An Essay on Gary Becker for the Hoover Digest

I wrote this short essay on Gary Becker for the Hoover Digest where it will appear in a forthcoming issue:

Gary Becker was “the greatest social scientist who has lived and worked in the last half century.” So declared Milton Friedman a decade ago, and when Gary Becker died earlier this month at the age of 83 the outpouring of praise from his friends and colleagues reminded us why: His unique style of economic analysis, firmly rooted in facts, yielded a host of truly amazing ideas and predictions from the growth effects of investment in human capital to recent changes in the distribution of income and intergenerational mobility. Many of his ideas—including that free competitive markets help combat discrimination and that simple cost-benefit calculations applied to children help determine fertility rates—were originally controversial, but are now widely accepted. I regularly teach them to beginning students in the Economics 1 course at Stanford.

In the rush to describe Gary’s contributions to economics we sometimes forget his deep interest in economic policy. He took economics very seriously, no less so when he applied it to public policy.  For Gary, more than for most economists, economics and economic policy were inseparable.  When he talked to a politician running for office or to a public official already in office, his policy recommendations would be exactly the same as if he were speaking to a student, a colleague, or the readers of his Business Week columns, blogs, and research papers.  There was no difference between his economics and his school of economics.

This close connection between economics and economic policy was most apparent to me during the times of year that he was in residence at the Hoover Institution, which itself has had a focus on policy. For several decades Gary would spend a number of weeks or months of each year at Hoover, and he kept in touch with Hoover policy research projects at other times, from joining in oped columns with other Hoover fellows to commenting on their ideas. His Hoover office was next to mine, and I will miss him, his advice, and our conversations greatly as will many of his other good friends.

Gary’s association with the Hoover Institution began in the 1970s when he served on the influential Domestic Policy Advisory Committee along with Milton Friedman, George Stigler, and James Buchanan all who would also become Nobel prize winners.  He officially became a Hoover Senior Fellow in 1990.

During his stints on the west coast Gary regularly attended the annual Economists Weekend at Villa Cyprus on the Monterey Peninsula hosted by George Shultz.  There he would interact and vigorously debate the hot policy topics of the day with Shultz, Friedman and other economists, but also with practical business people engaged in economics and finance like Walter Wriston of Citibank and Dick Kovacevich of Wells Fargo.  Breakfasts, lunches and dinners became serious seminar-like policy conversations with rejuvenating breaks to play tennis or hike along the rocks and surf. Policy topics would change over the years, but the seriousness with which Gary confronted them did not.

Another example of Gary’s focus on economic policy was the 1996 presidential campaign where Gary was a key economic adviser to candidate Bob Dole.  He focused mainly on education and training issues, but weighed in on all other economic issues from the budget to tax policy. From my vantage point as another adviser, I can tell you that Gary’s advice could not have been more closely aligned to his economic research, with absolutely no hedging or bending if politics threatened to push out good economics. In a campaign memo he wrote: “The value of education, training, and other human capital is no less than that of machines and other physical capital, and almost certainly it is larger,” adding to another memo “We have seen income distribution widen in the United States and other countries” and that reflects “a particular problem with the education and training of those at the lower end of the income distribution.”  He advised that “The aim of policy reforms in this field should be to help stimulate economic growth by encouraging better quality and more effective schooling and training, especially for those at the bottom and middle of the human capital distribution.”  This “will both raise economic growth and also reduce inequality in earnings.”

So long before its recent popularity in policy and political circles, Gary was diagnosing and looking for solutions to income distribution problems.  Indeed some of his most recent work at the Hoover Institution was on income distribution. In a paper presented at the Hoover Economic Policy Working Group last year he applied his unique approach to the problem—one could say he Beckerized the problem—and uncovered a natural connection between changes in the cross sectional distribution of income and changes in intergenerational income mobility.

The recent financial crisis led many to question basic economic principles, but Gary fought back. In the a September 2011 Wall Street Journal article headlined “The Great Recession and Government Failure,” he said that “The origins of the financial crisis and the Great Recession are widely attributed to ‘market failure’….government behavior also contributed to and prolonged the crisis. The Federal Reserve kept interest rates artificially low in the years leading up to the crisis….Regulators who could have reined in banks instead became cheerleaders for the banks….’government failure’ added greatly to its length and severity, including its continuation to the present. In the U.S., these government actions include an almost $1 trillion in federal spending that was supposed to stimulate the economy.”

The “blame the markets not the government” mantra was enough to discourage anybody.  I remember going into his office and griping about it. But Gary could see people’s perceptions changing, and he was pleased that the revival of a highly interventionist approach to economic policy had not captured all of the profession. Gary remained optimistic to the end, and that should be an inspiration to us all.

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