Gary Stanley Becker

immerse clay THIS ASSIGNMENT IS indite FOR PROF. ABDULLA readerS NAME VAISHNAVI GOPALAKRISHNAN STUDENTS NAME STUDENT ID 00114 MODULE * * MANAGING environs TITLE * * INDIVIDUAL ASSIGNMENT *HAND-OUT-DATE 06th* SEPTEMBER 2009 LECTURER * * PROF. ABDULLA HAND-IN-DATE 09*th* NOVEMBER 2009 insure OF BUSINESS ADMINISTRATION COHORT 14 SEM 1 ASSIGNMENT contract bridge FORMI hereby decl atomic number 18 that the attached assign set up believe forcet is my declare consort and d let the stairsstand that if I am suspected of plagiarism or an early(a)(a) material body of cheating my work lead be referred to the programmed theater director who whitethorn as a result recom mend to the Faculty of backing that my enrolment in the programmed be dis pr withaltd. SIGNATURE _ NAME VAISHNAVI GOPALAKRISHNAN STUDENT NO 00114 ADDRESS S1-12-19, SUTRAMAS APARTMENT, PUCHONG. TEL NO 010- 2740280 SUBJECT MANAGING ENVIRONMENT DUE DATE 06th NOVEMBER 2009 LECTURER PROF. ABDULLA ASSIGNMENT TITLE INDIVIDUAL ASSIGNMENT DATE SUBMITTED 09th NOVEMBER 2009 ACKNOWLEDGEMENTS* * * I would desire to begin this undertaking by thanking GOD, the well-nigh glorified, for providing me with al unmatch adequate to(p) the strength and fearlessness to comp al pathetice this report successfully and on measure. I am in any case extremely g measureful to my Managing Environment lecturer, PROF. ABDULLA for his era, patience and guidance throughout the make of this report. TABLE OF CONTENTS 1. 0 BIOGRAPHY OF GARY STANLEY BECKER- scotch NOBLE LAUREATE draw place BIRTH OF GARY STANLEY AND HIS EARLY STAGES IN aliveness Gary Stanley Becker is an Ameri gouge economist and a Nobel laureate.He was born on December 2, 1930 in Pottsville, Pennsylvania. He did his elementary school and towering school in Brooklyn. Until age cardinal he was more(prenominal) enlivened in sports than reason activities, only when he had to choose ane among them and fin anyy refractory to choose bri nging up, although he was reveal at sports. BECKERS FAMILY His father is a business man. His father had left field school in Montreal after the 8th crisscross beca use of wides and go he was vehement to make gold. His mother alike left after the 8th grade because girls were not expect to get much assertment.He has deuce sisters, Wendy and Natalie, and one brother, Marvin. He married for the source clipping in 1954, and has two daughters from that join, Judy and Catherine He married for the second age in 1980 to Guity Nashat as his low gear wife died in 1970. This gave him two stepsons, Michael and Cyrus, to go with two daughters. Guity is the one who overcame his reluctance to do the Business Week columns. She is an historian of the Middle East with professional interests that circle his own on the business office of women in stinting and amicable life, and the causes of frugal growth.The personal and professional compatibility she provided has made his life so m uch better. go down CAUSE OF THE REASON WHY BECKER ENTERED INTO THE ECONOMICS DEPARTMENT His father but him with semipolitical and financial news. After his father lost near of his sight, he had the task of reading him stock quotations and other reports on financial organic evolutions. by chance that stimulated his interest in frugalal science, although he was rather bored by it. He had whatsoever(prenominal) a(prenominal) lively discussions in the house closely government and justice.This explicates why by the age he finished high school, his interest in mathematics was beginning to compete with a desire to do something useful for society. These two interests came together during his freshman year at Princeton, when he accidentally took a unravel in political miserliness, and was greatly attracted by the mathematical rigor of a subject that dealt with fond shaping. HIS ACADEMIC EXCELLENCE Becker accurate his B. A in economics at Princeton University in the y ear 1953. He took a hardly a(prenominal)er extra courses during degree, and he chose reading courses in redbrick algebra and differential equations.He completed a Ph. D. at The University of lettuce in 1955. HOW THE INVOLVEMENT IN MATHEMETHICS HELPED IN HIS PROFESSION Till now, his heavy investment in mathematics at Princeton prep ard him advantageously for the increasing use of mathematics in economics. He began to lose interest in economics during his senior (third) year because it did not calculate to deal with master(prenominal) sociable problems. He contemplated transferring to sociology, but tack up that subject too trying. Fortunately, he decided to go to the University of Chicago for ammonium alum work in economics.HIS WORK WITH MILTON FRIEDMAN He worked with Milton Friedman in 1951 on microeconomics which was the root cause of the excitement about economics. He came to know that economic guess was not a game con melt by able academicians, but was a powerful t ool to analyze the real world. His course was filled with insights twain into the structure of economic guess and its application to practical and profound questions. That course and subsequent contacts with Friedman had a king-size(p) install on the direction capturen by his search.He employ some of the economists theories in his various branch of query work. BECKERS ACHIEVEMENTS He publish two conditions in 1952, base on his interrogation at Princeton. He published an article in 1957, which was pen along with Friedman and a book based on his Ph. D. dissertation. He wrote a book on tender detonator which was his first explore confound for the National Bureau of Economic Research. He in any case wrote frequently cited articles on the tryst of time, disgust and punishment, and anomalous port. He began a workshop at Columbia on diligence economics and related subjects.Becker along with George Stigler wrote two influential papers together a polemic one on t he stability of tastes, and an early treatment of the principle-agent problem. He had published a briefly paper on economics of politics in 1958. In the eighties he published two articles that developed a theoretical stupefy of the role of special interest groups in the political process. A series of articles in the 1970s culminated in 1981 in A Treatise on the Family, and a greatly expanded edition was published in 1991. Until 1985, he had published lone(prenominal) technical books and technical articles in professional journals.He was asked to economize a monthly column for Business Week magazine in about 800 words per column without using any technical jargons which patronageed the business and professional readers of the magazine. BECKERS HONOURS He has won the Seidman pose from presidency of the Ameri sens Economic Association. He has won the first social science Award of Merit from the National Institute of Health. Becker won the tin kindle Bates Clark Award of the Am erican Economic Association in 1967 and was president of that standstill in 1987. He was awarded the Nobel Prize in economic science in 1992He received the United States Presidential Medal of Freedom in 2007. HOW DID HE APPLY ECONOMICS TO THE SOCIAL ISSUES? The book which was published in 1957 contains the first transcriptionatic effort to use economic conjecture to analyze the make of prejudice on the honorarium, employment and occupations of minorities. It started him the path of applying economics to social issues, a path that he has continued to follow. The book was very favorably reviewed in a few major journals, but for several years it had no visible impact on anything.Most economists did not think racial secernment was