A rational choice

Economist Gary Becker returned to Chicago because I knew I would be challenged by the faculty, by the students. He met the challenge.

By Burke Frank, ’11, and Asher Klein, ’11



This past June Gary S. Becker, AM’53, PhD’55, Chicago’s University professor in economics, sociology, and Chicago Booth, was awarded the Alumni Association’s highest honor, the Alumni Medal, for a career spent broadening the scope of economic research. It is hardly his first honor; the Princeton graduate also won the John Bates Clark Medal, given to the best U.S. economist under 40, in 1967; the 1992 Nobel Memorial Prize in Economic Sciences; and the Presidential Medal of Freedom in 2007. His studies of human capital, familial relations, crime, and workplace discrimination pioneered an explosion of economic research. A University professor since 1970, he also writes a weekly politics and economics blog with Seventh Circuit Federal Appellate Judge and Law School Senior Lecturer Richard Posner. They started the blog in December 2004, after Becker ended 19 years as a BusinessWeek columnist. Collected here are samples of Becker’s thoughts on his work and life.


On economics
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.—Alumni Medal acceptance speech

The economic approach I refer to does not assume that individuals are motivated solely by selfishness or gain. It is a method of analysis, not an assumption about particular motivations. Along with others, I have tried to pry economists away from narrow assumptions about self interest. Behavior is driven by a much richer set of values and preferences.”—Nobel lecture

On crime 
I began to think about crime in the 1960s after driving to Columbia University for an oral examination of a student in economic theory. I was late and had to decide quickly whether to put the car in a parking lot or risk getting a ticket for parking illegally on the street. I calculated the likelihood of getting a ticket, the size of the penalty, and the cost of putting the car in a lot. I decided it paid to take the risk and park on the street. (I did not get a ticket.)

As I walked the few blocks to the examination room, it occurred to me that the city authorities had probably gone through a similar analysis. The frequency of their inspection of parked vehicles and the size of the penalty imposed on violators should depend on their estimates of the type of calculations potential violators like me would make. Of course, the first question I put to the hapless student was to work out the optimal behavior of both the offenders and the police, something I had not yet done.

...I was not sympathetic to the assumption that criminals had radically different motivations from everyone else. I explored instead the theoretical and empirical implications of the assumption that criminal behavior is rational. ... Rationality implied that some individuals become criminals because of the financial rewards from crime compared to legal work, taking account of the likelihood of apprehension and conviction, and the severity of punishment.—Nobel lecture

On health
Good health and a long life are important aims of most persons, but surely no more than a moment’s reflection is necessary to convince anyone that they are not the only aims: somewhat better health or a longer life may be sacrificed because they conflict with other aims. The economic approach implies that there is an “optimal” expected length of life, where the value in utility of an additional year is less than the utility foregone by using time and other resources to obtain that year. Therefore, a person may be a heavy smoker or so committed to work as to omit all exercise, not necessarily because he is ignorant of the consequences or “incapable” of using the information he possesses but because the lifespan forfeited is not worth the cost to him of quitting smoking or working less intensively. These would be unwise decisions if a long life were the only aim, but as long as other aims exist, they could be informed and in this sense “wise.”—Introduction to The Economic Approach to Human Behavior (1976)

On human capital
Human capital is so uncontroversial nowadays that it may be difficult to appreciate the hostility in the 1950s and 1960s toward the approach that went with the term. The very concept of human capital was alleged to be demeaning because it treated people as machines. To approach schooling as an investment rather than a cultural experience was considered unfeeling and extremely narrow. As a result, I hesitated a long time before deciding to call my book Human Capital, and hedged the risk by using a long subtitle. Only gradually did economists, let alone others, accept the concept of human capital as a valuable tool in the analysis of various economic and social issues.—Nobel lecture

The persistence of discrimination against blacks shows that competition and free enterprise do not by themselves eliminate the effects of prejudice in the marketplace, especially when the prejudice is deep and widespread and when governmental and private discrimination are mutually reinforcing.—“The American Dream May Be Coming Closer For Blacks,” BusinessWeek, (April 21, 1986; Becker’s first BW column)

On family
The point of departure of my work on the family is the assumption that when men and women decide to marry or have children or divorce, they attempt to maximize their utility by comparing benefits and costs. So they marry when they expect to be better off than if they remained single, and they divorce if that is expected to increase their welfare.—Nobel lecture

Even small amounts of market discrimination against women or small biological differences between men and women can cause huge differences in the activities of husbands and wives. Therefore, large market discrimination or strong biological differences are not required to understand why the gender gap in earnings traditionally has been enormous. A sizable gap is expected when women have specialized in household activities, have invested little in market human capital and have allocated most of their energy to the household.—from A Treatise on the Family (1981)

On Gary Becker
I had a fine time in 12 years at Columbia. But I began to feel as a young elder statesman. And I felt if I came back to Chicago, I certainly wouldn’t be allowed to have that feeling. And I didn’t want to have that feeling. I even now don’t consider myself an elder statesman, and certainly not in 1970 when I returned to the University of Chicago. I knew I would be challenged by the faculty, by the students; whatever I had accomplished wouldn’t matter in terms of the discussions we had.—Alumni Medal acceptance speech

There was a sea change. I began to notice it in the 1970s and 1980s. A lot of the younger people coming out of Harvard, MIT, and Stanford were very interested in what I was doing, even though their faculty were mainly—not entirely—opposed to the sort of stuff I was doing.—interview, Financial Times, June 17, 2006

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.—“A 19 Year Dialogue on the Power of Incentives,”BusinessWeek, July 12, 2004 (Becker’s final BW column)

My whole philosophy has been to be conventional in things such as dress and so on. But when it comes to ideas, I’ll be willing to stick my neck out: I can take criticism if I think I’m right.—interview, Financial Times, June 17, 2006

 

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