Gary Becker
Citation: For having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior.
The key idea
Apply economics to everything: human capital (education and health as investment), family decisions (marriage, fertility, divorce), crime (cost-benefit calculation), discrimination (taste-based vs statistical).
The explanation
Becker's 1964 Human Capital book formalised education as investment. His Economics of Discrimination (1957) modelled prejudice as a cost firms accept; competitive pressure should drive it out. His work on family economics modelled fertility as a function of the opportunity cost of women's time.
Why Africa should care
Becker's human-capital framework underpins every African analysis of returns to schooling, returns to health, and gender-gap arguments. His fertility model explains why African fertility falls with women's labour-market participation — the cornerstone of the demographic dividend argument. The discrimination framework guides analyses of gender pay gaps and intra-African xenophobia in labour markets.
How to use it
Use Becker's lens to identify which 'social problems' are amenable to economic incentives. Education uptake, fertility, savings — all respond to changes in the relevant prices (returns, opportunity costs).
Canonical works
- Gary S. Becker (1964) "Human Capital: A Theoretical and Empirical Analysis" Columbia University Press
- Gary S. Becker (1957) "The Economics of Discrimination" University of Chicago Press
- Gary S. Becker (1981) "A Treatise on the Family" Harvard University Press
More from Information, finance, and development · 1990-1999
- 1990Harry Markowitz, Merton Miller, and William Sharpe
Markowitz: portfolios are mean-variance objects, and diversification is the free lunch. Sharpe: the CAPM — expected return equals risk-free plus beta times market risk premium. Miller (with Modigliani): capital structure irrelevance in frictionless markets.
- 1991Ronald Coase
Transaction costs are everything. The Coase Theorem: with well-defined property rights and zero transaction costs, externalities are resolved by private bargaining regardless of initial allocation. The Nature of the Firm: firms exist because internal coordination has lower transaction costs than market exchange.
- 1993Robert Fogel and Douglass North
Quantitative economic history. North: institutions — formal rules, informal norms, enforcement — determine long-run economic performance. Fogel: railroad cliometrics; the US economy without railroads would have been only 3% smaller in 1890.
- 1994John Harsanyi, John Nash, and Reinhard Selten
Nash equilibrium: in strategic interactions, each player chooses a best response to the others. Harsanyi extended this to incomplete information. Selten refined to subgame-perfect equilibrium.
- 1995Robert Lucas
Rational expectations: people use all available information to form forecasts, including forecasts of policy. Policy that exploits expectational mistakes is therefore self-defeating once people learn.