Gary Stanley Becker

drawframe THIS ASSIGNMENT IS WRITTEN FOR PROF. ABDULLA refereeS NAME VAISHNAVI GOPALAKRISHNAN STUDENTS NAME STUDENT ID 00114 MODULE * * MANAGING ENVIRONMENT TITLE * * INDIVIDUAL ASSIGNMENT *HAND-OUT-DATE 06th* kinsfolk 2009 LECTURER * * PROF. ABDULLA HAND-IN-DATE 09*th* NOVEMBER 2009 MASTER OF BUSINESS ADMINISTRATION COHORT 14 SEM 1 ASSIGNMENT answer FORMI hereby decl atomic number 18 that the attached assignment is my own consummation and understand that if I am suspected of plagiarism or an separate(a) tier of cheating my work provide be referred to the programmed director who whitethorn as a result recommend to the Faculty of business that my enrolment in the programmed be discontinued. SIGNATURE _ NAME VAISHNAVI GOPALAKRISHNAN STUDENT NO 00114 ADDRESS S1-12-19, SUTRAMAS APARTMENT, PUCHONG. TEL NO 010- 2740280 SUBJECT MANAGING ENVIRONMENT c in allable DATE 06th NOVEMBER 2009 LECTURER PROF. ABDULLA ASSIGNMENT TITLE INDIVIDUAL ASSIGNMENT DATE SUBMITTED 09th NO VEMBER 2009 ACKNOWLEDGEMENTS* * * I would wish to get under hotshots skin this undertaking by thanking GOD, the cheeseparingly glorified, for providing me with all the strength and courage to complete this report successfully and on clip. I am too extremely grateful to my Managing Environment lecturer, PROF. ABDULLA for his m, patience and guidance throughout the fashioning of this report. TABLE OF CONTENTS 1. 0 BIOGRAPHY OF GARY STANLEY BECKER-ECONOMIC NOBLE LAUREATE drawframe BIRTH OF GARY STANLEY AND HIS ab captain STAGES IN emotional state Gary Stanley Becker is an Ameri poop economist and a Nobel laureate.He was born on December 2, 1930 in Pottsville, Pennsylvania. He did his elementary school day and high(prenominal) school in Brooklyn. Until age sixteen he was to a greater extent(prenominal)(prenominal)(prenominal) interested in sports than in assortectual activities, that he had to take on bingle among them and finally decided to choose education, althoug h he was die at sports. BECKERS FAMILY His father is a business man. His father had leftfield school in Montreal after(prenominal) the 8th grade beca occasion he was burning to buzz off m sensationy. His m another(prenominal)(a) as strong as left after the 8th grade because girls were non anticipate to get much education.He has cardinal sisters, Wendy and Natalie, and unmatched brother, Marvin. He married for the foremost cartridge clip in 1954, and has two daughters from that marriage, Judy and Catherine He married for the second succession in 1980 to Guity Nashat as his first wife died in 1970. This gave him two stepsons, Michael and Cyrus, to go with two daughters. Guity is the wiz who overcame his wavering to do the Business Week columns. She is an historian of the Middle East with professional interests that overlap his own on the role of women in economic and tender life, and the causes of economic growth.The personal and professional compatibility she provi ded has made his life so much better. ROOT CAUSE OF THE REASON WHY BECKER ENTERED INTO THE ECONOMICS DEPARTMENT His father encouraged him with policy-making and financial new-mades. later his father lost most of his sight, he had the task of reading him stock quotations and other reports on financial developments. Perhaps that stimulated his interest in economic science, although he was instead bored by it. He had many another(prenominal) lively discussions in the house about politics and justice.This pardons why by the era he finished high school, his interest in mathematics was beginning to compete with a lust to do whateverthing reusable for monastic order. These two interests came together during his freshman year at Princeton, when he accidentally took a course in economic science, and was greatly attracted by the mathematical rigor of a subject that dealt with affable organization. HIS pedantic EXCELLENCE Becker completed his B. A in economics at Princeton Uni versity in the year 1953. He took a few extra courses during degree, and he chose reading courses in new-fashioned algebra and differential equations.He completed a Ph. D. at The University of lolly in 1955. HOW THE INVOLVEMENT IN MATHEMETHICS HELPED IN HIS PROFESSION Till directly, his heavy investment in mathematics at Princeton prep atomic number 18d him well for the increasing use of mathematics in economics. He began to lose interest in economics during his senior (third) year because it did not search to deal with eventful cordial puzzles. He contemplated transferring to sociology, but found that subject too difficult. Fortunately, he decided to go to the University of Chicago for graduate work in economics.HIS choke WITH MILTON FRIEDMAN He worked with Milton Friedman in 1951 on microeconomics which was the root cause of the devotion about economics. He came to know that economic system was not a game picniced by clever academicians, but was a powerful tool to cr umple the real reality. His course was fil conduct with insights two into the structure of economic conjecture and its application to practical and signifi faecal mattert questions. That course and subsequent contacts with Friedman had a dusky effect on the direction taken by his research.He used many of the economists theories in his various branch of research work. BECKERS ACHIEVEMENTS He print two articles in 1952, base on his research at Princeton. He published an article in 1957, which was written along with Friedman and a concord base on his Ph. D. dissertation. He wrote a book on piece dandy which was his first research project for the National Bureau of stinting Research. He overly wrote frequently cited articles on the allotment of time, crime and punishment, and chimerical carriage. He began a workshop at Columbia on pains economics and related subjects.Becker along with George Stigler wrote two potent papers together a controversial one on the stability of gustatory sensations, and an early treatment of the pattern-agent problem. He had published a short paper on economics of politics in 1958. In the 