economics, and sociologists and psychologists loosely did not believe he was add to their fields. However, Friedman, Lewis, Schultz, and others at Chicago were confident that he had written an important book. The reason for him to continue in economics was the state who supported him with volitioningness. HIS FIRST STEP IN TO THE PROFESSIONAL LIFE After his third year of graduate story he became an Assistant professor at Chicago. He had only few classes of teaching, so he could concentrate mainly on research.However, he matt-up that he would become more independent if he left the insane asylum and concentrate only on the research. After three years in that position, he withdrew much larger salary from Chicago to come a same appointment at Columbia unite with one at the National Bureau of Economic Research. For twelve years he dual-lane his time in the midst of teaching at Columbia and doing research at the Bureau. HIS EXPERIENCE DURING THE DOCTORATE DEGREE IN CHICAGO UNIVERSITY The workshop on weary economics and related subjects involved transplanting the workshop system of supervising doctoral research from Chicago where it originated.After a few years, Jacob Mincer yokeed the Columbia de relegatement and became co-d irector of the workshop. They had a very excite atmosphere and attracted nigh of the best students at Columbia. Both Mincer and Becker were doing research on homo cracking before this subject was adequately comprehended in the profession at large, and the students found it fascinating. They were also working on the storage assignation of time, and other subjects in the forefront of research. HIS FOCOUSED AREA OF WORK in the first place he worked on the family after returning to Chicago. He had much preferably use economic hypothesis to try to understand birth rank and family size.He now began to consider the whole range of family issues marriage, divorce, self-sacrifice toward other members, investments by p bents in children, and long term changes in what families do. He has tried not only to understand the determinants of divorce, family size, and the alike(p), but also the effects of changes in family composition and structure on inequality and economic growth. Most of his research on the family, and that by students and faculty at Chicago and elsewhere was presented at the Workshop in Applications of Economics that Sherwin Rosen and Becker run.WAS HIS WORK BEEN RECOGNISED BY some other ECONOMISTS? For a long time his type of work was either ignore or strongly disliked by some of the leading economists. He was considered counselling out and perhaps not really an economist. But younger economists were more sympathetic. They may disagree with his compend, but accept the kind of problems, study as ameliorately permit. HIS SECOND STEP IN TO THE PROFESSIONAL LIFE In 1983, the Sociology Department at Chicago offered him a joint appointment. He was happy to accept because this was an outstanding department.James Coleman and Becker shortly in that locationafter began an interdisciplinary faculty seminar on rational plectrum in the social sciences that has been outlying(prenominal) more successful than they anticipated. 2. 0 * *BECKERS CONT RIBUTION TO ECONOMICS major APPLICATION OF BECKERS MODEL TO DIFFERENR TYPES OF sympathetic BEHAVIOUR Investments in human capital Behavior of the family (or phratry), including dispersion of work and allocation of time in the family abuse and punishment and Discrimination on the grocerys for cut into and safes.INVESTMENTS IN HUMAN CAPITAL Gary Beckers most noteworthy contribution is perhaps to be found in the atomic number 18a of human capital, i. e. , human competence, and the consequences of investments in human competence. The theory of human capital is considerably older than Beckers work in this field. His first off achievement is to fork up suppose and formalized the microeconomic foundations of the theory. In doing so, he has developed the human-capital hail into a general theory for determining the distribution of labor income.The predictions of the theory with look on to the betroth structure bedevil been formulated in so-called human-capital- requital e conomic consumptions, which specify the relation between meshing and human capital. These contributions were first presented in some articles in the early sixties and were developed further, both theoretically and semiempirically, in his book, Human Capital, written in 1964. The theory of human capital has created a uniform and generally applicable analytical framework for perusing not only the return on education and on-the- suppose training, but also wages differentials and wage profiles over time. another(prenominal) important applications, pursued by various economists, include a breakdown into components of the particularors underlying economic growth, migration, as well as investments and earnings in the health sector. The human-capital come also admirers develop trade patterns cross sorts countries in fact, differences in the supply of human capital among countries give been shown to watch more explanatory power than differences in the supply of real capital. domi cile AND FAMILY Gary Becker has carried out an even more radical extension of the applicability of economic theory in his analytic thinking of relations among individuals outdoor(a) of the commercialize system.The most notable example is his analysis of the do works of the family. These studies are summarized in his book, A Treatise on the Family, written in 1981. A fundamental idea in Beckers analysis is that a nursing home can be regarded as a diminished factory which produces what he calls basic goods, much(prenominal) as meals, a residence, entertainment, and so on , using time and input of ordinary marketplace goods, semi-manufactures, which the household purchases on the market. In this type of analysis, prices of basic goods yield two components. st is comp fig outd of the direct embody of purchasing intermediate goods on the market. 2nd is the time expenditure for end product and consumption of the good in question for a specific good, conviction expenditure ? wages ? time worn-out(a) per unit of the good produced in the household. This implies that an increment in the wage of one member of the household gives rise not only to changed incentives for work on the market, but also to a dismissal from more to less time-intensive product on and consumption of goods produced by the household, i. e. , basic goods.Instead of an analysis in foot of the conventional wave-particle duality between work and untenanted, Beckers pattern provides a general theory for the households allocation of time, as exemplified in the essay, A Theory of the Allocation of Time, from 1965. This prelude has turn out to be a highly useful foundation for examining many different issues associated with household look. Becker has gone even further. He has formulated a general theory for deportment of the family including not only the distribution of work and the allocation of time in the family, but also decisions regarding marriage, divorce and children.As real wages increase, along with the possibilities of substituting capital for labor in housework, labor is released in the household, so that it becomes more and more uneconomical to let one member of the household specialize wholly in household labor (for instance, child care). As a result, some of the familys previous social and economic functions are shifted to other institutions such as firms, schools and other earth agencies. Becker has argued that