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May 04, 2014 12:43 PM R.I.P., Gary Becker

By Kathleen Geier

Gary Becker, the Nobel Prize-winning economist, has died. He was 83. Becker was a giant within economics and his work had a profound impact not only within the field but beyond it. Becker, who declared that “the economic approach provides a framework applicable to all human behavior,” was notable for expanding the range of econ and deploying its neoclassical toolkit to examine social phenomena that had rarely before been subject to economic analysis. Topics such as racial discrimination, crime, drug addiction, advertising, and the family were all put under the economic microscope.

Whether you’re pleased or perturbed at the way economics has colonized every other social science discipline, Gary Becker is the person who, more than any other single individual, is responsible for this development. To give the man his due, I admire the rigor of his formal models and the audacity of his intellectual project. Unfortunately, the overall impact of his work on the economics profession and the world at large has been a pernicious one.

When I was doing graduate work in public policy at the University of Chicago, I took Becker’s famous graduate course in human capital. This was maybe five or six years ago, when he was a man in his 70s. But he was still vigorous, energetically lecturing and scrawling his elegant mathematical models and proofs on the blackboard. (He wasn’t a PowerPoint kind of guy, at least not in the classroom). Perhaps he made a mistake while transcribing his formulae from his notes to the board. If he did, I don’t remember it.

Becker was a free market, University of Chicago economist to the bone, a fact that made his work extremely controversial, especially to those outside the field of economics. I am going to focus on two aspects of his work that have inspired some particularly interesting critiques: his work on the economics of the family and feminist responses to it, and also his human capital theory, which Piketty pointedly addresses in Capital in the Twenty-First Century.

There are many ideas in Becker’s Treatise on the Family (originally published in 1981; republished in a revised version in 1991) that are problematic and/or offensive to feminists. For one thing, there is the assumption that economic actors behave selfishly in markets but altruistically within families — a theory that’s objectionable in both parts. There’s also the matter of how, in the words of Deirdre McCloskey, “the family in Becker’s world has one purpose, one utility function — guess whose? — unproblematically unified in the way that the neoclassical firm is supposed to be.”

Power struggles and conflicts of interest between family members are simply theorized away. The head of the family has a utility function that is supposed to include his own preferences as well as give weight to those of others in the family. But there’s no attempt to deal with the fact that since the head of the house earns the most money, he has the power to exert disproportionate control over the family’s resources. This is a type of problem that plagues neoclassical models generally. Power relations are rarely modeled.

Then there’s Becker’s theory about the gendered division of labor. What he did there was apply the concept of comparative advantage to the family context. He assumed that there are two types of work, market activity and household production, and that there are gains from efficiency to be had if each sex specializes in one type of work. He made some qualifications and acknowledged that traditional gender roles were changing somewhat, but that was the gist of it. Then he went on to claim to that the division of labor explained things like why society doesn’t encourage women to train for highly paid careers, why women’s wages tend to be lower, etc.

Becker said quite a few other wacky things in the Treatise. For instance, he performed a formal mathematical proof that purports to demonstrate that women are better off under polygamy, because, given Becker’s theoretical assumptions, their income under polygamy would be higher. H’okay.

Feminists (and I certainly include myself among them) have found plenty to object to in Becker’s work. But it’s also true that in taking institutions like marriage and the family seriously as subjects fit for economic analysis, Becker helped open up a space for feminist ideas within economics. To be sure, he wasn’t the first. In classical political economy, there was Friedrich Engels with The Origin of the Family, Private Property, and the State. Within the neoclassical school, there was also another University of Chicago economist named Margaret Reid, who beginning in the 1930s had done pioneering work concerning the economics of household production.

But Becker was the first economist to analyze marriage and the family within a neoclassical framework, and to do so in such a systematic way. Law professor Katharine B. Silbaugh had this to say about Becker’s uses for feminism:

We are indebted to Becker for raising extraordinarily important economic questions about the functioning of the family. Becker has brought us many ideas that are extremely helpful in thinking about family relations, including the very notion that in economic terms the home is a place of production and not just a place of consumption.

Economists like Nancy Folbre and Claudia Goldin have been influenced by Becker’s work on the family but have also moved beyond it into explicitly feminist directions.