1980s he published two articles that developed a surmisal-based ride of the role of special interest groups in the political process. A series of articles in the mid-seventies culminated in 1981 in A Treatise on the Family, and a greatly expanded edition was published in 1991. Until 1985, he had published notwithstanding technical books and technical articles in professional journals.He was asked to write a monthly column for Business Week magazine in about 800 words per column without victimisation any technical jargons which interested the business and professional readers of the magazine. BECKERS HONOURS He has won the Seidman prize from presidency of the Ameri brush aside Economic Association. He has won the first societal science Award of virtuousness from the National Institute of Health. Becker won the John Bates Cla rk Award of the Ameri bottom of the inning Economic Association in 1967 and was chair of that association in 1987. He was awarded the Nobel Prize in economic science in 1992He received the linked 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 systematic effort to use economic surmise to analyze the effects of mischief on the dough, employment and occupations of minorities. It started him the path of rescueing economics to social issues, a path that he has continued to get married. The book was very favorably reviewed in a few major journals, but for several years it had no visible impact on anything. around economists did not think racial contrast was economics, and sociologists and psychologists usually did not believe he was contributing to their fields. However, Friedman, Lewis, Schultz, and others at Chicago were confident that he had written an important book. The conclude for him to continue in economics was the state who supported him with willingness. HIS FIRST STEP IN TO THE PROFESSIONAL LIFE after his third year of graduate study he became an Assistant Professor at Chicago. He had only few classes of teaching, so he could center mainly on research.However, he felt that he would become more independent if he left the institution and reduce only on the research. After three years in that position, he withdrew much larger salary from Chicago to take a similar appointment at Columbia combined with one at the National Bureau of Economic Research. For twelve years he divided his time surrounded by teaching at Columbia and doing research at the Bureau. HIS EXPERIENCE DURING THE DOCTORATE DEGREE IN CHICAGO UNIVERSITY The workshop on labor economics and related subjects convolute transplanting the workshop system of supervising doctoral research from Chicago where it originated.After a few years, Jacob Mincer joined the Columbia department and became co-director of the workshop. They had a very exciting gloriole and attracted most of the best students at Columbia. Both Mincer and Becker were doing research on tender-hearted with barbarian(p) in the beginning this subject was adequately appreciated in the profession at large, and the students found it fascinating. They were besides working on the allocation of time, and other subjects in the forefront of research. HIS FOCOUSED AREA OF WORK Mainly he worked on the family after returning to Chicago. He had much earlier used economic theory to try to understand acquit pass judgment and family size.He now began to consider the whole range of family issues marriage, divorce, altruism toward other members, investments by parents in boorren, and long term changes in what families do. He has tried not only to understand the determinants of divorce, family size, and the like, but also the effects of changes in family composition and structure on inequality and econom ic 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 economic science that Sherwin Rosen and Becker run.WAS HIS WORK BEEN RECOGNISED BY OTHER ECONOMISTS? For a long time his type of work was either cut or strongly disliked by most of the leading economists. He was considered focal point out and possibly not really an economist. But younger economists were more sympathetic. They whitethorn disagree with his compend, but accept the cordial of problems, studied as perfectly legitimate. HIS SECOND STEP IN TO THE PROFESSIONAL LIFE In 1983, the Sociology part at Chicago offered him a joint appointment. He was happy to accept because this was an outstanding department.James Coleman and Becker shortly thereafter began an interdisciplinary faculty seminar on perspicacious prize in the social sciences that has been uttermost more successful than they anticipated. 2. 0 * *BECKERS CON TRIBUTION TO ECONOMICS MAJOR APPLICATION OF BECKERS MODEL TO DIFFERENR TYPES OF tender-hearted BEHAVIOUR Investments in human with child(p) Behavior of the family (or house), including distribution of work and allocation of time in the family Crime and punishment and Discrimination on the market places for labor and heftys.INVESTMENTS IN HUMAN CAPITAL Gary Beckers most renowned contribution is perhaps to be found in the area 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 foremost achievement is to use up formulated and formalized the microeconomic foundations of the theory. In doing so, he has developed the human-capital admission into a general theory for determining the distribution of labor income.The previsions of the theory with watch over to the remuneration structure have been formulated in so-called human-capital- clams func tions, which specify the similitude mingled with earnings and human capital. These contributions were first presented in some articles in the early 1960s 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 fashion archetype for analyze not only the return on education and on-the-job training, but also wages differentials and wage profiles over time. other important applications, pursued by various economists, include a breakdown into components of the factors implicit in(p) economic growth, migration, as well as investments and earnings in the health sector. The human-capital approach also dos