Gary Becker, the influential University of Chicago economist who won the Nobel Prize in Economics in 1992, died this weekend at the age of 83. Becker won the Nobel “for having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including non-market behavior.” Becker was a member of CME Group’s Competitive Markets Advisory Council (CMAC) since its inception in 2004, and last year presented at the Global Financial Leadership Conference (video above).
CME Chairman Emeritus Leo Melamed, a close friend of Becker’s, introduced him at a keynote speech he gave at the CME Group Lecture on Global Financial Markets for the Chicago Council on Global Affairs in April 2013. Following are Melamed’s remarks followed by thoughts on Becker’s passing.
Where to begin?
How do you begin to introduce as well known and influential an economist as Gary Becker?
Do I begin by telling you that Gary Becker received the Presidential Medal of Freedom Award in 2007? The Medal of Freedom award, as all of us know, is the highest civilian award in the US.
Or do I begin by explaining that he is credited with the “Rotten Kid Theorem.” The theorem that suggests that “family members, even if they are selfish, will act to help one another if their financial incentives are properly linked.”
Or perhaps I should explain that he is a political conservative, who nevertheless enjoyed sharing a monthly Business Week column for 19 years (from 1985 to 2004), with Alan Blinder, a strong Princeton liberal economist. And that this column morphed into the very successful Becker-Posner Blog, with the highly regarded appellate jurist Richard Posner.
Or maybe instead, I begin by telling you how in high school, back in Brooklyn, Gary Becker faced his first life-changing dilemma. He was both on the handball team, and the mathematics team. In love with and excellent at both disciplines, which career path to follow was a most difficult decision for him. I am not sure where handball would have led him, but fortunately for the world, Gary Becker chose mathematics by the time he entered Princeton. It led him to the field of economics because he thought that might be a more productive social endeavor.
It was a lecture at Princeton by non-other than his eventual teacher and mentor, Milton Friedman on the value of flexible exchange rates which again changed the course of Becker’s life. At the time the concept of flexible exchange rates was, in Becker’s words, “wacko,” yet Friedman’s logic was flawless. It caused Becker in 1951 to follow Friedman to the University of Chicago for his graduate studies.
There, Becker fell in love with the university that John D. Rockefeller said was the greatest investment he ever made. To Becker, the University, seemed to have a “chip on its shoulder.” He liked that. It fostered a revolutionary zeal of experimentation and new ideas. It happened to be what Becker describes as the Golden Age at the U/C with the likes of Milton Friedman, George Stigler, Theodore Schultz, Robert Mundel, Harry Markowitz, to name but a few. Its culture, as we all know, gave rise to an extraordinary number of Nobel Prizes.
Under Friedman’s tutelage, Becker learned that economics “was not a game played by clever academics, but a serious subject that helped us understand the real world we lived in”. It led Becker to the idea of taking the prejudices of workers, employers, and customers, and even governments, and examining them through a stricture of economic analysis. His analysis included such things as investment in human capital, the family, marriage and divorce, crime and punishment and racial and sexual discrimination, and even drug use and addiction. Analysis of these and other social issues represented a new facet for economics.
To no one’s surprise, in 1992 Gary Becker received the Nobel Prize, “for having extended the domain of microeconomic analysis to a wide range of human behavior and interaction including non-market behavior.”
But maybe I should tell you that not only was Milton Friedman Becker’s teacher, friend and mentor, Friedman and Becker shared a fundamental truth that economics, grounded in empirical research, is uniquely suited for understanding the human condition. Thus, while Friedman’s fame is based in part on contributions to macroeconomics, Becker is recognized for expanding microeconomics to include a wide array of subjects.
To be clear, Becker learned from Friedman that which is best described in a little ditty written and sung by former Secretary of State George Schultz on the occasion of Friedman’s 90th birthday:
“A fact without a theory
is like a ship without a sail.
Is like a boat without a rudder.
Is like a kite without a tail.
A fact without a theory is as sad as sad can be.
But if there’s one thing worse in this universe,
it’s a theory . . . without a fact.”
This explains why the Becker-Friedman Institute for Research in Economics, was established just two years ago as a collaborative, cross-disciplinary center for research in economics.
Or maybe it is simply enough to tell you that Gary Becker exemplifies a scholar committed to the free market ideal, “unafraid to cross boundaries, share ideas, and ask difficult questions.”
I’ll miss Gary Becker as a friend and as an advisor on the CME Group Competitive Markets Advisory Council. The world will miss him for the great and lasting contributions he made to better understanding the world around us through economics. CME Group extends our deepest sympathy to his wife Guity, daughters Catherine and Judy, his entire family, as well as students and faculty members of the University of Chicago.