Capital Ideas Blog


By Robin Mordfin

From: Blog

This week's IGM Forum poll honors Nobel Laureate Gary Becker's groundbreaking research into discrimination and families. Using the evaluative and analytical tools of economics, Becker delved into topics that had previously only been studied by sociologists. In 1957 he confronted the economic effects of discrimination in the marketplace and demonstrated that discrimination reduces real incomes in the Economics of Discrimination. Then, after spending two decades studying the family and analyzing marriage, divorce, fertility, and social security, he published A Treatise on the Family in 1981.  

With Becker's research in mind, the forum's administrators first asked the IGM experts if employers that discriminate will be at a competitive disadvantage, if their customers do not care about their mix of employees, as compared with firms that do not discriminate. Seventy percent of the panel's participants agreed. "Discriminating firms pay higher wages and draw from a smaller labor pool, raising labor costs," noted Yale's Joseph Altonji with his vote. Hilary Hoynes of Berkeley agreed, noting, "you want to employ the best workers to maximize profits." 

A significant fifteen percent of forum members were uncertain in their responses or did not respond at all. Those that did answer considered that employees might wish to work in a more restricted environment. As Bengt Holmström of MIT put it, "One can imagine cases where employees care and discriminate, it could (unfortunately) benefit the firm, since customers don't care." Two participants disagreed altogether for similar reasons. 

This week's second question dealt with family by asking if rising market wages are an important reason why family sizes have fallen over the past century in rich countries. Nearly 70 percent of respondents agreed with this. Chicago's Austan Goolsbee echoed the sentiments of many when he noted, "Turns out that it takes a lot of money to raise a kid these days." 

Still, more than 30 percent of panelists were uncertain about this question or did not respond at all. Of those who could not make up their minds, most were concerned about the substitution effect and its relationship to income. "Certainly this is not a theorem—it depends on preferences and technology—income versus substitution effects," wrote Stanford's Robert Hall with his uncertain vote. Similarly, Harvard's Oliver Hart noted, "The substitution effect goes this way, but the income effect can go in the opposite direction; with more income you can afford more children." 

While there is dissension among the esteemed economists who populate the IGM forum, it is a demonstration of Becker's vast influence that overall there was a significant level of agreement among these thinkers. Economics will always be a field with disagreement and opposition, but Professor Becker changed the field by bringing new questions, subjects, and methods to the table and will be long remembered for doing so.


Latest Comments