explain trade patterns across countries in fact, differences in the supply of human capital among countries have been shown to have more explanatory power than differences in the supply of real capital. HOUSEHOLD AND FAMILY Gary Becker has c arried out an even more infrastructure extension of the applicability of economic theory in his synopsis of relations among individuals outside of the market system.The most notable example is his digest of the functions of the family. These studies are summarized in his book, A Treatise on the Family, written in 1981. A basic idea in Beckers analysis is that a household stern be regarded as a small factory which produces what he calls basic priceys, such(prenominal) as meals, a residence, entertainment, etc. , development time and input of ordinary market goods, semi-manufactures, which the household purchases on the market. In this type of analysis, charges of basic goods have two components. st is comp stick upd of the direct be of purchasing intermediate goods on the market. 2nd is the time expenditure for employment and habit of the good in question for a specific good, Time expenditure ? wages ? time fagged per unit of the good produced in the household. This implie s that an ontogenesis in the wage of one member of the household gives summon not only to changed fillips for work on the market, but also to a shift from more to little time-intensive product on and utilisation of goods produced by the household, i. e. , basic goods.Instead of an analysis in terms of the tralatitious dichotomy amid work and leisure, Beckers model provides a general theory for the households allocation of time, as exemplified in the essay, A Theory of the each(prenominal)ocation of Time, from 1965. This approach has turned out to be a highly useful foundation for examining many different issues associated with household expression. Becker has gone even further. He has formulated a general theory for means 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 summation, 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 exertion (for instance, child care). As a result, some of the familys introductory social and economic functions are shifted to other institutions such as firms, schools and other habitual agencies. Becker has argued that these processes explain not only the increase in married womens job participation outside the home, but also the emerging tendency toward divorce.Alongside 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 plausibly his studies on cornucopia, which were initiated in an essay entitled, An Economic compend of Fertility, 1960. Parents are assumed to have preferences regarding both the number and educational level of their children, where the educational level is touch on by the amount of time and other resources that parents 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, combined with a decrease in the number of children. Becker uses this theory to explain, for example, the historical decline in natality in industrialized countries, as well as the variations in fertility among different countries and between urban and rural areas. In particular, the highly extensive family policy in Sweden, to which Becker practically refers, implys the merits of an economic approach to the analysis of these issues.Gary Beckers ideas have dominated research in the economics of the family, shaping the tools we use, the questions we ask, and the answers we give. The foundational presumptions of Beckers economic approach to the family maximizing port and labyrinthine sense as well as such particular auxiliary assumptions as household w ork and interdependent preferences, are now widely received not only by economists but also by family sociologists, demographers, and others who study the family. provided the interesting and provocative suggestions of Beckers economic approach to the family do not follow from the foundational assumptions or from the primary auxiliary assumptions. Instead they depend on contested auxiliary assumptions to which neoclassic economics has no commitment and which lack empirical support. CRIME AND PUNISHMENT The third area where Gary Becker has utilize the theory of rational behavior and human capital is crime and punishment.A criminal, with the exception of a express number of psychopaths, is assumed to react to different stimuli in a predictable (rational) dash, both with respect to returns and costs, such as in the form of expected punishment. Instead of regarding criminal activity as irrational behavior associated with the specific psychological and social status of an offender, criminality is analyzed 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 approach indicate that the type of crime committed by a certain group of individuals may to a large extent be explained by an individuals human capital (and hence, education). These empirical studies have 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 means confined to judicial activities it includes various forms of crime.In a seminal paper (Becker, 1968) it was argued that crime is not an aberration outside the celestial orbit of rational analysis, but or else the predictable outcome of opportunities for gain. He argues that a decision to engage in illegal activity is the outcome of an individu alistic calculus benefits and costs (both monetary and non-monetary) are weighed up, and the individual makes a decision which reflects the expected balance of them. One way to conceptualize decisions of this kind is as a quite a special kind of investment activity.Many of the crucial 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 rates can in prescript be tested. As usual Beckers contribution has mainly been to analyze and suggest possibilities for hypothesis testing, but his graduate students and other interested economists have been quick to pick up the challenge.In the last decade a good deal of evidence has been accumulated to support the plausibility of Beckers quarrel that criminal behavior responds