Gary Becker, the economic way of thinking, and the arts (updated)

rational change in what we wantUniversity of Chicago economist, and Nobel Laureate, Gary Becker, has died at the age of 83. A brief summary of his work is here, and a more complete picture given by his Nobel address, here.

He is one of the most influential economists of the contemporary era. His innovations stemmed from the idea that the basic methods of traditional economics – the study of how individuals and firms make choices given the constraints and prices they face – could be applied to many, many aspects of human life: choices about investments in education and health; choices about whether to break the law; decisions regarding the number of children to have, and what to invest in their upbringing; philanthropic giving and bequests within the family; marriage; politics and bureaucracy; the list goes on and on. If economists’ analyses of these issues now seem commonplace, it is a result of his pioneering work (even though not everyone studying in these areas necessarily agreed with his assumptions or ways of framing problems).

Amongst those economists who study the arts, perhaps his most cited paper is “A Theory of Rational Addiction”, co-written with Kevin Murphy, published in the Journal of Political Economy in 1988 (JSTOR-gated version here, wikipedia summary here). What’s the idea?

First note that Becker always began with the idea that people are rational, in the sense of weighing opportunity costs, and responding to changes in incentives, when pursuing their goals. Many non-economists stop reading right there, but it turns out to be an assumption that generates interesting models and predictions about human behavior: students respond to changes in labor market conditions and tuition rates; criminals avoid activities where expected benefits are low and the chance of getting caught, together with the expected penalty if caught, are high; men’s and women’s choices regarding marriage and childbirth adjust to changes in their economic circumstances, and so on.

So, what if we made decisions now that we knew would change our future desires and behavior? Someone who wants to get in shape has a tough time making that first visit to the gym. But if he or she thinks “this is a hard thing to get started, but I know from my friends’ experience that once you get the hang of it, you actually want to get a workout in every day, and feel out-of-sorts without it. Therefore, I will make these first, unpleasant visits to the gym knowing that my feelings will begin to change – I will become ‘addicted’ to exercise.”

Many genres of the arts are – sorry! – like exercise: they require exposure that at first is not that interesting, even off-putting, but people do in fact pursue knowledge of the arts, through classes, exhibitions, lectures, performances, in the hopes that their tastes will eventually change. “I don’t really get much out of the opera, but I know from my friends that giving it a try, reading about it, starting with some of the ‘lighter’ ones, can lead to a fulfilling enjoyment of this art form. I will learn to like it, and be better and happier for it.” An old theory in public economics, now mostly faded from view, was about merit wants – those goods, like higher education in the humanities and the arts, that people should want, even if at present they don’t. The theory looks like it could be a rationale for public subsidy of the arts, in order to develop those ‘higher’ tastes, but the theory fell from favor as the question was asked, “who is to decide which wants are meritorious? Some government cultural bureaucrats?”

But Becker and Murphy’s theory of rational addiction held that people could be aware themselves of the possible benefits of changing their own wants, and would make efforts to change themselves accordingly.

UPDATES: Columns by Tim Harford, Justin Wolfers, and Cass Sunstein. Tyler Cowen links to this (somewhat technical) paper of Becker’s on why profit-seeking sellers of some cultural goods might prefer persistent excess demand for their product rather than increasing the price (Spoiler: the visibility of high consumer demand generates interest from potential new customers).

UPDATE 2: And a New Yorker interview.

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  1. The USA only has 3 cities in the top 100 for opera performances per year. For performances per capita, we are behind every European country except impoverished Portugal. People can’t make that merit based decision to attend their first opera when there’s no opera to be heard. In this case, merit based decisions occur through a combination of both individual decisions and communal endeavors that make the decision a viable option.

    Young people from working class families who become the first in their families to attend college probably won’t head off to Harvard. They will go to the publicly funded Indiana University because their applications will be successful and its tuition affordable. They make a merit based decision based on a viable option provided by communal endeavor. Problem is, the Chicago Boys don’t like to hear about communal endeavor or concepts of the government working for the common good. They will tell us that evil, lefty bureaucrats are dictating what we’re supposed to aspire to, like attending IU.

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