these processes pardon not only the increase in married womens job fellowship outside the home, but also the rising tendency toward divorce.on board Beckers analysis of the distribution of labor and allocation of time in the household, his most influential contribution in the context of the household and the family is likely his studies on fertility, which were initiated in an essay entitled, An Economic Analysis of Fertility, 1960. Parents are assumed to encounter gustatory perceptions regarding both the number and education al level of their children, where the educational level is stirred by the amount of time and other resources that sustains spend on their children.Investments in childrens human capital may then be derived as a function of income and prices. As wages rise, parents increase their investments in human capital, have with a decrease in the number of children. Becker uses this theory to explain, for example, the historical winnow out in fertility in industrialized countries, as well as the magnetic variations in fertility among different countries and between urban and rural areas. In particular, the highly extensive family constitution in Sweden, to which Becker a good dealtimes refers, suggests the merits of an economic accession to the analysis of these issues.Gary Beckers ideas father rule research in the economics of the family, moldable the tools we use, the questions we ask, and the answers we give. The foundational assumptions of Beckers economic antenna shot to the family maximizing sort and offset as well as such immemorial supplemental assumptions as household employment and interdependent preferences, are now widely accepted not only by economists but also by family sociologists, demographers, and others who study the family.Yet the fire and provocative implications of Beckers economic come along to the family do not follow from the foundational assumptions or from the primary appendix assumptions. Instead they depend on con tried auxiliary assumptions to which neoclassical economics has no payload and which lack empirical support. hatred AND PUNISHMENT The third area where Gary Becker has applied the theory of rational bearing and human capital is crime and punishment.A deplorable, with the exception of a throttle number of psychopaths, is assumed to react to different stimuli in a predictable (rational) way, both with respect to returns and be, such as in the form of expected punishment. Instead of regarding criminal le gal action as irrational way associated with the specific psychological and social status of an offender, criminality is analyse as rational behavior under uncertainty. These ideas are set forth, for example, in Beckers essay, Crime and Punishment An Economic Approach, 1968, and in Essays in the Economics of Crime and Punishment, 1974.Empirical studies related to this attempt specify that the type of crime affiliated by a certain group of individuals may to a large extent be explained by an individuals human capital (and hence, education). These empirical studies distinction also shown that the probability of getting caught has a more deterrent effect on criminality than the term of the punishment. Beckers analysis of time allocation is by no call backs confined to reasoned activities it includes various forms of crime.In a seminal paper (Becker, 1968) it was argued that crime is not an aberration outside the reaching of rational analysis, but rather the predictable outcome of opportunities for gain. He argues that a decision to lock in in outlaw(prenominal) activity is the outcome of an single calculus benefits and cost (both monetary and non-monetary) are weighed up, and the individual makes a decision which bounds the expected balance of them. atomic number 53 way to conceptualize decisions of this kind is as a rather special kind of investment activity.Many of the essential decision variables-probability of apprehension and conviction, likely punishment, substitute earnings possibilities in legitimate occupations are empirically observable, and hence their effect on observed crime rate can in principle be tested. As habitual Beckers contribution has mainly been to analyze and suggest possibilities for hypothesis testing, but his graduate students and other interested economists surrender been quick to pick up the challenge.In the last decade a good deal of try out has been compile to support the plausibility of Beckers contention that c riminal behavior responds to changes in costs and benefits. Un unremarkably for Becker, the competition is couched throughout in normative terms. The stumper of criminal behavior put forward is devised to be used in conjunctive with cost functions for law enforcement and a simpleton social wel farthere function in order to generate goals about the optimal levels of insurance variables such as the extent of enforcement, type of punishment and perhaps even what should e a crime. Becker is not, however, arguing for major policy changes. Given the behavioral responses to legal and illegal incentives which he discerns, and addicted the costs and benefits of enforcement and punishment programs, he suspects that the authorities, at least in the USA, get things roughly right perhaps a surprising conclusion, given his scepticism of the efficacy of the government action in other spheres. on that point seem to be two main weaknesses to Beckers arguments.The first is the assumption of s ocial homogeneity implicit in the notion of a social welfare function, when it is widely held (not least among economists) that some groups of the population shoot greater political power than others, leading to legislation and enforcement patterns which reflect the find out of sectional interests. Secondly, it is difficult not to feel that Beckers en thenceiasm for the economic approach does tend at times to run away with him.Although differences in incomes and assets, preference earnings possibilities, probabilities of conviction and so forth are much more important in determining behavior than they are often given credit for, there are surely variations in attitudes and degrees of honesty which travel the propensity to commit crimes even among individuals facing similar economic circumstances. duration Becker would accept this, by implication he regards them as not oddly significant, possibly assuming that such variations in tastes are randomly distributed. ECONOMIC DISCRIM INATION some other example of Beckers unconventional application of the theory of rational, optimizing behavior is his analysis of discrimination on the basis of race, sex, and so forth This was Beckers first significant research contribution, published in his book entitled, The Economics of Discrimination, 1957. Discrimination is delineate as a situation where an economic agent is prepared to discover a cost in order to refrain from an economic transaction, or from entering into an economic contract, with someone who is characterized by traits other than his/her own with respect to race or sex.Becker demonstrates that such behavior, in purely analytical terms, acts as a tax wedge between social and private economic rates of return. The explanation is that the discriminating agent behaves as if the price of the good or service purchased from the discriminated agent were higher than the price actually paid, and the interchange price to the discriminated agent is lower than the pri ce actually obtained. Discrimination thus tends to be economically detrimental not only to those who are discriminated against, but also to those