David R. Henderson  

Gary S. Becker, RIP

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Becker's unusually wide applications of economics started early. In 1955 he wrote his doctoral dissertation at the University of Chicago on the economics of discrimination. Among other things, Becker successfully challenged the Marxist view that discrimination helps the person who discriminates. Becker pointed out that if an employer refuses to hire a productive worker simply because of skin color, that employer loses out on a valuable opportunity. In short, discrimination is costly to the person who discriminates.

Becker showed that discrimination will be less pervasive in more competitive industries because companies that discriminate will lose market share to companies that do not. He also presented evidence that discrimination is more pervasive in more-regulated, and therefore less-competitive, industries. The idea that discrimination is costly to the discriminator is common sense among economists today, and that is due to Becker.

This is from the biography of Gary Becker, the Nobel Prize-winning economist at the University of Chicago who died yesterday. Regular readers of this blog will remember that last week I applied his insight about discrimination to the case of Los Angeles Clippers owner Donald Sterling. I knew Gary a little. He was one of the nicest famous economists I've ever met. I met him first in 1977 when I gave a presentation on my dissertation at the University of Chicago's famous Industrial Organization workshop, run by the late George Stigler. Then, in 1978, Stigler chose me as a discussant of his paper at the Mont Pelerin Society meetings in Hong Kong. That's when Gary was shifting his research to the economics of the family.

I will miss him.

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CATEGORIES: Obituaries

COMMENTS (10 to date)
Daniel Kuehn writes:

re: "That's when Gary was shifting his research to the economics of the family."

Of course he made so many important contributions that this should read "shifting his research back to". By 1965 he had already made the contribution that serves as the backbone of the economics of the family to this day.

Pajser writes:

If, for any reason, black workers are more desperate than white workers, they will accept same job as white workers for less money and even anti-racist employer will have incentive to pay them less. They will know that they can get good white worker for $100 and equally good black worker for $90.

It leads to greater unemployment of white workers and difference between whites and blacks will diminish. But not completely. As long as there is some cultural or even genetic cause for different position of the race in society, the employers will have the incentive to discriminate to some degree, determined by market.

Am I right?

Daniel Kuehn writes:

Pajser -
Becker brings both assumptions and frameworks to the table. Assumptions plus frameworks equal a conclusion. Often in Becker's case they were stark conclusions.

I think the important point in all of his work was the framework, and less the assumptions. A lot of these problems had not been analyzed with economic tools before, and bringing that framework in has been a powerful innovation.

Short answer is yes, there are lots of tweaks you can (and people have) made that may give us cause to be concerned about discrimination. But you really can't dispense with bringing the economic way of thinking and an appreciation of how competitive pressures work on decision making to the question of discrimination.

I am not saying you are trying to dispense with those things - I'd just suggest that "loosening the assumptions" does not overturn the contribution.

David R. Henderson writes:

Yes, your reasoning is right and, in fact, it’s reasoning that Becker gives in his book, except for one word you use. Drop the word “incentive” in your second-last line. The differential in wages gives every employer an incentive NOT to discriminate. But employers will trade off this incentive against their own discriminatory tastes. With enough employers having discriminatory tastes, there would be a discrimination wage differential in equilibrium.

Mark V Anderson writes:

I think Pajser is correct that in a world where Blacks are unfairly discriminated against, there is an incentive to discriminate by non-racists. But of course the incentive is to discriminate against Whites by hiring more Blacks, because Blacks have a higher value per dollar of wages.

Greg Heslop writes:

Gary Becker was active until the end. I know he was teaching Price Theory and Human Capital last year, and I believe he was still doing both this year, and was scheduled for conferences in the autumn.

Chicago will never be the same without this towering scholar. Indeed, economic science would not be anything like it is had it not been for Gary Becker. I am doubtful, but I really hope there is an afterlife so that he may continue his quest for truth and to spread his great insights.

mike davis writes:

Professor Becker’s life should be celebrated for his many contributions but his passing should be mourned for the loss of someone who could have helped all of us understand the revolution that is happening in the way we think about economics. Psychology, biology and anthropology are changing our understanding human nature. With the insights presented in books like Haidt’s "Righteous Mind" economics has a chance to transcend the crude, mechanistic models that once characterized accepted wisdom. Becker understood all of this and could have helped us work through the implications for economics. I’m glad the NYT obituary included this paragraph (paraphrasing his Nobel lecture)

“He said that, unlike Marxists, he rejected the assumption that individuals were motivated solely by the prospect of selfish, material gain. Rather, he insisted, “behavior is driven by a much richer set of values and preferences” that can also include altruism, loyalty and spite. “

'It leads to greater unemployment of white workers....

'Am I right?'

Not about that. The competition from black workers puts downward pressure on the white workers' wages, at first.

But don't forget about the black workers' demand (using their new $90 paychecks). As well as the $10 saved by the employer. In a free, competitive, labor market there will be a new equilibrium, not unemployment.

Mark Bahner writes:
The differential in wages gives every employer an incentive NOT to discriminate.

I've been reading a bit about Bill Veeck. He wrote in his autobiography that he planned to buy the the Phillies in 1942 and stock them with Negro League stars. He said Kenesaw Landis squelched the plan.

Wikipedia article on Bill Veeck

The claim is controversial. But if it was true, and if it had gone through, the results would have been *extremely* interesting!

Charles Phillips writes:

The remembrances of Gary Becker provided by Lauren Landsburg, Bryan Caplan and David Henderson would not have brought the congregation to its feet.

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