Books: The Economic Approach - Unpublished Writings of Gary S. Becker

(Drivebycuriosity) - Gary Becker was one of the most important economists of the 20th century. I had the luck to meet him in Prague in the early 90s - shortly before he received the 1992 Nobel Prize in economics. He joined a conference of leading economists who discussed about how Eastern Europe should change to prosper after the fall of the wall. I was there as a journalist working for a German magazine.

Even though Prof. Becker belonged to the rock stars of economics, he was very polite and friendly and talked openly with a humble journalist like me. He treated me as if I had been part of the elitist scientists he usually dealt with. I am very grateful for that and I feel especially honored by his generous treatment.

Gary Becker was one of the leading thinkers in microeconomics and focused on decisions of households, how you and I respond to economic incentives. Becker's Nobel Prize lecture is entitled "The Economic Way Of Looking At Life".

Becker belonged to the pioneers of human capital theory: "Becker pointed out what again seems like common sense but was new at the time: Education is an investment. Education adds to our human capital just as other investments add to physical capital" (econlib ). In the preface for his book "Human Capital" (1964) Becker explained the importance of human capital (the sum of knowledge and skills) by "a substantial growth in income in the United States remains after the growth in physical capital and labor has been accounted for".

Greater education provides greater knowledge and information, and skill at processing information, that also improve many other aspects of life. These include health and how long individuals live, their skills at investing in their children, the quality of the marriages they make and more.

Becker dealt - in a methodical & scientific way - with a lot of aspects of everyday life, including "allocation of time within a family, using the economic approach to explain the decisions to have children and to educate them, and the decisions to marry and to divorce" ( econlib).

Becker`s economic theory of the family includes a theory of marriage. According to him promiscuous dating on the campus could result in a better knowledge of the other sex and develop communication skills and hence be a part of a selection process to find the most appropriate mate. In the language of economists the cost of sex could be an investment in human capital (knowledge) and hence an investment into the future.

 Becker has been called a conquistador among economists, colonizing other fields. He became famous for his theory of the allocation of time, based on the insight that households are producers as well as consumers. Inspired by him his students explored religious sects and signaling one`s devotion to the deity or looked at cheating among Sumo wrestlers. When economists study non-traditional topics, such as suicide, addiction, riots, warfare, charity and identity, they are all ultimately following the path the Gary Becker blazed.

Recently I read "The Economic Approach: Unpublished Writings of Gary S. Becker" (215 pages  amazon). The book - edited and curated by Julio J. Elias, Casey B. Mulligan & Kevin M. Murphy - gives a short introduction into his works and presents some of his speeches plus some drafts & notes. Even though the book is very short the editors guide the readers to Becker´s basic thinking and describe his influences on today´s economic thinking.
 

Becker said in the banquet speech for his Nobel Prize celebration: "This prize gives recognition in the most influential way possible to all economists who endured many obstacles, criticisms, and even ridicule to study and analyze broader aspects of behavior than is traditional in economics...Economics surely does not provide a romantic vision of life. But the widespread poverty, misery, and crisis in many parts of the world, much of it unnecessary, are strong reminders that understanding economic and social laws can make an enormous contribution to the welfare of people" .
 

While Becker´s teacher Milton Friedman was concerned with making the government smaller, Becker was more concerned with making government better. For instance Becker thought that the generosity of US and EU welfare systems made open borders impracticable because "a significant fraction of people will move to try to take advantage of welfare benefits...The incentives created by welfare benefits would attract both an inefficiently large number of immigrants and immigrants who preferred public benefits to working". Today´s deluge of so called "refugees" to Europe confirms him. Becker recommended selling visas would attract " skilled, young people and those who want to make a commitment to the country". Government could be made more efficient through the power of prices. 

Becker also implied that criminals respond to incentives as professors and others in choosing their occupations. Potential criminals consider the cost as well as benefits from crime in deciding whether to become criminals. He assumed that a better education (investment in human capital) reduces crime by raising earnings from legal activities. Otherwise a greater likelihood of apprehending and punishing criminals also reduces crime by raising the cost to potential criminals of engaging in crime.,

I find it also interesting that Becker studied first mathematics and that he "accidentally took an economic course".