Saturday, May 10, 2014

The great trailblazer: Economists everywhere should mourn the passing of Gary Becker

May 10, 2014

If there is one person to blame for economists’ habit of opining on everything, it is Gary Becker, who died on May 3rd. Not content with studying the world’s economies, he was the first prominent economist to apply economic tools to all aspects of life. His revelation was the sort that seems obvious only in hindsight: that people are often purposeful and rational in their decisions, whether they are changing jobs, taking drugs or divorcing their spouses. This insight, and the work that followed from it, earned him a Nobel prize in 1992. No less an eminence than Milton Friedman declared in 2001 that Mr Becker was “the greatest social scientist who has lived and worked in the last half-century”.

At the heart of Mr Becker’s work was the view that “individuals maximise welfare as they conceive it.” Welfare need not mean income; it could derive from the pleasure of altruism or the thrill of deviancy. But critically, this thesis implied that people respond to incentives—a realisation that opened the door to insights across the whole range of human activity.

Mr Becker first used this approach in his doctoral study of discrimination, a raw issue in 1950s America. At the time economists’ models assumed that employers cared only about productivity, whatever the colour of the worker. Shunting this view aside, Mr Becker instead assumed that many individuals had a “taste for discrimination”, and perceived themselves to be worse off when forced to work alongside people of other races. He then explored how this preference affected labour markets.

In America, where the black population was roughly one-tenth of the total, discrimination against blacks led to relatively small reductions in white incomes but far more substantial ones for black workers. In South Africa, with a far higher proportion of blacks, discrimination brought much larger reductions in incomes across the economy. Mr Becker pointed out that although competition from more rational firms might gradually eliminate corporate discrimination, market forces alone would rarely erode discrimination rooted in the tastes of workers or consumers. His book on the subject, “The Economics of Discrimination”, became the foundation for subsequent research.


Sunday, May 4, 2014

Gary S. Becker, Nobel-winning scholar of economics and sociology, 1930-2014

by William Harms

UChicago News

May 4, 2014

Nobel Laureate Gary S. Becker, AM'53, PhD'55, made historic changes to the study of economics and the social sciences, combining disciplines to understand decisions in everyday life, while spawning rich new questions for scholars in diverse fields to pursue.

Becker, 83, University Professor of Economics and of Sociology at the University of Chicago, died on May 3 following complications from a recent surgery. He won the Nobel Memorial Prize in Economic Sciences in 1992 “for having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including non-market behavior.”

Becker pioneered study in the fields of human capital, economics of the family, and economic analysis of crime, discrimination, addiction, and population. University of Chicago President Robert J. Zimmer said Becker will be remembered as one of the foremost economics scholars of the 20th century.

"Gary was a transformational thinker of truly remarkable impact on the world and an extraordinary individual,” Zimmer said. “He was intellectually fearless. As a scholar and as a person, he represented the best of what the University of Chicago aspires to be."