The Human Capitalist: Five Minutes with Gary Becker
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University Professor of Economics and of Sociology Gary Becker, PhD ’51 (economics), added to his long list of accomplishments in November when he received the Presidential Medal of Freedom. Even as a grad student, Becker was a pioneer, becoming one of the first economists to study topics traditionally considered the purview of sociologists including racial discrimination, crime, family organization, and drug addiction. His work on those subjects earned him the Nobel Prize in economic sciences in 1992. In 2006, a university-wide research center, the Becker Center on Chicago Price Theory, was named in his honor. Becker spoke with Chicago Booth Magazine recently about his early research, how he started a blog, and what life is like for a Nobel laureate.
Where do you get your research ideas?
It’s hard to say. Ideas come at different moments. When I worked on crime, it just came to me when I was going to park my car and I began to think about whether I should park it illegally or not. There’s no one source.
What about human capital?
The importance of individuals in the economy was neglected in the literature, and a number of people at Chicago started to think about that question. I was one of them. I was still a graduate student. I thought I’d just do a little project on it for the National Bureau of Economic Research. To get connected with them, I submitted a proposal. We got a small grant. The more I worked on it, the more I saw, “Gee, this is a big topic! There’s a lot to be done on this project.” It took me several years to produce my book on the subject.
Do the results of your research ever surprise you?
Yes. If you anticipated all the results beforehand, the analysis wouldn’t be very powerful. Economic analysis is an engine, and when you put this engine to work, you’ll end up in places you didn’t think you could get to before. That’s what research is all about. With my work on the family, or on some aspects of human capital and crime, I always had some results I didn’t anticipate initially.
Where have you been able to see your research applied? For instance, is the business world different because of your work on human capital?
I’d like to think that businesses now appreciate the fact that, by far, their most important assets are their employees, and how they invest in their employees, how they treat their employees, how they raise the skill level of their employees—that is the dominant factor that determines whether they’re going to succeed. Bill Gates once said, “You take away the top 20 employees of Microsoft, we’ll just be an ordinary company. Top employees are what makes us.” And that’s true in a lot of companies.
Businessmen and women now think much more about the role of human capital in their success—how to attract it, nurture it, and invest in it. Certainly the concept of human capital has had a significant influence on business.
You’ve taught here since 1970. Do you think Chicago economics has changed?
Fields evolve. And I think Chicago still emphasizes that economics is a powerful tool for understanding the world, whether it’s finance, accounting, consumer behavior, or antitrust. That remains the same, and that’s been a hallmark of Chicago—to take economics seriously. Economic analysis is important; it’s not just a game being played by clever academics.
The precise things that economists are studying evolve over time as economics itself has evolved: developments in finance, human capital, in theory of a firm, and understanding how firms behave. You can go on and on. Those have changed, and that means a lot of problems that are attracting people are different.
But at a fundamental level, Chicago economics is the same as it was—people taking economics seriously as a tool, an engine for understanding the world, and, hopefully, making the world—the business world and the world of public policy—a better place.
What led to your joint appointment with Chicago Booth?
Shortly after Ted Snyder became dean, he asked me if I would be interested in having a joint appointment. I told him I already was thinking I would like to teach a course on public policy, and that it would fit better in the business school than in the economics department. He said he would be interested in getting involved. Kevin Murphy [George J. Stigler Distinguished Service Professor of Economics] was, too, so we started the course.
It has been advantageous. It’s the kind of course I like giving. It’s not the type of course that fits in so well in the graduate school curriculum of the economics department, but it fits very well in the MBA curriculum because there’s more emphasis on the application without so much on the technique. MBAs don’t have so much technique, which is good up to a point. They are much more worried about the applications.
What do you get out of teaching?
Two things: conveying knowledge to students, and seeing that it changes them as a result. I’ve had many students over the years, and I’ve seen the impact on students who come and tell me—maybe years later—that the courses have changed their lives or affected them greatly. The second thing is to see some students really succeed, whatever it may be at, whether it is in business or academia. It is very gratifying to say you’ve contributed to that success, maybe not in an unimportant way.
The process—instilling knowledge, then seeing some of the outcomes of it—is, I think, what attracts all teachers, what really keeps you at it and why I like to teach.
How did you start writing your blog?
I wrote a monthly column for BusinessWeek for 19 years. When that ended, I took about five months off, but I missed writing. At the time, blogs were about five or six years old. I thought, “I’m not very high-tech, but I’m sure the internet as a way of communicating is going to become increasingly important.” I spoke to Judge Richard Posner [of the United States Seventh Circuit Court of Appeals and senior lecturer in law at the University of Chicago Law School] and he was interested in doing it, so we started this joint blog. I think it is a success. It has been gratifying for both of us and exceeded our expectations. We thought we would do it for a year and see how things go. We have been at it nearly three years now.
How does winning the Nobel Prize affect you?
Of course you become a lot more famous and well-known and invited to a lot of things. But in terms of what it does or what you do, it varies from Nobel winner to Nobel winner. I speak for myself. You get some more money, so you have more financial independence. I never did much consulting so I never had any big source of income. So that was, of course, useful.
The other thing is that it legitimized some of what used to be called “oddball” areas that I was working in—the family, crime, addiction. And it legitimized these areas not only for me, but also for all of my students and others in the profession who were doing that. I got plenty of comments from people I knew who were working on these problems. That was very gratifying. Before, I was worried that I got them into this area that was always under attack and wasn’t so accepted. Now I feel I helped them out a little bit, so I made up for it, to some extent.
The Nobel Prize did not really fundamentally affect what I did. I continued to do my research the same way. I did somewhat more lecturing. I got more invitations to lecture internationally so I ended up doing more of that. But the first thing is the recognition of my type of work; I think that was the most important thing, from my point of view.
What has been your biggest challenge intellectually?
I took a path of research by starting on my doctoral dissertation on racial discrimination that was not popular. Not that people were in favor of discrimination, but it was not a topic that was considered economics. The establishment in those days—schools like MIT, Harvard, Stanford, Yale—did not think what I was doing was really economics. I had to fight against the current for a long time and keep up my optimism and confidence in the face of this neglect or ridicule that I sometimes experienced.
Fortunately I had supporters—some of my teachers at Chicago like Milton Friedman, George Stigler, and Ted Schultz, who had confidence in me. Without that, I probably would have gone into researching more conventional subjects. I felt what I was doing was important, but I needed the support of people I respected, and they gave me that support.
What would you say has been your most important contribution?
My work on human capital, the family, and discrimination. Human capital is the best-known general area. But I am proud of my book on discrimination and my book on the family. I think they made a contribution.
I have about seven or eight active research projects. I’m doing some work on the economics of health. I have worked on economic growth in the past and I’m doing more work on that. Also further analysis of the role of education in the household. I do not have a shortage of things I am working on, I have a shortage of time. I’m busier now than I was 30 years ago, with a lot of demands from journalists and request for speeches. I do not have as much free time as I used to.
Gary Becker was one of the first economists to study topics traditionally explored by sociologists. Check out this sampling of his “oddball” research.
The Economics of Discrimination (1957)
Human Capital (1964)
The Economic Approach to Human Behavior (1976)
A Treatise on the Family (1981)
The Economics of Life, with Guity Nashat Becker (1996)
Social Economics, with Kevin Murphy (2000)