Professor Gary S. Becker passed away on May 3 at the age of 83. Although his legacy in the social sciences is immense -- his mentor, Milton Friedman, called Becker "the greatest social scientist who has lived and worked in the last half century"-- one should not overlook his defense of freedom.
Becker changed the face, method, and scope of social sciences forever – one reason why he received the Nobel Prize in economics in 1992. He was trained as an economist, notably attending Friedman's lectures on microeconomics in the early 1950s at the University of Chicago – the esteemed university whose reputation was further enhanced by Becker's work. Yet he chose to approach issues traditionally reserved for sociology.
His method was to systematize the analysis of what he called the "economic approach" to various aspects of human and social life. His extension of the rationality assumption to behavior not strictly speaking belonging to the market realm was based on the idea that individuals always balance the costs and benefits of action and thus tend to "maximize" their utility – in fact he saw individuals as producers of their own utility.
Becker is probably mostly famous for his concept of "human capital." The powerful insight behind this once-scary concept (some people hated the expression, which suggested that humans were machines) is essential to understanding economic growth and differences in incomes. Human capital is seen as a stock of productive resources embodied in individuals: skills, abilities, and the like. Education, general or specific, enables individuals to increase their human capital. Before deciding to invest in human capital, individuals -- and firms -- balance the expected costs and benefits. Higher human capital increases labor productivity and is thus good for growth. At the same time, differences in human-capital investments can explain differences in incomes based on productivity. Modern theories of endogenous growth actually rely largely on this analysis of human capital.
Another crucial consideration found in Becker's works is the importance of time. While economic growth can bring more goods and services, the endowment of time cannot change. Thus time becomes more and more valuable with higher and higher incomes. This obviously has implications for decisions to engage in time-consuming activities such as shopping, preparing meals, and even raising kids. This insight opened the door to a new consumer theory, in which consumption is seen as an act of production of one's utility, and an economic analysis of family decisions.
The economics of the family is indeed another big chunk of Becker's works. The idea that individuals engage in rational decisions about family, notably marriage, kids, and divorce, might seem unromantic, but it is actually quite a powerful analytical tool. One interesting conclusion, for instance, is that parents might not invest in raising their kids' awareness of the need to take care of them when they are old if government pension and medical programs exist.
The same logic of the "economic approach" applies to crime and punishment. Once when late for an appointment at Columbia University, Becker decided to park illegally on the street instead of driving to the next parking lot. He did so after rationally balancing the potential costs of the two options. This was the beginning of his work on the economics of crime and punishment. Criminals are just like anyone else: they balance costs and benefits when engaging in their activity. The policy trend at the time was to be increasingly lax with criminals. To Becker there was no mystery to why criminality was exploding: crime paid. By increasing the cost of criminal activity with tougher punishment and more vigorous enforcement, crime would be less profitable. Many cities, such as New York, implemented policies based on Becker's ideas.
His early work dealt with the economics of discrimination, explaining how competitive markets would tend to eliminate discrimination. In his later years Becker highlighted how globalization was a force against racist and sexist discrimination and the economic inequality that comes with it.
Many have been critical of Becker's "economic imperialism." Yet, as Becker stated in his Nobel speech, "Unlike Marxian analysis, the economic approach I refer to does not assume that individuals are motivated solely by selfishness or gain. It is a method of analysis, not an assumption about particular motivations. Along with others, I have tried to pry economists away from narrow assumptions about self interest. Behavior is driven by a much richer set of values and preferences." Thus the heuristic potential – to say the least – of Becker's "revolution" should be clear. It has already borne fruit: it gave rise to the "Freakonomics" generation, and its interdisciplinary dimension has facilitated valuable cross-pollination. It has also been essential to the revival of institutional analysis, a key subdiscipline of the humane studies.
Professor Becker, a true classical liberal -- i.e., a devotee of individual liberty under the rule of law -- was the president of the Mont Pèlerin Society, 1990-92. I had the opportunity to meet him twice and interview him once. He was a true gentleman, humble, accessible, and ever ready to listen. He truly cared for the less gifted and unfortunate of this world. He was dedicated to the cause of freedom for all.
This is shown by his last words in his last blog post, in March, in which he wisely advocated an "end [to] the embargo on the export and import of goods and services between the United States and Cuba The Cuban people will benefit almost immediately. This may just be the time when such a move puts added pressure on the Cuban government to end its failed experiment with communism."
May he rest in peace.