Grassroots Commentary

Gary Becker RIP

Bill Franklin · May 19, 2014

Gary Becker is not a household name. Few economists are. So when he died on May 3rd I initially hesitated in deciding if his outstanding career accomplishments had enough interest to be suitable for a blog. Only after reading a couple of dozen eulogies published upon his passing did I conclude Becker’s story deserved telling regardless of his general renown.

Becker’s mentor, University of Chicago Nobel laureate Milton Friedman, an economist who is widely known in the business community, called him “the greatest social scientist of the last half century.” Apparently Friedman thought “economist” was too narrow a category to corral Becker’s fecund mind. “Gary Becker may well go down in history as the chief architect in the designing of a truly general science of society,” said another mentor and University of Chicago Nobel laureate, George J. Stigler.

When he was selected to receive the Nobel Prize in 1992, Becker told an interviewer, “I was interested in social problems but felt that economics had the tools by which to handle these long-term interests and social questions.” Indeed. He created so many new fields for economic inquiry that in awarding Becker the Nobel prize the committee had to create a new category for his work, recognizing him for “having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior.” In the past, winners were chosen for a specific piece of work; Becker was chosen for many innovative works.

As to making the best decisions for society, Becker, a free market libertarian, trusted the imperfections of markets rather than the imperfections of government regulators. His choice of market solutions over government-run solutions was based on analytic study, not ideology. Nevertheless it put him on the wrong side of the tracks as far as the Left was concerned, for whom more government is always the solution. Until he saw how badly government managed it, Becker confessed several years ago that he initially supported the Iraq war.

His work was controversial, offending non-economists with, for example, suggestions that decisions like marriage, having children, immigration, crime, and drug trafficking, among many other social issues, could be analyzed as economic choices, no different – some would say – than buying a house or a bag of groceries. Critics thought his ideas patently absurd. Never mind that marriage and divorce, having and parenting children are profoundly economic decisions at their core.

Becker fended off critics who argued that social decisions were not rationally made. He described the “marriage market” for example:

It’s not an organized market the way the stock market is or a bazaar is in the Middle East, but it’s a market nevertheless with the property that there are different people in this who are looking to get married. Not everybody can marry the same wonderful man or woman, and they have to make choices. And they may have met somebody who they’re pretty happy with. They wonder about whether if they’d waited they’d meet somebody better, and these are the kinds of choices one makes in other markets. So using market as a metaphor, but I think it’s a very good metaphor for what goes on here.

Becker opposed the redistribution of incomes by government social engineers who defended it saying redistribution is the “fairest” solution for combatting rising income inequality in the US. Becker’s rationale was firmly supported by economic analysis rather than emotional “do-goodism” typical of government solutions. “I think inequality in earnings has been mainly the good kind,” Becker said. How could inequality be good, lamented the social architects who believed every child deserved an “A” and every youth team should be awarded a winner’s trophy?

Income inequality rewards those with more education, according to Becker, and rewards people who possess more skills to create more value in the world. Yes, the rich get richer and the poor get poorer. Becker knew that from his research. But “If you’re in an environment where knowledge counts for so much, then if you don’t have much knowledge, you’re going to be a loser,” Becker says. The poor fall behind because the rich are better educated in marketable skills. The gap creates the right kind of incentives, not the kind government creates in tax policy which penalizes the most successful and rewards the least successful. The poor know that more skills and education are the key to getting ahead. When they respond to that incentive, society benefits, which is good even if some choose to be left behind.

“Well, it’s unfair,” Becker agreed. “The accident of birth, the accident of the genes we have, the accident of parents we have: It is unfair.” So should government impose remedies to compensate for the inequalities of parents and genes? Should we switch babies as Plato suggested? Who wants to live in a world that equal?

Yet, government intrudes with its typical meat-axe solutions designed to override choices people make in its quest for a fairer economy. Fairer by whose standards? Fairer for how long? Forever? Isn’t that called a subsidy? Government solutions that combat society’s “bad” choices are always a dangerous step in infringing everyone’s freedom. Taking money from one group to give to another, Becker said, was an ill-advised unbalancing of incentives that are naturally in place. Knowing the government will protect them for making bad choices, what incentives will high school graduates have to work hard at getting more education or skill training instead of taking a dead-end job? Choosing less education and training deprives society of a more competitive workforce. The economy grows slower. Everyone is penalized in the long run. Thankfully few people choose that route. But, in Becker’s view, the less educated and less skilled should be penalized until they choose to make better decisions. That’s the best incentive. Government doesn’t have a better one.