who practice discrimination.Although Beckers writings range far and wide we can trace a logical development and a methodological accord in his work. The signs are there in his first major domaination, The Economics of Discrimination (Becker, 1957, 1971). This monograph, based on his doctoral thesis, appeared when Becker was 27. By his own account, it was greeted with languor or hostility by fellow economists. Given the clever atmosphere of the mid-1950s this is probably explicable.The book starts from the position that economic inequality between two groups blacks and whites, women and men or whatever -is not of itself evidence of discrimination in a market economy. In such an economy, variations in earnings, for instance, can be expected to occur between individuals or groups on a systematic basis, reflecting variations in borderlin e productivity and hours worked. What is needed is to separate out differentials due to variations in such factors as education, skills and job experience, in order to leave a residual due to pure discrimination, Beckers primary concern.To this end, Becker defines a market discrimination coefficient, Which in principle would measure the extent of this residual? What Becker is attempting to show is that pure discrimination is evidently a special kind of taste which, like the taste for apples or (Beckers pre-Womens Lib example) Hollywood actresses, can be analyzed in economic terms. As with these other commodities, pure discriminations consumption is conditional upon variables such as income and price.The highly controversial point that Becker is making is that discrimination in this sense is not, as is commonplacely assumed, a means of raising the discriminators cash income, but actually imposes costs on the discriminator as well as the party discriminated against. Where discrim ination exists, then, the discriminator is evidently willing to pay these costs in put back for the benefit of indulging a taste. The argument rests on a clever analogy with international trade. Suppose there are two economies, Whiteland and Backland, which initially do not engage in trade. deep down each country, however, perfect competition is the rule.This means, as the neoclassical textbooks tell us, that the incomes of owners of factors of drudgery will reflect coitus factor scarcities. thus in Whiteland, where labor is assumed to be scarce and capital abundant, wages will be relatively high and rates of profit will be relatively low. By contrast, Backland (where labor is abundant and capital scarce) is characterized by low wages and high rates of profit. If trade and factor mobility are now permitted, theory predicts that labor and capital movements will occur, so that the long result is that profit rates and wage rates will each be equalized in the two economies.As a re sult of resources moving from areas where their marginal productivity is low to those where it is high, aggregate world output is increased. The analogy is obvious, and the conclusion important just as both of these countries can in principle gain from trade and mobility, so can both blacks and whites in an economy gain from the absence of discrimination, which in this context seems equivalent to some form of trade barrier, 3 or, to put it differently, both blacks and white can lose from discrimination.Lack of space precludes the minute examination of the implications of Beckers argument, and indeed of the many objections which have been come ond to it. Most of these objections have centered on the assumption of perfect competition in his beat if such a condition is dropped, optimal tariff theory suggests that in some cases discrimination (while reducing total output) could increase the income of the discriminating group, which would neutralize Beckers whole analysis. Becker, h owever, is clearly aware of this criticism, and it is instructive to see why he must(prenominal) reject it.He believes that so pervasive a phenomenon as discrimination cannot be adequately explained by market imperfections for market imperfections, most Chicago economists agree, disappear in the long run. In Beckers first important publication, two central features of his work the insistence on using given preferences, costs and incomes to define a situation where individuals make decisions, and the concern with long-run symmetricalness. THE ECONOMIST AS EMPIRE-BUILDER Few contemporary economists have done as much to extend the generality and range of economic theorizing as Professor Gary S. Becker of the University of Chicago.With the exception of one or two papers written as a graduate student, all Beckers publications have applied economic reason out to aspects of human behavior which have usually been classified as outside the scope of economics, at least since the disciplin e started to give itself scientific expose in the latter years of the nineteenth century. These scientific pretensions were associated with the introduction of mathematical techniques from the fields of physics and mechanics, often by professionals trained in those disciplines many economists then, and not a few since, resented the intrusion of these alien elements.Similarly, Beckers intrepid expeditions into the jealously-guarded territories of sociology, political science, demography, criminology and biology have encountered considerable resistance. While it is too early to direct the ultimate outcome of these imperialistic excursions, the increasing numbers of economists eager to join Becker in search of plunder have already forced some of the initially-scandalized natives to come to a modus Vivendi with the intruding barbarians. Areas for co-operation rather than conflict are earnestly being sought, as we shall note later. FERTILITYBeckers contiguous important sack into soc iological country was to be a paper on the economics of fertility written for the National Bureau of Economic Research (1960b). Although political economy was once about involved with demography (witness Malthuss famous essay), for much of this century the study of population was firmly in the muckles of sociologists and un-theoretical number-crunchers. A few tentative attempts had been made to relate birth rates to economic variables, but Beckers paper went way beyond this. Here the decision to have children is firmly integrated deep down the familiar framework of neoclassical economics. more(prenominal) particularly, Becker adopts the startling and controversial position that children are in important regard analogous to consumer durables such as automobiles, TV sets and dishwashers thus the economic theory which has proved fruitful in relation to these commodities can be applied equally to human beings. He argues that, at least under modern conditions, the raising of childr en involves a net cost to their parents. Yet passel do continue to have children, despite the availability of effective contraception. therefore if people choose to have children it is because they obtain ample returns to mend for the costs involved.These costs include such obvious things as food, array and schooling. Perhaps more importantly, however, they also include costs in terms of agnate time, a scarce commodity which has preference uses. Indeed, if one alternative is to use this time in the labor market, a comfort (its prospect cost in the jargon) can be put on it which will indicate that a very large proportion of the total costs of childrearing is accounted for by parental time. The existence of these net costs indicates that children are some form of consumer good their