Fri, May 23, 2014 - Page 9 News List

Nobel-winning economist Gary Becker transformed his field

By Michael Boskin

Like many others, I first met the Nobel laureate economist Gary Becker, who died earlier this month, by reading his seminal works Human Capital and The Economics of Discrimination. Several dozen outstanding economists have won the Nobel Prize in Economics since Sweden’s central bank began awarding it in 1969, but Becker is among the handful who have fundamentally transformed how economists (and social scientists more generally) think about a wide array of important economic issues.

Becker was remarkable for applying his penetrating insights, especially concerning economic incentives, to issues that had been mostly underexplored by economic analysis. This included viewing education as an investment, asking who gained and lost from discrimination, examining how families allocated their time and explaining women’s fertility decisions.

His research on any one or two of these issues might well have won him a Nobel Prize on its own; to develop important insights into such a wide range of questions is truly remarkable.

He amply deserved the rare accolade accorded to him by his long-time mentor and friend, Milton Friedman (himself a Nobel laureate who, like Becker, transformed economists’ thinking in many areas). Becker, Friedman said, was “the greatest social scientist who has lived and worked in the last half-century.”

BEHAVIOR AND INTERACTIONS

Becker’s constant focus was on the main forces driving human behavior and people’s interaction in markets and in non-market activities. Early in his career, his work was often criticized for being overly dependent on economic analysis in dealing with big social problems, sometimes touching raw nerves on very sensitive issues.

For example, the notion of modeling children as a durable good seemed crass to some, but led Becker to analyze the allocation of parental time and financial resources. He showed how this insight could predict trends in female labor-force participation and birth rates, and led to the policy conclusion that the best way to lower high birth rates in poor countries was to educate women.

Better education would raise women’s wages, making staying at home more costly, and would lead to higher female labor-force participation and a voluntary decline in birth rates.

THE POWER OF INCENTIVES

This analysis reflected Becker’s deep belief in the power of incentives to lead people, in pursuit of their own interest and interacting within and outside markets, to achieve great things with minimal government input. In this sense, he was very much in the tradition of the great 18th-century Scottish economist Adam Smith, whose writings Becker regarded as one of the greatest influences on his career.

Equally off-putting to some was the notion that education was an investment — that an important reason to pursue post-secondary schooling, for example, was to raise one’s future earnings. The education establishment recoiled at what it considered a less-than-noble reason to seek higher education.

And the idea that one could model the economics of racial discrimination as rational, if deplorable, behavior and trace out the implications was sometimes misconstrued as paying insufficient attention to the character and behavior flaws of those who discriminate.

Truth will out, as Shakespeare reminds us, and eventually even Becker’s harshest early critics came around to appreciating his deep insights and conclusions. For example, the education industry now touts the economic value of a college degree. And governments around the world conduct vast surveys of households’ time use.

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