Gary Becker: Economic Imperialist

Published May 6, 2014

Gary Becker (1930-2014), part of the vaunted Chicago School of economics of the late 20thCentury, brought the paramount insight of economics to the entire spectrum of human behavior, including areas previously considered parts of sociology, psychology, criminology and education.

From his first great insight into racial discrimination, through subsequent insights into schooling, the family, crime, addictive behaviors and even suicide, Becker re-unified the social sciences, with economics as the King, mathematics as the Queen and statistics as the Jack. Much indeed was gained, but something too was lost.

The paramount insight of economics is that humans are rational, weighing cost and benefit in making decisions. This is not to say that humans are completely rational. On this point, I could go Chicago School and say that for most purposes it is useful to assume that humans are rational. But, instead, I will say that the great majority of humans are rational when due allowance is made for the cost, in real time, of acquiring and analyzing information.

In the traditional ordering of the social sciences, economics focused on decision-making in the marketplace where cost and benefit are relatively easy to quantify. Sociology, in contrast, focused on decision-making – if you wanted to use that term – in non-market settings, where cost and benefit are relatively difficult to quantify, where reciprocity unsupported by legal obligation is involved, and therefore where emotional ties, trust and loyalty are involved.

Game Theory might seem to describe situations where the decisions of those participating in a game are based on expectations of reciprocity. But, social institutions such as families, churches, charities and even business organizations and nation-states, by developing emotional ties, affect the probability of reciprocity and, so, can foster greater cooperation.

Becker’s imperialism consisted of interjecting the economic insight of rational decision-making into non-market settings. For example, criminal behavior. People commit crime, he said, because the expected benefit exceeds the expected cost. Thus, when a person’s prospect of finding a job is low, that person is more likely to consider going into the “occupation” of thief. Conversely, if society wants to deter crime, among its options are to increase the likelihood of convicting thieves and to increase the penalties for those who are convicted.

Becker’s imperialism also consisted of requiring that theories of human behavior be subject to test. Thus, statistical analysis became de rigueur throughout the social sciences. Only, statistical analysis has been discovered to be rife with difficulties. Rape statistics, for example. More reporting of rape might reflect increased confidence in law enforcement, rather than increased incidence of rape. Long prison sentences might lower crime only because more of the relatively few criminals among us are removed from the population, rather than because more would-be criminals are deterred from crime. And, the correlation between the death penalty and the rate of murder may be more due to low-murder rate jurisdictions ending the death penalty than by any deterrent effect of a death penalty, what we call reverse-causation.

Putting aside the problem of statistical analysis, what has been lost in the translation of human behavior into mathematics is the evolutionary characteristic of social institutions. For Becker, the institutional framework in which individuals make their decisions is a datum entering his models. But, in free societies, social institutions evolve. These social institutions include customs and the law, in addition to the family, the church and so forth. In a free society, these develop so as to better enable people to be successful by promoting what we come to recognize as virtuous behavior. Things like prudence, integrity, tolerance and compassion.

But, in a socialistic society, the nation-state increasingly atomizes us, destroying social institutions. Whether intended or not, the family, the church, and private charity are displaced by the state, and customs are coarsened. Initially, appeals for support of an expanded nation-state might be made on the basis of the bourgeois virtues of the formerly free society, but eventually the realities of socialism require usefulness to the nation-state.

As important as was Becker’s application of the economic paradigm of rational decision-making to all human behavior, and the requirement that theories of human behavior be subject to empirical analysis, it is even more important that we reverse the rise of the nation-state and the destruction of our social institutions.