spread over time indicates we are dealing with a consumer durable.They therefore have to compete with other consumer durables for a limited share of the household budget more children means less high fidelity equipment or a smaller car. Once this rather bizarre resemblance is admitted, it opens up the likelihood that decisions to have children will be affected by such variables as their price (in terms of alternatives foregone) and the size of the household budget. As we have indicated, Becker accepts Friedmans view that the usefulness of a hypothesis depends on its ability to explain or predict.So how does Beckers approach fare in this respect? right away we are confronted with a problem. Broadly speaking, the demand for consumer durables tends to rise with income on Beckers reasoning we might expect the demand for children to follow a similar pattern. Yet there is much evidence to suggest that family size declines with income. How does Becker grip this apparent refutation of his approach? Are babies inferior goods? One argument Becker offers in order to re lap this difficulty is kindle in the unaccented of his later work.This is the argument that the cost of rearing children tends to rise with family income, largely as a result of the higher opportunity cost of parental time. At any particular moment better-off families tend to be better enlightened and thus to have greater earning power over time, all earnings tend to rise as income rises. The argument can be illustrated diagrammatically. In Figure 1, an increase in income-illustrated by a parallel outward shift of the budget backwardness -leads to increases in the consumption of both competing consumer durables and babies, if the relative price of these commodities remains constant.At the point of tangency between a new (higher) indifference crape and the new budget constraint, more babies (B2) are chosen. If, however, the increased income results largely from higher wages paid to family members (a highly glib assumption), this will raise the opportunity cost of time spent on rearing children, and thus increase their relative price. The budget constraint pivots, as in Figure 2, and the n ew preferred combination of babies and other consumer durables may involve a smaller desired family size. drawframe It is ingenious, if not altogether convincing There is a suspicion that evidence Becker uses to support his arguments is highly selective, and moreover some of the generalizations he makes are tractable to alternative interpretations for instance the observed inverse relation between education and family size could have nothing to do with the opportunity cost of parental time, but a lot to do with the different values and attitudes education might be expected to inculcate.However Beckers approach is more arguable in relation to short-term variations in fertility economic factors seem far more significant here than ad hoc changes of tastes. In his approach empirical generalizations are linked to a broader theoretical framework this is why, like it or not, it has stimulated so much further work in this field. THE ALLOCATION OF TIME We have seen something of the emphasi s which Becker places on the value of time in his analysis of economic behavior.This concern led to an important article which generalized the question of time allocation and simultaneously provided a basis for the reformulation of standard Consumer theory (Becker 1965). Before Becker, the established way to deal with time in the context of consumer theory was to concentrate on a simple dichotomy between work and empty. Work meant paid work in the labor market, by means of which individuals were able to obtain market-produced goods and run, which were the objectives of economic activity. In this context, vacant clearly has an opportunity cost, the goods and services foregone by not working.If individuals choose not to work all the hours they could, this must be because leisure itself is a good, some of which is consumed in preference to other goods. so leisure can be incorporated into standard analysis very easily, and from the time spent on leisure, we can deduce its complement , the time spent working. Thus the supply of labor is linked to the demand for goods. Becker however takes the view that time has more than two uses. Certainly, as in the traditionalistic approach, time can be used in the labor market. It can also, however, be used in many types of non-paid work (housework, do-it-yourself etc. . Furthermore all consumption takes time too. He suggests therefore that we abandon leisure as a separate category all leisure involves some consumption and all consumption involves some leisure. Instead of a choice between consumer goods and leisure, the relevant choice is taken to be that between various consumption activities which use different combinations of market-produced goods and services (which have to be purchased with funds largely acquired through the sale of labor time in the market) and time spent in household production.Becker argues that instead of a choice between paid work and leisure we should analyze a choice between high time activities (like a home-prepared meal) and low time activities (like the purchase and consumption of a hamburger). The choice set is lastly strained by the limited time we have available, and the productivity of this time in its various uses. If all our available time were to be allocated to paid work, the value of the time in this use is termed (on Friedmans suggestion) full income.Some of the full income, however, will normally be used for consumption and domestic production, using as complementary inputs in the domestic production process goods which are purchased with the reward of paid work. All the predictions obtained from the standard theory can be obtained in this framework as well for instance changes in the wage rate alter the slope of the full income budget constraint, while increases in non-work income shift the constraint outwards in each case we would expect the allocation of time to be affected whether we apply the Becker analysis or the traditional approach.But in addition Beckers method allows further influences to be incorporated. Thus a change in the technology of household production the development of labor-saving gadgets -economizes on time spent in domestic work. People steal more gadgets and spend less time on housework the gadgets can of course be purchased by spending some of the time saved working in the labor market. The relevance of this analysis to such phenomena as the rising labor-force participation of married women should be clear. Similarly transport improvements economize on time and can be expected to affect labor supply.The approach also has the incidental benefit of providing a theoretical basis for the classification of goods as substitutes or complements when goods are no longer seen as the final sources of utility but rather as inputs in a household production process, it is rather easier to see why the consumption of certain commodities is linked. drawframe Figure 2 The ends-means spectrum reflected by Beckers work Becker s theory of time and consumption does establish new theory, in that it proposes an alternate ensample to the then-accepted economic model of consumption (Becker proposes consumption be treated as a form of production).In this regard, Becker breaks the ground for new theory. MARRIAGE Another of Beckers path breaking ventures is his development of an economic theory of marriage (1973, 1974), part of a growing literature on the economics