to changes in costs and benefits. Unusually for Becker, the argument is couched throughout in normative terms. T he model of criminal behavior put forward is devised to be used in conjunction with cost functions for truth en abilityment and a simple social welfare function in monastic order to generate conclusions about the optimum levels of policy 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 results to legal and illegal incentives which he discerns, and given 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. There seem to be two main weaknesses to Beckers arguments.The first is the assumption of social homogeneity implicit in the notion of a social welfare function, when it is widely held (not least among economists) that some groups of the populatio n have greater political power than others, leading to legislation and enforcement patterns which reflect the influence of sectional interests. Secondly, it is difficult not to feel that Beckers passion for the economic approach does tend at times to run away with him.Although differences in incomes and assets, alternative 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 impact the propensity to commit crimes even among individuals facing similar economic circumstances. While Becker would accept this, by implication he regards them as not particularly significant, possibly assuming that such variations in tastes are haphazard distributed. ECONOMIC DISCRIMINATIONAnother example of Beckers unconventional application of the theory of rational, optimizing behavior is his analysis of difference on the basis of rac e, sex, etc. This was Beckers first significant research contribution, published in his book entitled, The Economics of Discrimination, 1957. Discrimination is defined as a accompaniment where an economic agent is prepared to incur a cost in order to refrain from an economic consummation, 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 bully agent behaves as if the price of the good or service purchased from the discriminated agent were higher than the price in truth paid, and the selling price to the discriminated agent is lower than the price in truth obtained. Discrimination thus tends to be economically detrimental not only to those who are discriminated against, but also to those who practice disparity.Although Beckers writings range far and wide we can trace a logical development and a methodological consistency in his work. The signs are there in his first major publication, 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 indifference or hostility by fellow economists. Given the talented 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 marginal productiveness and hours worked. What is take oned is to separate out differentials due to variations in such factors as education, skills and job experience, in order to leave a re sidual 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 simply 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 utilisation 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 usually assumed, a means of raising the discriminators silver income, but actually imposes costs on the discriminator as well as the party discriminated against. Where discrimination exists, then, the discriminator is ostensibly willing to pay these costs in exchange for the benefit of indulging a taste. The argument rests on a clever analogy with internatio nal trade. Suppose there are two economies, Whiteland and Backland, which initially do not engage in trade. Within each country, however, perfect competition is the rule.This means, as the neoclassical textbooks tell us, that the incomes of owners of factors of production will reflect relative factor scarcities. and so 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-run result is that profit rates and wage rates will each be equalized in the two economies.As a result of resources moving from areas where their marginal productivity is low to those where it is high, hail world output is increased. The analogy is unequivocal, and the conclusi on 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 detailed examination of the implications of Beckers argument, and indeed of the many objections which have been nip and tuckd to it. Most of these objections have centered on the assumption of perfect competition in his model 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 undermine Beckers whole analysis. Becker, however, is clearly aware of this criticism, and it is instructive to see why he essential reject it.He believes that so pervasive a phenomenon as discrimination cannot be adequa tely explained by market imperfections for market imperfections, most Chicago economists agree, disappear in the long run. In Beckers first important publication, two central takes 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 equilibrium. THE ECONOMIST AS EMPIRE-BUILDER Few contemporary economists have make 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 reasoning to aspects of human behavior which have usually been classified as outside the desktop of economics, at least since the discipline started to give itself scientific airs in the latter years of the ordinal century. These scientific pretensions were associated with the introduction of mathematical techniques from the f ields 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 right smart resistance. While it is too early to forecast 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 kind of than conflict are earnestly being sought, as we shall note later. FERTILITYBeckers coterminous important foray into sociological 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 closely involved with demog raphy (witness Malthuss famous essay), for much of this century the study of population was firmly in the pass aways 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 coordinatedd within the familiar framework of neoclassical economics.More particularly, Becker adopts the startling and controversial position that children