becker.Levy_1

The Multiple Talents of Gary Becker — Richard Epstein

I first arrived at the University of Chicago Law School as a visiting associate professor in the fall of 1972, quickly learning that a good place to be seen (but not heard) was at the joint law and economics workshops that were held biweekly.

One reason for that was the presence of four economic giants who strode the halls of the university, all of whom are household names in the legal academy: Ronald Coase, Milton Friedman, George Stigler, and — the youngest of the group by a generation — Gary Becker, who, on Saturday, became the last of this formidable group to pass away.

It was a sobering experience to watch how these minds took after the innocents who presented papers to them. The questions were always tough, and always directed both to matters of high economic theory and to basic forms of social behavior.

Each of these economists had his own special niche. Becker’s forte was applying rigorous forms of rational choice theory to the kinds of behaviors that most social scientists thought belonged to the disciplines of sociology or psychology. Becker was a strong economic imperialist, not willing to concede that any question concerning human behavior lay outside the reach of economics. Indeed, he was a professor of both economics and sociology at Chicago — with an appointment at the Law School thrown in for good measure — for precisely that reason.

It was not that Becker denied that there were emotional roots to the infinite variations in human behavior. Rather, his view was that those variations should not conceal the common elements of human behavior, which — given the necessity of making do in a world of limited resources — would impose rational choice constraints on just about every area of human activity. His guiding principle was “Don’t get lost in the details of individual cases if you can first figure out a way to understand the common elements of human behavior.”

The power of this approach was quickly evident from his choice of topics. His first major book, The Economics of Discrimination, grew out of his doctoral dissertation at the University of Chicago. It was published in 1957, at a time when the civil rights movement had no familiarity with the field. It is difficult to offer a tidy summary of its contents, but one theme within the book is that parties who exhibit a “taste” for discrimination have to pay for that taste in the marketplace. Applied to racial discrimination in the United States, this meant that the willingness of white businesses to reject black customers or employees meant that they worked at a disadvantage relative to firms that did not harbor this costly preference.

One implication of this theory is that market discrimination should be self-limiting, so long as less prejudiced rivals can compete in the marketplace. Becker’s approach was foundational when, in 1992, I wrote my own book on discrimination, Forbidden Grounds: The Case Against Employment Discrimination Laws, where I relied on his insights to argue for the repeal of Title VII of the Civil Rights Act in cases of competitive markets, where new entries would transform the operation of labor markets. The corollary of that position is that where new entry is blocked by either political forces or private violence, the anti-discrimination laws become one tool to offset those illicit uses of power. Becker wrote before the 1964 Civil Rights Act, but his conceptual framework helped shape the legal debates that arose in the generations that followed.

This was not the only example of Becker’s ability to change the way lawyers thought about their own work. His well-known book Human Capital, first published in 1964, showed the extraordinary versatility of Becker’s mind. The standard arguments about investment typically applied to physical assets. But there was no reason why that logic could not carry over to the investments that individuals make in their own personal improvement. The juxtaposition of the words ‘human’ and ‘capital’ signaled that the processes used to evaluate investment behavior for physical resources could apply to, for example, education as well, where the investments that people make in themselves today should yield a higher return to them tomorrow.

That body of work has proved to be of great value to lawyers who teach in the field of income taxation, because it gives them the analytical tools to decide how to treat educational expenses incurred over the life cycle for tax purposes. Some of these create a capital asset that should be written down for tax purposes over their useful lives. Others in the ever more active market for continuing professional education should be regarded as ordinary business expenses that could be written off over a single year. Getting the conceptual framework right does more than tell people how to control their own budgets. It also gives insight into the public organization of these markets.

Let me give must one more example of how Becker’s fertile mind spread his influence outside of economics. His 1981 Treatise on the Family is calculated to raise the hackles of the many people who think that economics applies to their business but not their personal lives. Once again, however, the concern with the psychological should not obscure some basic fundamentals about how families function. On this score, Becker gave some real insight on the fundamentals of the marriage market (taken literally), including his account of the rise and fall of polygamy. He also stressed the connection between biology and affection, which built on the work of evolutionary biologists who cared about inclusive fitness, in which the overlap between genetic endowments tends to reduce conflicts of interests between parent and children and between children themselves.

Indeed, it is on this point that I think that Becker made a rare error in connection with what he termed the “rotten kid” theorem, which was the topic of his 1974 paper “A Theory of Social Interactions.” (A lot of his papers have ‘theory’ in the title, and rightly so.) In that article, Becker was surely correct when he argued that parents can mediate conflicts between siblings by making benefits (such as a future inheritance) for a ‘rotten child’ contingent on benevolence towards the brothers or sisters he might otherwise be inclined to harm. But when he presented this paper at Stanford’s Center for Advanced Studies in the Behavioral Sciences in the spring of 1978, Oliver Williamson, himself a Nobel Prize Winner, asked Becker what prevents one sibling from killing the second to neutralize the parental options. 

The correct answer depends, at least in part, on the evolutionary connection that runs between siblings, so that — from a genetic point of view — hurting the sibling is hurting one’s own prospects. This line of thought is discussed under the heading of inclusive fitness, which makes (with a bit of exaggeration) the gene, not the person, the center of biological inquiry. Under that analysis, there is a price for treachery, which help explains the following two phenomena: (1) When stakes are relatively low, fraternal cooperation is fairly normal. The XYZ Brothers, for instance, is a common form of business, relying in part of trust. (2) By contrast, consider a high stakes situation. When a monarchy is in play, for instance, the stakes are high enough that the overlap in genes is not large enough to stop the occasional case of fratricide.

This last digression gives some sense as to why Becker was so influential a figure. He always asked hard questions, to which he gave challenging answers. One can learn more from the rare Becker mistake (if mistake it be) than from the correct results of many lesser thinkers. It’s for that reason that Becker — who won every conceivable honor during his life — will now enter the pantheon of great economists, and indeed great thinkers. 

  1. Midget Faded Rattlesnake

    Thank you for this, Dr Epstein. It’s a fitting tribute as well as a good suggested reading list for those of us who aren’t professional economists. I look forward to reading Becker’s work.

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