of the family stimulated by his work and that of Theodore Schultz-on fertility and human capital. Once Beckers method is understood, the relevance of his approach to the institution of marriage becomes apparent. Here is a major and persistent phenomenon with ramifications in every economy. Whatever the precise legal arrangements, the majority of adult cosmos have married throughout recorded history.Individuals (or their parents in some cultures) choose amongst competing electromotive force spouses in an attempt to maximize utility, measured in Becker s terms by the consumption of household-produced commodities of the kind discussed earlier. The ubiquity of marriage suggests to Becker that male and female labor is complementary in certain types of household production, notably the rearing of the partners own children. An individual marries when the expected gain from a partnership exceeds the expected cost of marriage in terms of the alternatives foregone (staying single or marrying the next best alternative spouse).Because of imperfect information, individuals engage in search. This is costly, and therefore individuals may eventually settle for spouses with less than ideal characteristics. Or they may engage in bargaining to achieve compensatory concessions these may include sums of money (dowries etc. ) or behavioral commitments (promises to give up fishing). In Beckers view, however, there is sufficient freedom of choice and sufficient information to ensure an remainder where there is a Pareto-optimal sorting of partners (any rearrangement of couples could only increase some individuals utility at the cost of reducing that of other individuals).The use of the household production approach as an analytical framework may seem simply an economists joke, an intellectual game certainly some of its conclusions seem banal. But it does throw up interesting predictions which other methodologies do not. For instance the approach predicts that gains from marriage-and therefore, presumably, the probability of marriage -will be greater for couples between whom there is a considerable variation in earning power, basically because there are greater gains from trade within such a marriage if one partner specializes in paid work and the other in household production.The analysis is developed further to incorporate non-selfish motives for entering marriage. Caring for the partner is hold ind in the model this means that the individuals utility function includes the partners consumption as well as his or her own. This is shown to affect the allocation of output produced by the marriage and increase the potential gains from it. The analysis is also linked to earlier work Becker produced on charity and social interaction. over again the model is not tested in a systematic way and we occasionally get the impression that the anecdotal evidence adduced is of slight value.However Becker has produced another(prenominal) paper which tests some of the ancillary predictions of the theory with reference to data on marital instability. For instance, the approach suggests that major changes in the variables on which potential spouses make their decisions to marry will make them reconsider their decisions if divorce is cheap, marital detachment may follow. This appears to be the case. For example, where earnings are unexpectedly higher or lower than primarily anticipated, the probability of divorce increases.The amount of time spent in search is also related to marital instability those marrying young, on the basis of limited information about the characteristics of their partner and available alternatives are particularly liable to divorce. There is, then, something to be said for the approach. While it cannot explain all aspects of marriage, it does at least suggest that human mating behavior is less tightly constrained by biological and institutional factors than is often suggested. THE METHODOLOGY From the material surveyed so far it is possible to infer the common elements of Beckers methodological program.He has however provided us with an essay (Becker, 1976b) which spells out his approach and offers a vigorous defense of it. In his view, his method is applicable to all human behavior its hollow is the combined assumptions of maximizing behavior, market equilibrium and stable preferences, used relentlessly and unflinchingly (Becker, 1976b, p. 5). Consider these assumptions in turn. MAXIMISATION The individual, we have seen, is assumed to maximize utility subject to a budget con straint which, although taking a different form to the traditional one, is nevertheless closely related to it -indeed, subsumes it as a special case.It is important to note that this is not inevitably rationality in the everyday sense of the term it is not necessarily self-interest, nor are the sources of utility necessarily market goods and services. Becker has suggested that social distinction can be a source of utility, and he has gone so far as to claim (Becker, 1962) that even apparently random behavior by individuals can lead to the basic prediction of downward-sloping demand curve which is at the gain vigort of economic reasoning. Behind the maximizing impulse, Becker has suggested, there ultimately lies the principle of natural selection.In a paper (Becker, 1976a) concerned with the origins of selflessness he has expressed approval of the new science of sociobiology, arguing that a synthesis of economic reasoning and natural selection can explain the dominance of maximizi ng behavior. He also suggests that the basic tastes which determine preference patterns can be attributed to natural selection. The principle of maximization must be maintained as a central analytical device. When an apparently juicy opportunity is not exploited we should not take refuge in assertions about irrationality, contentment r convenient ad hoc shifts in values (Becker, 1976b, p. 7). Instead we should look for hidden costs -such as transaction costs, or costs of getting information-which render such opportunities unprofitable. This seems dangerously close to tautology, but the test, as good Chicago economists always tell us, is the predictive power of the hypotheses generated and Becker is optimistic on this score. _MARKET EQUILIBIRIUM _we have already seen the importance of this in Beckers approach. Even where explicit markets do not exist-as in the case of marriage Becker insists that we operate on Chicago as if principles.Note that Beckers approach throughout is to use partial equilibrium analysis. He has written with approval of Marshalls development of this apparatus for taking one problem at a time for analysis. This is revealing when we consider his usual reluctance to enter the arena of normative economics. The tradition of general equilibrium analysis instigated by Walras is associated with the normative position that unfettered competitive capitalist economy tends to produce an optimal allocation of resources.To do this it paints a grossly oversimplified deliver of an economy without any of the subtleties of Beckers approach. Once we admit Beckers contention that preferences are based on home-produced commodities which are not sold in a market of the normal kind, it is less obvious that the traditional prescription of generalized individualistic is the appropriate one. The implications of Beckers approach for general equilibrium remain to be determined. STABLE-PREFERENCES We have seen how fixed tastes play an important role in Beckers analysis.Such tastes are tastes for consumption activities rather than