Gary S. Becker’s Economics Imperialism

Investment in human capital- A theoretical analysis GS Becker – Journal of political economy, 1962

A Theory of the Allocation of Time GS Becker – The economic journal, 1965

A theory of marriage- Part I GS Becker – Journal of Political economy, 1973

A theory of social interactions GS Becker – Journal of political economy, 1974

De gustibus non est disputandum GJ Stigler, GS Becker – The american economic review, 1977

A theory of competition among pressure groups for political influence GS Becker – The quarterly journal of economics, 1983

A theory of rational addiction GS Becker, KM Murphy – Journal of political Economy, 1988

Barriers to the advance of organizational science- Paradigm development as a dependent variable J Pfeffer – Academy of management review, 1993

Human capital revisited GS Becker – Human Capital- A Theoretical and Empirical Analysis …, 1994


A history of Becker’s Economics of discrimination by JB Fleury (& how “imperialism” is just ex-post rationalization)


Gary Becker’s concept of human capital – Economist

human capital: the abilities and qualities of people that make them productive  (knowledge + others)

As far back as Adam Smith in the 18th century, economists had noted that production depended not just on equipment or land but also on peoples’ abilities → But treat labour as an undifferentiated mass of workers, lumping the skilled and unskilled together → little thought how such abilities fit with economic theory or public policy
(Arthur Pigou, coining the term “human capital”, believed there would be an under-supply of trained workers → because companies would not want to teach skills to employees only to see them poached by rivals.)

→ in 1950s Becker first examined links between education and incomes →  calculating returns on schooling → the concept of human capital → a full-fledged theory that could be applied to any number of social questions

1] distinguish between specific and general human capital 
→ people acquire general human capital often at their own expense rather than that of employers (e.g. student loan + interns and junior employees being paid lesss as the cost of getting them up to speed)

=> people would be purposeful and rational in calculating how much to invest in their own human capital → compare expected future earnings from different career choices and consider the cost of acquiring the education to pursue these careers
← reality was far messier, with decisions plagued by uncertainty and complicated motivations => model as an “economic way of looking at life”

2] expanded theory
a) younger generations spent more time in schooling
← longer life expectancies raised the profitability of acquiring knowledge
← advances in technology made it more profitable to have skills
b) under-investment in human capital was a constant risk
← young people can be short-sighted given the long payback period for education
← lenders are wary of supporting them because of their lack of collatera

3] beyond returns to individuals from education
a) why some countries fared far better than others:
← to promote income growth, heavy investment in schooling was necessary
b) why firms in poor countries tended to be more paternalistic, providing dormitories and canteens
← they reaped immediate productivity gains from rested, well-fed workers
c) big increases in the numbers of women studying law, finance and science since the 1950s
← the automation of much household work meant that women could invest more in building their careers
d) the shrinkage of families in wealthy countries:
← if increasing value is placed on human capital, parents must invest more in each child, making large families costly.

4] backlash/pushback
← overstated the importance of learning → Education matters only because signaling

5] empirical analyses (Becker stress)
a) 1/4 of the rise in per-person incomes from 1929 to 1982 in America → because of increases in schooling → Much of the rest was a result of harder-to-measure gains in human capital such as on-the-job training and better health
b) success of Asian economies such as South Korea and Taiwan, endowed with few natural resources, as proof of the value of investing in human capital (in particular of building up education systems)
=> original focus on private benefits → expanded to include the broader social gains from having well-educated populations.

6] how to cultivate human capital
a) government ought to pour money into education and make it widely available at a low cost
b) the private gains from education are so big that students should bear the costs

=> Rather than subsidising students who go on to become bankers or lawyers → more productive for the government to fund research and development

7] policy 
“bad inequality” / “good inequality” → Higher earnings for scientists, doctors and computer programmers help motivate students to tackle these difficult subjects → pushing knowledge forward
=> inequality contributes to human capital
=> if gets too extreme → poor families unable to provide → depresses human capital, leaving society worse off

=> more subsidising should be done to invest in early childhood education and improve the state of schools

8] The knowledge economy
→ “economic approach” to look at all human behaviour (the motives of criminals + drug addicts + the evolution of family structures + discrimination against minorities)

→ initially a radical challenge to convention →  went mainstream
← attack:  ← behavioural economics: → limits to rationality in seeking to maximise welfare
← attack; improvements in data collection and analysis gave rise to more detailed empirical research → instead of the wide-ranging concepts

9] a lot others to offer
how governments ought to respond to disruptive technological change
→ From the standpoint of human capital → Technological advances mean that the knowledge that people acquire in school is becoming obsolete more quickly than before
→ longer life expectancies mean that the returns on mid-career training are higher than in the past → designing better systems for lifelong learning



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