are in important respects analogous to consumer durable goods 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 children involves a net cost to their parents. Yet people do continue to have children, notwithstanding the availability of effective contraception. Thus if people choose to have children it is becaus e they obtain decent advan differentiatee to cook up for the costs involved.These costs include such obvious things as food, clothing and schooling. Perhaps more importantly, however, they also include costs in terms of parental time, a scarce commodity which has alternative uses. Indeed, if one alternative is to use this time in the labor market, a value (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 comparison is admitted, it opens up the likelihood that decisions to have children will be adjoined 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? Straightaway we are confronted with a problem. Broadly speaking, the petition 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 handle this apparent refutation of his approach? Are babies inferior goods? One argument Becker offers in order to resolve this difficulty is interesting in the descend 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 be tter educated 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 restraint -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 curve 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 pat assumption), this will raise the opportunity cost of time exhausted on rearing children, and thus increase their relative price. The budget constraint pivots, as in Figure 2, and the new preferred combination of babies and other consumer durables may involve a smaller desired family size. drawframe It is ingenious, if not birthday suit 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 amenable 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 glib 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 cadence We have seen something of the emphasis 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 shopworn 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 leisure. Work meant paid work in the labor market, by means of which individuals were able to obtain market-produced goods and serve, which were the objectives of economic activity. In this context, leisure 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. Thus 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 th e traditional 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 stratum all leisure involves some consumption and all consumption involves some leisure. Instead of a survival of the fittest between consumer goods and leisure, the relevant extract 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 last constrained by the limited time we have forthcoming, and the productivity of this time in its various uses. If all our available time were to be al conciliated 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 proceeds 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-s aving gadgets - carry throughs on time spent in domestic work. People buy 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 expense benefit of providing a theoretical basis for the classification of goods as substitutes or complements when goods are no all-night 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 Beckers theory of time and consumption does establish new theory, in that it proposes an twitch model to the then-accepted economic mod el 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 human beings have married throughout recorded history.Individuals (or their parents in some cultures) choose amongst competing potential spouses in an attempt to maximise utility, measured in Beckers terms by the consumption of household-produced commodities of the kind discussed earlier. The ubiquity of marriage suggests to Becker tha t male and effeminate labor is complementary in certain types of household production, notably the rearing of the collaborationists 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 angiotensin converting enzyme or marrying the next best alternative spouse).Because of imperfect information, individuals engage in search. This is costly, and therefore individuals may last 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 equilibrium 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 o ther individuals).The use of the household production approach as an analytical framework may seem simply an economists joke, an intellectual game sure enough 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 introduced 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. 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 paper which tests some of the ancillary predictions of the theory with reference to data on matrimonial instability. For instance, the approach suggests that major changes in the variables on which potential spouses make their decisions to marry will make them consider their decisions if divorce is cheap, marital dissolution may follow. This appears to be the case. For example, where earnings are unexpectedly higher or lower than originally 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 particula rly 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 look backed 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 core 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 constraint which, although taking a different form to the traditional one, is all the same closely related to it -i ndeed, subsumes it as a special case.It is important to note that this is not necessarily 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 heart 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 altruism he has expressed eulogy of the new science of sociobiology, arguing that a synthesis of economic reasoning and natural selection can explain the dominance of maximizing behavior. He also suggests that the basic tastes which determine preference patterns can be attributed to natural selectio n. The principle