Now on to Piketty. In Capital, Piketty has quite a lot of interesting things to say about capital of the human sort. Human capital is an idea with a history that predates Gary Becker; Becker, however, became its best-known theorist. To Becker, a person’s human capital is her non-transferable knowledge, skills, health, and values. Piketty defines human capital in a similar way, as an individual’s “labor power, skills, training, and abilities.” Piketty makes it clear that when he discusses capital generally in the book, he is not referring to human capital. (“Capital” according to Piketty’s definition mean physical and financial capital, not human capital). But there are some very interesting sections where he addresses human capital specifically.

Piketty examines the question of whether the “the apparently growing importance of human capital over the course of history” has been illusory. The idea is that labor is more important to the production process than previously. Because of that development, many have assumed that inherited capital is far less important than it used to be and that human capital is more important, because of the greater demand for it. If this is true, than economic inequality would seem to have a meritocratic justification, since it’s human capital-based. Inherited capital, of course, has nothing to do with merit. But human capital is something you can presumably control, through greater investment in your own education, skills, etc.

Suffice it to say that Piketty is extremely skeptical of this notion. He notes that a society of allegedly meritocratic “supermanagers” can be just as inegalitarian as a society of rentiers, and also that there’s nothing to prevent the children of the supermanagers from becoming rentiers. Piketty also argues that because the long-run elasticity of substitution of capital for labor is greater than one, there’s no reason to expect that capital’s share of income will decrease over the long term. True, over the past century, capital’s share of income has decreased slightly. But that doesn’t mean society has fundamentally changed from one based on “capital, inheritance, and kinship” to one based on “human capital and talent.” He warns against “mindless optimism.” Capital “has not disappeared,” he says.

Becker may well have been one of the “mindless” optimists Piketty was thinking about while writing that passage. He addresses Becker’s ideas about human capital most explicitly in the book’s wonderful endnotes. (Seriously, kids, you’ve got to read the endnotes for this book. If you don’t, you’re missing out on some great stuff). Here’s what Piketty says about Becker in those notes:

Becker never explicitly states the idea that the rise of human capital should eclipse the importance of inherited wealth, but it is often implicit in his work. In particular, he notes frequently that society has become “more meritocratic” owing to the increasing importance of education (without further detail). Becker has also proposed theoretical models in which parents can bequeath wealth to less gifted children, less well-endowed with human capital, thereby reducing inequality. Given the extreme vertical concentration of inherited wealth (the top decile always owns more than 60 percent of the wealth available for inheritance, while the bottom half of the population owns nothing), this potential horizontal redistribution effect within groups of wealthy siblings (which, moreover, is not evident in the data, of which Becker makes almost no use) is hardly likely to predominate.

I’d say Piketty nails Becker dead to rights. Human capital was a conveniently optimistic theory that told us that our economic success was merit-based and within our control. It detracted attention from the growing power of the other kind of capital, and the attendant spiraling economic inequality it was creating.

Yet underneath its sunny facade, human capital theory has a dark side. As Philip Mirowski notes, Foucault pointed out that Becker’s concept of “human capital” brilliantly flipped our self-identification as economic actors from laborers to capitalists, “investing” in ourselves like we’re a piece of run-down property that needs some sprucing up. That’s a profoundly creepy and alienating self-concept. And it’s certainly of a piece with Becker’s hard-right politics. Sally Satel’s ghoulish op-ed in today’s New York Times, which argues that people should be allowed to sell their kidneys — that’s an idea that is literally straight out of Becker. Then there’s the matter of not just all the reactionary political ideas Becker advocated in this country, but his proud support of death-dealing, neoliberal Latin American regimes such as Pinochet’s Chile.

Clearly, there is a great deal in Becker’s legacy to be deeply disturbed about. But there is also something about Becker’s approach I find bracing. A lot of people are greatly offended by the implicit suggestion in Becker’s work that decisions like marrying, or having children, are economic transactions like any other — no different than buying a car or a pair of shoes. And of course those are entirely different categories of decisions — in one sense.

But marital relationships, parent-child relationships, decisions to marry and divorce, etc., are also profoundly economic acts. That can sometimes be hard to see, given the pervasiveness of sentimental claptrap about the family throughout American society. But Becker blasted through the Victorian detritus of all that bourgeois romantic ideology to analyze the ways in which marital and reproductive behaviors are fundamentally rooted in a utilitarian economic calculus. You could appreciate his general approach without necessarily buying into the details of his argument. That was a real contribution, and even a radical one, after a fashion.

R.I.P.

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee

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