Becker wrote his doctoral dissertation on the economics of discrimination – an area of society overgrown with government interference and regulation. He challenged the idea put forth by Karl Marx that the person who discriminates gains advantage by exercising bias. But Becker argued that employers who refuse to hire qualified people simply because of their skin color will ultimately lose out to competitors in a free market. Discrimination is less likely, Becker said, in highly competitive industries because survival and prosperity depends on hiring the most qualified people regardless of skin color. Professional sports is a case in point. Over 70% of the players are black. In contrast, Becker noted, government-regulated industries are less competitive and therefore more likely to discriminate covertly if not overtly.

Take the current scandal set off by Don Sterling’s surreptitiously taped remarks, for example. The media stoked his off-hand comments into a firestorm to show he was a racist. Sterling is the owner of the Los Angeles Clippers basketball team. No one would conclude, however, that he was a racist by looking at his team make up, which is essentially all black. No one could conclude that he was racist by looking at his pay structure – the top three players, each black, make $46 million, 63% of the total salaries paid to the 18 players on the team.

Regardless of what Sterling says, what he does is guided by sound non-racial economics. An all-white or mostly-white team would not be competitive. He knows that. It didn’t take government meddling to achieve a non-racial team make-up. A competitive market did it. Sterling, however, has now been banned for life by the NBA and the association of team owners is investigating ways it can legally force Sterling to sell his team. For what? For a stupid remark he made, which his actions put to the lie? If “right thinking” is to be policed, let’s start with Congress and White House, and don’t leave out the Supreme Court.

I don’t have enough space in this blog to show the insight Becker brought to understanding crime and punishment, human capital, marital decisions, and the drug war to mention a few social issues that yielded to his applications of economic analysis. Illegal drug trafficking and the crime it spawns exist because a market for drugs has been created by current laws. Eliminate the illegal market by legalizing drugs, Becker proposes, and the profit leaks out of illegal drugs and the attendant criminal activity diminishes. In time the demand for legal drugs would shrink and crime would vanish.

At its core, the decision to commit a crime is an economic decision, according to Becker. The benefits of the crime are weighed against the probability of being caught and the consequences of punishment. The reason crime exists in many segments of society – from white collar, to street crimes, to violent crimes – is that the benefits far outweigh the costs. Combating crime, Becker recommends, requires increasing the probability of punishment and its severity.

Why do we have a healthcare system whose costs are consuming our GDP? Because government has interfered with the systems to deliver it. Government has created incentives that drive healthcare costs up by preventing health insurance from being sold across state lines, mandating minimum coverage, creating a malpractice industry, insuring more than catastrophic losses, paying the insurance expense for one group by taxing its cost from another group – to name a few government-sponsored abuses. Real Becker-based healthcare reform would rid the system of these perverse incentives. That isn’t likely to happen because government would have to limit itself.

Many of Gary Becker’s insights and recommendations were controversial when proposed and all were unorthodox. He forced ideologues to argue their solutions with facts and to turn them into policy solutions as he did. While he never was able to overcome critics’ resistance to his attempts to revolutionize social policy he revolutionized its rhetoric.

If you want to read a book that applies economics to non-economic problems as Becker did throughout his career, read [Freakonomics](www.amazon.com/Freakonomics-Economist-Explores-Hidden-Everything/dp/0060731338(). The author Steven Levitt is a former Becker student.

Levitt and a colleague analyzed which economists have had the greatest impact on society as measured by citation frequency in research papers by authors published in the top journals in recent years. Becker was the leading economist with thirteen of his works cited. No other economist had more than three or four works cited.

From the time that his doctoral dissertation was accepted, Gary Becker produced a continuous stream of influential work averaging two original researched books in each of the six decades his career spanned before death claimed him at age 83. No other economist has had such output.

My Ph.D. is in business, not economics. Nevertheless we studied his emerging work when I was in graduate school. Even 40 years ago, his ideas were inspired.

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