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Amitai Etzioni Headshot

Gary Becker -- A Giant

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GARY BECKER
ASSOCIATED PRESS

Gary Becker, who just passed away, is correctly gaining much attention. The 1992 Nobel Laureate and University of Chicago professor was -- as many are reporting -- one of the most influential economists of the age, just next to Milton Friedman. Unfortunately, this does not mean that he carried the social sciences in the right direction, empirically or morally. Becker is justifiably famous for what is called economic imperialism -- for arguing that economic models can explain social behavior, including courtship, crime, suicide, and much else. His main argument was that people act in these relationships the way they do in the market place. They know what they are after -- which is invariably their self-interest; they collect information about their options; process it rationally; and then render a rational choice.

By Becker, and by the scores of economists and other social scientists he inspired, people commit crimes -- because they calculate that the benefits to them are greater than the "costs" (which reflect time in jail divided by the probability of being caught); people commit suicide when they find the afterlife is more promising than their current condition; people date someone until they find that they can trade up -- and mate with a more desirable partner; and people weigh whether to have a child or buy a bigger house or a new car.

Becker and his associates debunked moral considerations by reducing them to expressions for self-interests. For instance, Becker explains the virtues of a person faking ("simulating") altruism, because then he can benefit from the altruism of others without contributing his share.

The problem with this model is not that people in social relations never calculate, although we shall shortly see that the information they have is often skewed and they often draw the wrong conclusions from it. The problem is that people's calculations are deeply affected by their emotions and values and that these factors (a) affect which information they gain (e.g. conservatives get their facts from Fox, liberals -- from MSNBC etc.) and (b) emotions and values compete with their self-interests, narrowly defined as maximizing their happiness, which economists tend to equate with consuming more material goods. Thus Orthodox Muslims or Jews need not calculate how much they would save if they bought pork which is on sale compared to fish; people in love do not ditch the person they are infatuated with because they run into a rich potential date; and people die for their country because they believe it is their duty to do so, rather than expecting a big reward in the afterlife. Babies -- unlike cars -- do not come with warranties; cannot be traded in if they are poorly designed or recalled; people who "buy" a coronary bypass or valve replacement cannot learn from repeat purchases of what works for them and must rely on others, whose veracity they cannot assess.

Moreover, it turns out that not only do people, when engaged in social transactions, act in a mixture of what they perceive as their self-interest and what they believe is valid information -- and the effects of their emotions and values -- but people who engage in economic transactions face the same basic limitations and forces. That is why reverse imperialism is called for -- economics better heed what other social scientists have found. This has been highlighted by a much more recent 2002 Nobel Laureate in economics -- psychologist Daniel Kahneman -- and a legion of other behavioral economists. Behavioral economics provides unusually robust data that show that people have hardwired, systematic cognitive biases that greatly limit their intellectual capabilities. People, the data show, are unable to make rational decisions (unless one greatly dilutes the definition of rationality). People tend to invest themselves in their choices, to bet their pride and money on having made the correct decision. They, for instance, do not sell a stock or a house until its value has recovered at least to what they paid for it -- never mind changing economic conditions or their need to move on. When things go awry -- as they very often do -- they tend to act as if afflicted with what Daniel Kahneman calls 'theory induced blindness' and double down. Behavioral economics studies show that humans pay more mind to incidents than to statistics. Social scientists point to the ''the annuity puzzle'' -- the tendency of people to forego annualizing their wealth when they retire, even though it would assure them more annual income for the rest of their lives and reduce the risk of outliving their retirement savings. A survey of 450 401(k) plans found that only 6 percent of participants chose an annuity when it was available. People are willing to pay much more not to face a loss -- than make gains of the same size. And so on and so on.

We owe Gary Becker for putting this issue on the table in the big way only he could. We owe it to social science, and more importantly to the public, to give his magnanimous theory the rest it deserves.

Amitai Etzioni is a University Professor at The George Washington University and author of The Moral Dimension: Toward a New Economics.