazine, the final article of which was titled “A 19-Year Dialogue on the Power of Incentives.” He noted there:

Along with many others of my generation, I was a socialist when I started my university studies. But my first few economics courses taught me the power of competition, markets, and incentives, and I quickly became a classical liberal. That means someone who believes in the power of individual responsibility, a market economy, and a crucial but limited role of government.

Many of those columns are collected in the 1996 volume, The Economics of Life, coauthored with his wife, Guity Nashat Becker. Since December 2004, Becker and Richard Posner—a member of the faculty at the University of Chicago Law School, a federal circuit court judge, and a founder of the law-and-economics movement—have maintained a blog, where they each publish a short weekly essay on a timely policy issue.

Those heavily influenced by Becker include Steven Levitt, professor of economics at Chicago and coauthor of the best-selling book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. According to Levitt, “the science of economics is primarily a set of tools, as opposed to a subject matter,” which means that “no subject… need be beyond its reach.” Levitt, appropriately, is director of the Becker Center on Chicago Price Theory.

Becker is arguably the most ambitious and creative economist of his generation. Although not as famous as his mentor, Milton Friedman, Becker’s influence may ultimately rival Friedman’s. As the late George Stigler noted, “Gary Becker may well go down in history as the chief architect of a truly general science of society.”

 

Further Readings

Becker, Gary S. The Economic Approach to Human Behavior. Chicago: University of Chicago Press, 1976.

———. The Economics of Discrimination. Chicago: University of Chicago Press, 1957.

———. Human Capital. New York: Columbia University Press, 1964.

———. A Treatise on the Family. Chicago: University of Chicago Press, 1981.

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

Febrero, Ramón, and Pedro S. Schwartz, eds. The Essence of Becker. Stanford, CA: Hoover Institution, 1995.

Originally published .