goods themselves, however, and this is a considerable step forward from the traditional view. Becker has, though, gone further than this, and in a paper written with George Stigler (Becker and Stigler, 1977) has tentatively sketched a theory of taste formation. As already suggested, some basic tastes are probably biologically determined, but the behavioral form they take in a complex society needs further explanation. Becker and Stigler introduce an interesting model where tastes are learnt by exposure to new xperiences a special form of learning by doing. Individuals repeatedly exposed to a stimulus acquire, as it were, consumption capital, a body of knowledge and attitudes which raises the marginal productivity of consumption of the good in question, thus increasing demand for it. Within this framework the success of advertising can be rationalized and some kind of explanation can be offered for the increasin g stability of tastes as people get older -they are locked into their accumulated consumption capital, and their reduced pay-off period (life expectancy) discourages further investment.Again, this is all rather fanciful, but it illustrates once more the tenacity of Beckers commitment to the economic approach and his refusal to concede that economics might not have anything to say about some social phenomenon. ROTTEN KID THEOREM Gary Beckers fetid kid theorem suggests that family members, even if they are selfish, will act to care one another if their financial incentives are properly linked. Gary Stanley Becker (born December 2, 1930) is an American economist. Becker creates a hypothetical situation in which children will receive gifts of money income from a wealthy, altruistic parent in order to make them happy.One of the kids is a selfish, noisome kid who would take pleasure in harming his sibling. The theorem posits that the rotten kid has an incentive to avoid hurting his sib ling, and will in fact behave in such a way as to increase her happiness, because her happiness has a direct effect on the amount of money he will receive. Without creating any formal incentive structure, the altruistic parent can induce the rotten child to behave benevolently by making his welfare contingent upon the welfare of his sibling. Altruism is alternately a belief, a practice, a habit, or an ethical doctrine. The theorem suggests that parents should delay gifts of money to their children until they are older, or possibly until after they die. If parents plan to will their children money in accordance with their needs, each child will have an incentive to help his siblings maximize their income, because higher earnings by the other siblings will mean that more of the money will be given to the rotten sibling. electric organ MARKETS An article by Gary Becker and Julio Elias on Introducing Incentives in the market for Live and pinched Organ Donations said that a free market could help solve the problem of a scarcity in organ transplants.Their economic mildew was able to estimate the price tag for human kidneys ($15,000) and human livers ($32,000). It is argued by critics, that this particular market would exploit the underprivileged donors from the developing world. This view was endorsed by the National Kidney Foundation in a proof to the US relation where Dr Francis Delmonico argued that a US congressional endorsement for requital would propel other countries to sanction unethical and unjust standards Another concern is that, if a market for organ donations were introduced, then organs would oftentimes go to the patients most able to afford them, rather than patients who may have more need for them medically. political VIEWS Successful social economy organizations can play an important role in helping deliver many key governmental policy objectives by helping to drive up productivity and competitiveness contributing to socially inclusive wealth creation enabling individuals and communities to work towards renew their local neighborhoods showing new ways to deliver public services andHelping to develop an inclusive society and active citizenship. CONTROVERSY The naiant bloc On the horizontal axis each first step / organization is categorized by its ownership. On the left side the ownership lies with the public authorities whereas on the right side the ownership lies with private people. So the distinctive feature is the ownership of the enterprise. Is it private? Def. The term private industriousness contains all economic activity that deals with the capital of one or many private owners with a view to making moolah. The capital owners bear the risk. Or is it public? Def. The term public authorities contains all economic activity where the public authorities possess the capital on either European, federal, regional or local level. That includes all nationalized and public industries. The upright piano axis On the ver tical axis, each enterprise / organization is categorized by the primary objective of the enterprise. The dimensions range between social purpose on the crest and commercial purpose at the bottom of the axis. On the vertical axis an organization reaches the top, i. e. the social purpose is the primary objective of the enterprise, if you fulfill the quest criteria A Ethical concept** core definition for enterprises / organizations of the social economy) This core definition is the ideal of an enterprise / organization. Only these enterprises / organizations belong to the social economy whose ideal is a clearly defined ethical concept. B missionary station The primary objective of the enterprise is the improvement of the life situation and the chances of disfavor people as well as social cohesion and support. C Social economic creation of value and appropriation of earnings the profits and the resources are verifiably reinvested for the benefit of disadvantaged people.If the crite ria A, B and C are totally fulfilled, an organization can locate itself on top of the vertical axis. There is one last criterion which is not definitional but a describing feature D Intermediary function Social economical enterprises / organizations have an intermediator function between public and private. If none of the criteria above is fulfilled or the primary object of the enterprise is the commercial purpose then an enterprise / organization is located on the bottom of the vertical axis.Location between social and commercial purpose If the criteria above are only part fulfilled the enterprise is located between the top and the bottom of the vertical axis according to its self-definition. 3. 