by Federico N. Fernández
Austrian Economics Center
Gary S. Becker was awarded the Nobel Prize in Economic Sciences in 1992. According to the Swedish Academy, Becker “[had] extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior”. Indeed he was what we might call an economist without “borders”. What Becker tried was to analyze several aspects of the human conduct under the light of the principle of the rationality of individual choice. A principle which states that individuals maximize welfare as they conceive it.
He inaugurated this economic approach to non-economic objects of study with his doctoral dissertation. “The economics of discrimination” –which would later be turned into a book– dealt with the issue of discrimination in the work place. Becker argued that a competitive environment could be a powerful tool to fight employers’ discrimination against certain minorities. If an employer refuses to hire somebody just because this person happens to be black, in the long run the market will punish this sort of behavior. Carrying out a discriminatory hiring policy would eventually hurt the companies’ profits. Thus, free markets can be a very effective way to curb racism.
University of Chicago colleague and freakonomist Steven Levitt noticed that Becker was not only the most influential economist but also that he had published a major work in every decade since the 1950s. Among those we can mention Becker’s studies on human capital, crime and family.
Human capital was for Becker the investment individuals do in their own education. In this sense, spending both time and money in education is more deeply related with the future gains that can bring to the individual than to a desire for culture.
Regarding crime Becker’s insight can perhaps today seem quite obvious but it was shocking to most of the practitioners of social sciences of the late sixties. Instead of relying in some sort of deviations or difficult social context –the most common explanations of the time– Becker saw the explanation of crime in the cost-benefit analysis individuals do. If potential returns for criminal activities are high or the possibility of being punish is low, then the possibility to become a criminal will be more likely. Therefore, a society that wants to fight crime has to raise the criminal’s probabilities to be punished or to discourage their behavior with the threat of severe punishments.
On family Becker can help explain the current fertility crisis in many developed countries. The raise in work opportunities for women also raised the cost for them staying at home. Consequently, the prospect of raising a child, let alone a large family, becomes less and less attractive.
Gary Becker passed away perhaps in a time in which his discipline needs him the most. His rational-choice analysis, however flawed it could be, is now seriously contested by behavioral economics. According to this new trend based on the works of 2002 Nobel Prize awardee Daniel Kahneman, people are usually unable to make rational choices. It is yet difficult to say where this alternative research program would lead economics. In any case, perhaps Becker’s ideas are more useful than ever.
The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.
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