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Column: The man who took economics everywhere

Gary Becker, the Nobel laureate and University of Chicago economist who died last weekend, was offered many honorifics: "the greatest living economist," a "path-breaking scholar," "the greatest social scientist who has lived and worked in the last half century." (That last superlative came from his mentor, Milton Friedman.)

But perhaps more than anything else, Becker was the father of economics imperialism. And I mean that as a compliment.

Once upon a time, in the first half of the 20th century, economists basically stuck to their knitting. Prominent economists researched firms, prices, trade, capital, output, government spending, business cycles. That sort of thing.

Today, economists instead stick their noses (and mathematical models) just about everywhere, investigating the study of everything from drug addiction to gender roles to education to jaywalking to rotten kids. That is largely thanks to Becker, who planted the dismal science flag in every single one of these subjects, as well as many others that fall under the broad category we now call "everyday life."

Whatever you think of his conclusions, many of which remain controversial, the world is better off for his encouragement of cross-disciplinary work.

Becker's intellectual interests started out relatively conventional; his 1951 Princeton senior thesis was titled "The Theory of Multi-Country Trade." But in grad school his subjects of inquiry got a bit, well, weirder. That's when he started bringing economic theory and formal mathematical modeling to subjects that had traditionally been outside the domain of economics.

His 1955 University of Chicago dissertation, for example, examined the economics of discrimination. Using elegant mathematical proofs, he argued that discrimination hurts not only the targets of bigotry but also the bigots themselves. Avoiding a transaction merely because of prejudice imposes costs, after all. If a firm doesn't hire the most productive worker available because the worker is black (or female or old or whatever), it limits its own profitability.

While his theories on discrimination are widely cited today, when first published they were not immediately accepted as important. Or even as economics.

"Most economists did not think racial discrimination was economics, and sociologists and psychologists generally did not believe I was contributing to their fields," Becker wrote in an autobiography. (Becker eventually landed joint appointments in economics and sociology.) He added, "For a long time my type of work was either ignored or strongly disliked by most of the leading economists. I was considered way out and perhaps not really an economist."

Undeterred, he continued probing other subjects that were "not really" economics — an academic derring-do that was cited in his 1992 Nobel win.

By the 1960s he began applying economic analysis to gender relations, marriage markets and the division of labor within families, helping develop what has since become known as "new home economics." He predicted that rising wages would disrupt traditional gender roles and encourage more women to join the paid workforce. Likewise, he helped explain why people had fewer kids as societies got richer: As jobs began paying better, time spent raising children became costlier and raising children to get those jobs required more parental investment per child. Richer people still wanted children, but they would trade quantity for quality in their fertility decisions.

Becker argued that crime might be driven not by mental illness or social oppression but rather by rational cost-benefit analysis. He wrote about why restaurants don't raise prices even when wait times for tables are painfully long. And while the Chicago school is often criticized for assuming that people always behave rationally, Becker helped expand the definition of what "rational" behavior includes: He wrote extensively about what a powerful incentive altruism could be, as well as guilt, envy, loyalty, spite and other motivators aside from pecuniary pursuits alone. One famous paper, for example, examined the rationality of drug addiction.

Many of Becker's conclusions, which tend to point to free-market policies, remain contentious, and some of his theoretical work is in tension with empirical research that followed. But he helped normalize the idea that many social problems and questions could benefit from rigorous economic analysis. In retrospect, that seems like it should have been less revolutionary than it was; Adam Smith, the 18th-century founder of modern economics, was, after all, a moral philosopher.

© 2014 Washington Post

Column: The man who took economics everywhere 05/06/14 [Last modified: Tuesday, May 6, 2014 6:10pm]

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