Economics loses a creative thinker in Gary Becker’s death
4 min read . Updated: 07 May 2014, 01:23 AM ISTA key takeaway from Becker's research is that social phenomena are the product of rational choices made in constrained circumstances
In the death of Gary Becker, the economics profession has lost a creative, deep thinker. As the first teacher during my graduate studies at the University of Chicago, I feel a personal loss.
Our first class in the PhD programme was on microeconomic theory. It was co-taught by Becker, whom we knew as the winner of the 1992 Nobel Prize in economics, and Kevin Murphy. Murphy was the winner of the John Bates Clark medal, the precursor to the Nobel Prize in Economics.
As we sat excitedly for the first session, we were not sure which of the two stalwarts would teach. When Becker walked in for the first session, I remember pinching myself because it was the first time I had seen a Nobel laureate in the flesh. While we had the privilege subsequently of being taught by other Nobel laureates such as Robert Fogel, Robert Lucas and James Heckman and many other potential Nobel laureates, who went on to win the coveted prize, Becker would always remain in my fond memories. He was my first teacher during the graduate programme.
Within a week of our cohort joining the PhD programme, the 9/11 attack had happened. After the initial orientation and the foundation courses in mathematics, classes formally started on 16 September 2001. In the first class, after we paid homage to those who lost their lives in that dreadful event, Becker posed the question: “Why do terrorists behave in the way they do?" As many of us offered various explanations for their behaviour, he helped us to navigate through these explanations to understand the economic way of thinking.
In fact, the first assignment in the microeconomic theory class involved developing a theory for the causes and consequences of terrorism. Because economics treats actions by an individual as an outcome of the rational assessment of the costs and benefits stemming from the action, modelling terrorism provided a challenge befitting the first homework in a graduate programme.
The exercise was not to caricature actions that would be called irrational by most. Instead, the learning was in understanding the motives behind such actions by introspecting deeply about them. In fact, acts of terrorism often beg the question: Why are young and educated people willing to commit suicide in order to kill others? Why does the ending of several other lives matter to someone more than preserving his or her life? After all, what benefits can one enjoy after having ended one’s life? Undertaking the assignment enabled us to confront such questions without being superfluous about the answers.
A related but possibly more important question from an economic point of view pertained to the consequences of terrorism. Although the likelihood of being harmed by terrorism is negligible, the fear created by terrorism has huge and enduring effects on human behaviour. Beyond the direct losses from terrorist acts, the resultant terror—the intense and prolonged fear of imagined dangers—has other long-term repercussions.
The cost of increased security measures presents one such cost. A second cost stems from changes in individual choices such as deciding to not visit some very pretty places that may have higher chances of terrorist attacks. His opening question as well as the first assignment captured in essence what Becker regarded as the value of economics to the real world. Economics was not a game played by academicians sitting on an ivory tower. Economics helps one understand the real world.
His course enabled graduate students to understand and appreciate the importance of economic modelling to develop a nuanced understanding of any real-world phenomenon. Building economic models for each of his assignments taught us the importance of abstraction in modelling real-world phenomena. In particular, it taught us that economic models enhance our understanding of real-world phenomena because they help us to chip away at the unimportant features thereby enabling focus on the important ones.
This discipline of applying the economic way of thinking to social problems characterized Becker’s research. Among his several seminal contributions, he examined the influence of education, training and experience on individuals’ economic performance and used the same to understand the impact of human capital on the economy.
Though his work was slow to win recognition, it is now recognized as a major breakthrough in economic thinking. His work on human capital is all the more relevant in today’s economy where intangible assets contribute to production significantly more than tangible assets. Becker also studied crime and punishment, the allocation of time and various forms of what are usually regarded as irrational behaviour.
A key takeaway from his research is that social phenomena such as crime are the product of rational choices made in constrained circumstances. Thus by removing the constraints that led to such behaviour, the behaviour itself could be curtailed. This insight, first provided by Becker, has enormous implications for public policy.
Krishnamurthy Subramanian is an assistant professor of economics at Indian School of Business in Hyderabad.
