Gary Stanley Becker (1930-2014): Through My Austrian Window

by Mario Rizzo

It is tempting to over-romanticize a person when he or she is gone. I will strive to be balanced in keeping with how I feel and think about Gary Becker.

I am saddened by his recent death (May 3rd). I have known him since at least 1974 – some forty years. He was not on my dissertation committee but he took a strong interest in and liking to my dissertation on the effect of crime on property values. I audited his version of the first-year sequence in price theory at the University of Chicago. It was, in my view, the best of the three versions I was exposed to. He was a little scary insofar as he lectured and then suddenly would call on a student with a question. Since I was an auditor only, my name did not appear on the class list so I escaped the surprise questioning.

He loved economics and loved to apply it to a wide range of problems. He was no enemy of mathematical economics but thought that theory should be as simple as possible and developed with applications in mind. He was a true follower of Alfred Marshall on this: theory as the engine for the discovery of concrete truth. He was also no “positivist” in methodology. (Some people are quite careless about how they use that term.) He did not think that every statement in economic theory has to be falsifiable or testable. In response to what I believe to be the methodological disaster of behavioral economics, he argued that rationality per se is never testable. What is testable is the complex of assumptions and basic structure of a theory when it is applied to concrete problems. (I add, for those schooled in the philosophy of science, that he invoked the “Duhem-Quine Thesis.” )

He accepted Lionel Robbins’s view that economics is a science of choice generally, and not only a science of market exchange (what used to be called catallactics). In accepting that view he accepted the same perspective on this matter as Ludwig von Mises and the British economist Philip Wicksteed – from both of whom Robbins derived his own view. So there is immediately an undeniable Austrian connection.

Within the past couple of years or so, I wrote to Gary about how I thought his view on “irrational” preferences was similar to those of Philip Wicksteed who, in 1910, argued that irrationalities and inconsistencies of preference tend to be eliminated under the pressure of costs, when in fact those preferences detract from the agent’s attainment of his own goals. He agreed with me, with – in typically Beckerian fashion – the proviso that Wicksteed didn’t have adequate empirical evidence, but Becker did in some of his papers. Okay.

Some Austrians may think that Becker was an enemy of Austrian economics because in 1962 he and Israel Kirzner had a debate in the pages of the Journal of Political Economy. In the fullness of time, I believe that neither of them had a clear view of their own developing perspective in 1962. Nevertheless, Kirzner was emphasizing that some assumption about rationality (later “alertness”) was necessary if a market is to move from disequilibrium to equilibrium. Becker was arguing that you don’t need a rationality assumption to get a negatively sloped demand curve – scarcity is enough. Becker, I believe, was getting at a point later made by Vernon Smith that “rational” behavior can be provoked or engendered by the (institutional) constraints of the system under study. The interesting question is when is alertness the key and when are institutional constraints the key. What is the relative role of each?

I think to a certain extent contemporary economics has moved beyond (but probably not nearly enough) the equilibrium versus process divide. Most good theories borrow from each paradigm. Nevertheless, it is hard to argue that Becker’s relatively equilibrium-oriented approach has not provided useful insights about the real world.

Gary Becker will be missed not only for the breadth and depth of his ideas, but also because of his kindness and generosity to others.

Ave atque vale.