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Gary Becker

In: Business and Management

Submitted By Ledger
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Gary Stanley Becker (December 2, 1930 – May 3, 2014)[1] was an American economist. He was professor of economics and sociology at the University of Chicago and at the Booth School of Business. He made important contributions to the family economics branch of economics. Neoclassical analysis of family within the family economics is also called new home economics.
He was awarded the Nobel Memorial Prize in Economic Sciences in 1992 and received the United States Presidential Medal of Freedom in 2007.[2] He was a Rose-Marie and Jack R. Anderson senior fellow at the conservative[3] Hoover Institution, located at Stanford University.
Becker was one of the first economists to branch into what were traditionally considered topics belonging to sociology, including racial discrimination, crime, family organization, and drug addiction (see rational addiction). He was known for arguing that many different types of human behavior can be seen as rational and utility maximizing. His approach included altruistic behavior of human behavior by defining individuals' utility appropriately. He was also among the foremost exponents of the study of human capital. Becker was also credited with the "rotten kid theorem."
Born to a Jewish family[4] in Pottsville, Pennsylvania, Becker earned a B.A. at Princeton University in 1951, and a Ph.D. at the University of Chicago in 1955 with thesis titled The Economics of Racial Discrimination.[5] At Chicago, Becker was influenced by Milton Friedman, whom Becker called "by far the greatest living teacher I have ever had"[6] He taught at Columbia University from 1957 to 1968, and then returned to the University of Chicago. Becker was a founding partner of TGG Group, a business and philanthropy consulting company. Becker won the John Bates Clark Medal in 1967. He was elected a Fellow of the American Academy of Arts and Sciences in 1972,[7] and was a member (and for a time the President) of the Mont Pelerin Society.[8] Becker also received the National Medal of Science in 2000.[9]
A political conservative,[10] he wrote a monthly column for Business Week from 1985 to 2004, alternating with liberal Princeton economist Alan Blinder. In December 2004, Becker started a joint weblog with Judge Richard Posner entitled The Becker-Posner Blog.
Becker's first wife was Doria Slote, from 1954 until her death in 1970.[11][12] The marriage produced two daughters, Catherine Becker and Judy Becker.[12] In 1980[11] Becker married Guity Nashat, a historian of the Middle East whose research interests overlapped his own.[13] Becker had two stepsons, Cyrus Claffey and Michael Claffey, from his second marriage.[11][12]
Becker died in Chicago, Illinois, aged 83, on May 3, 2014,[14][15] after complications from surgery at Northwestern Memorial Hospital.[16] He was survived by his second wife, two daughters, two stepsons, and four grandchildren.[12]
Becker is also famous for his economic analysis of democracy. He asked what determines the extent to which an interest group can exploit another. The basis of his analysis was the concept of deadweight loss. As Palda (2013) explains "According to Becker, political equilibrium exists even in non-democratic societies. It arises out of a simple calculation that predatory interest groups and their taxpaying victims make: what return on my investment can I get by lobbying government? Becker’s insight is that the gains to predators are linear, but the losses to prey are exponential, thereby stiffening the resistance of victims as the aggression of predators plods on without similarly increased vigor. Think of a gang of robbers taking half the crop from peasants. They then return for the second half. The gain to the gang of the second half cut is the same as in their first extortion. Yet for peasants to lose the last half of their crops means possible starvation and the certain loss of seed corn. They can be expected to resist violently, as they did in the Hollywood movie The Magnificent Seven and in the Japanese movie on which it was based, The Seven Samurai."[21]
Becker's insight was to recognize that deadweight losses put a brake on predation. He took the well-known insight that deadweight losses are proportional to the square of the tax, and used it to argue that a linear increase in takings by a predatory interest group will provoke a non-linear increase in the deadweight losses its victim suffers. These rapidly increasing losses will prod victims to invest equivalent sums in resisting attempts on their wealth. The advance of predators, fueled by linear incentives slows before the stiffening resistance of prey outraged by non-linear damages.[22
Jurist Richard Posner has stressed the enormous influence of Becker's work "has turned out to be a fount of economic writing on crime and its control."[23][24]
Becker's interest in criminology arose when he was rushed for time one day. He had to weigh the cost and benefits of legally parking in an inconvenient garage versus in an illegal but convenient spot. After roughly calculating the probability of getting caught and potential punishment, Becker rationally opted for the crime. Becker surmised that other criminals make such rational decisions. However, such a premise went against conventional thought that crime was a result of mental illness and social oppression.
While Becker acknowledged that many people operate under a high moral and ethical constraint, criminals rationally see that the benefits of their crime outweigh the cost such as the probability of apprehension, conviction, and punishment, and their current set of opportunities. From the public policy perspective, since the cost of increasing the fine is trivial in comparison to the cost of increasing surveillance, one can conclude that the best policy is to maximize the fine and minimize surveillance. However, this conclusion has limits, not the least of which include ethical considerations.[25]
One of the main differences between this theory and Jeremy Bentham's rational choice theory, which had been abandoned in criminology, is that if Bentham considered it possible to annihilate crime completely (through the panopticon), Becker's theory acknowledged that a society could not eradicate crime beneath a certain level. For example, if 25% of a supermarket's products were stolen, it would be very easy to reduce this rate to 15%, quite easy to reduce it until 5%, difficult to reduce it under 3%, and nearly impossible to reduce it to 0% (a feat that would be so costly to the supermarket that it would outweigh the benefit, if it is even possible).

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