of maximization must be maintained as a central analytical device. When an apparently profitable opportunity is not exploited we should not take refuge in assertions about irrationality, satisfaction 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 acquiring 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 immenseness 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 show 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 capitalism tends to produce an optimal allocation of resources.To do this it paints a grossly oversimplified picture 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 laissez-faire 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 f orward 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 increasing stability of tastes as people get older -they are locked into their accumulated consumption capital, and their reduced pay-off per iod (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 rotten nipper theorem suggests that family members, even if they are selfish, will act to help 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, rotten kid who would take pleasure in harming his sibling. The theorem posits that the rotten kid has an incentive to avoid hurting his sibling, 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. ORGAN MARKETS An article by Gary Becker and Julio Elias on Introducing Incentives in the market for Live and Cadaveric Organ Donations said that a free market could help solve the problem of a scarcity in organ transplants.Their economic modeling was able to estimate the price tag for human kidne ys ($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 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 variety meat 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 universe of discourse enabling individuals and communities to work towards regenerating their local neighborhoods showing new way s to deliver public services andHelping to develop an inclusive society and active citizenship. CONTROVERSY The crosswise axis On the horizontal axis each enterprise / organization is categorized by its self-possession. 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 industry contains all economic activity that deals with the capital of one or many private owners with a view to making net income. 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 straight axis On the vertical axis, each enterprise / organization is categorized by the primary objective of the enterprise. The dime nsions range between social answer on the top 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 following criteria A good concept** core definition for enterprises / organizations of the social economy) This core definition is the ideal of an enterprise / organization. Only these enterprises / organizations break down to the social economy whose ideal is a clearly defined ethical concept. B Mission The primary objective of the enterprise is the improvement of the life situation and the chances of disadvantaged 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 criteria A, B and C are totally fulfilled, an organization can locate itself on top of the vertical axis. There is one l ast criterion which is not definitional but a describing feature D Intermediary function Social economical enterprises / organizations have an intermediary 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 partly 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 former(prenominal) 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 dis like 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 choice, approach to behavior builds on a theory of individual decisions, criticisms of this theory usually c oncentrate on particular assumptions about how these decisions are made. Among other things, critics deny that individuals act consistently 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 detailed response to the criticisms, so Gary Becker simply assert that no approach of comparable generality has yet been developed that offers sobering 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 individual 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 sterling(prenominal) 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 helps prevent both the theoretical analysis and the empirical research from becoming sterile.Empirically oriented t heories encourage the development of new sources and types of data, the way human capital theory stimulated the use of survey data, especially 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 depart equal amounts to different children. Gary Becker has been impressed by how many economists want 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. comfortable schools of rational choice theorists and empirical researchers are active in sociology, law, political science, history, anthropology, and psychology. The rational choice model provides the most promising basis presentl y 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 malodorous 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 collective choice is determined by the altruist model and that preferences give transferrable utility. Whether these auxiliary assumptions are described as primary, secondary, or tertiary, is a matter of taste. Beckers influence on welfare reform and other specific policies is difficult to assess. In the final paragraph of the General Theory, Keynes resplendently 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 instauration is ruled by little 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 economics of the family, shaping the tools we use, the questions we ask, and the answers we give. I can test ify 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 salient(ip) 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 nearly 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 pose 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 count ries 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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