0 EFFECT OF GARY BECKERS CONTRIBUTION TO THE foregone AND CURRENT WORLD ECONOMY An important step in extending the traditional analysis of individual rational choice is to incorporate into the theory a much richer class of attitudes, preferences, and calculations.This step is prominent in all the examples that Gary Becker consider. The analysis of discrimination includes in preferences a dislike of prejudice against members of particular groups, such as blacks or women. In deciding whether to engage in illegal activities, potential criminals are assumed to act as if they consider both the gains and the risks including the likelihood they will be caught and severity of punishments.In human capital theory, people rationally evaluate the benefits and costs of activities, such as education, training, and expenditures on health, migration, and formation of habits that radically alter the way they are. The economic approach to the family assumes that even intimate decisions like marriage, divorce, and family size are reached through weighing the advantages and disadvantages of alternative actions. The weights are determined by preferences that critically depend on the altruism and feelings of duty and obligation toward family members.Since the economic, or rational c hoice, approach to behavior builds on a theory of individual decisions, criticisms of this theory usually concentrate on particular assumptions about how these decisions are made. Among other things, critics deny that individuals act systematically over time and question whether behavior is forward-looking, particularly in situations that 52 Economic Sciences 1992 differ significantly from those usually considered by economists such as those involving criminal, addictive, family, or political behavior.This is not the place to go into a luxuriant response to the criticisms, so Gary Becker simply assert that no approach of comparable to(predicate) generality has yet been developed that offers serious competition to rational choice theory. While the economic approach to behavior builds on a theory of individual choice, it is not mainly concerned with individuals. It uses theory at the micro level as a powerful tool to derive implications at the group or macro level.Rational individ ual choice is combined with assumptions about technologies and other determinants of opportunities, equilibrium in market and nonmarket situations, and laws, norms, and traditions to obtain results concerning the behavior of groups. It is mainly because the theory derives implications at the macro level that it is of interest to policymakers and those studying differences among countries and cultures. None of the theories considered in Gary Beckers lecture aims for the greatest generality instead, each tries to derive concrete mplications about behavior that can be tested with survey and other data. Disputes over whether punishments deter crime, whether the lower earnings of women compared to men are mainly due to discrimination or lesser human capital, or whether no-fault divorce laws increase divorce rates all raise questions about the empirical relevance of predictions derived from a theory based on individual rationality. A close relation between theory and empirical testing hel ps prevent both the theoretical analysis and the empirical research from becoming sterile.Empirically oriented theories encourage the development of new sources and types of data, the way human capital theory stimulated the use of survey data, in particular panels. At the same time, puzzling empirical results force changes in theory, as models of altruism and family preferences have been enriched to cope with the finding that parents in Western countries tend to bequeath equal amounts to different children. Gary Becker has been impressed by how many economists emergency to work on social issues rather than issues forming the traditional core of economics.At the same time, specialists from fields that do consider social questions are often attracted to the economic way of modeling behavior because of the analytical power provided by the assumption of individual rationality. Thriving schools of rational choice theorists and empirical researchers are active in sociology, law, politic al science, history, anthropology, and psychology. The rational choice model provides the most promising basis presently available for a unified approach to the analysis of the social world by scholars from the social sciences.Beckers economic approach to the family is often believed to imply that certain types of targeted government policies cannot affect allocation within families because they will be fully neutralized by individuals responses. For example, the altruist model and the Rotten Kid Theorem imply that which parent receives the child benefit must be irrelevant. But I would like to argue earlier that the interesting implications of the economic approach to the family do not follow from maximizing behavior and equilibrium, the foundational assumptions of the economic approach, but depend on contested auxiliary assumptions.For example, the conclusion that parents will neutralize the child benefit depends on the assumption that family incorporated choice is determined by t he altruist model and that preferences exhibit movable utility. Whether these auxiliary assumptions are described as primary, secondary, or tertiary, is a field of taste. Beckers influence on welfare reform and other specific policies is difficult to assess. In the final paragraph of the General Theory, Keynes famously asserted that, in the long run, ideas are more important than vested interests in public policy he ideas of economists and political philosophers, both when they are right and When they are wrong, are more powerful than is commonly understood. Indeed, the World is ruled by microscopic else. Practical men, who believe themselves to be quite exempt From any intellectual influences, are usually the slaves of some defunct economist? Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. Beckers influence on the economics of the family has been pervasive.His ideas have dominated research in the eco nomics of the family, shaping the tools we use, the questions we ask, and the answers we give. I can testify to their influence on my own thinking, work, and career. The foundational assumptions of the economic approach maximizing behavior and equilibrium as well as such primary auxiliary assumptions as household production and interdependent preferences are now widely accepted not only by economists but also by family sociologists, demographers, and others who study the family.Some of the differences between Beckers original vision and the current state of the economics of the family reflect the evolution of Beckers ideas, sometimes in response to his critics. Other differences reflect ongoing and often vigorous debate. For example, Becker jettisoned stable preferences, which he originally presented as a foundational assumption and dropped his insistence on deferential preferences (altruism), acknowledging the importance of merit goods.With household production, the basic concept is now generally accepted but the secondary and tertiary auxiliary assumptions about household technology are contested. More specifically, Beckers formulation of the household production model assumes the absence of joint production, and some of his most striking conclusions depend on this assumption, yet joint production is present whenever individuals care how they spend their time. No one can predict with confidence the irection the economics of the family will take over the next twenty-five or fifty years. After all, economists took some two centuries to unpack Adam Smiths contributions and establish the conditions under which the conclusions of the invisible hand theorem hold. Perhaps economists unpacking Beckers contributions will move more quickly. Those who complete the task will surely honor Gary Becker for laying the foundations of the economic approach to the family.Organ market view was endorsed by the National Kidney Foundation in a testimony to the US Congress where Dr Francis Delmonico argued that a US congressional endorsement for payment would propel other countries to sanction unethical and unjust standards Another concern is that, if a market for organ donations were introduced, then organs would oftentimes go to the patients most able to afford them, rather than patients who may have more need for them medically. 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