The Economic Approach to Human Behavior

Gary Becker is one of the most brilliant economists of our time, especially when it come to applying economics principles to non traditional areas. For example, Becker provides a rationale for altruistic behavior emerging in society, and he studies crime from the the perspective of a market economy of criminal activity. The book is somewhat technical, so a somewhat quantitative background is recommended.

This book is definitely a milestone of modern economic thought. It is one of the brightest signs of changing paradigm, from considering only those problems as 'economical' where prices and volumes could be estimated, to go beyond towards traditional areas of other sciences. Economics of family and of crime to name a few. Becker considers the decision making in these cases to show that it can be straight economical, the same as applied in a pricing or in a decision to produce. The judgement of Becker's 'economic imperialism', though, is a discussible point of view. To what extent economic reasoning can be applied is a matter of axioms underlying every economic theory. And these are not obvious but questionable instead. Therefore, it is my belief that this book should be read with a greater degree of criticism, just like any analysis of problems beyond 'traditional' scope of issues of economics.

Becker's Theory of Everything

This is a book that applies the rationality postulates of neoclassical economics to social sciences other than economics, especially sociology. The neoclassical maximizing postulates for economic rationality are (1) consumers seek to maximize their utility and (2) producers seek to maximize their profit.

In his "Introduction" Becker says firstly that the heart of his argument is that human behavior is not compartmentalized, sometimes based on maximizing, sometimes not, sometimes motivated by stable preferences, sometimes by volatile ones, sometimes resulting in an optimum accumulation of information, sometimes not. And he then says in the second sentence that all human behaviors can be viewed as involving participants who maximize their utility from a stable set of preferences and accumulate an optimum amount of information and other inputs in a variety of markets. (p. 14.)

Becker's phrase "viewed as" in the second sentence together with this book's title suggest that he is not imputing the economist's utility-maximizing psychology to the participants, but rather is merely proposing an analytical "approach" to be taken by the social scientist. But the first sentence together with most of his book clearly suggests he is describing the actual decision-making of the participants. Becker exploits the ambiguity.

For example he references Nobel laureate Milton Friedman's "Methodology of Positive Economics" (1952), reprinted in his Essays in Positive Economics (1953), and also Robert Merton's Social Theory and Social Structure (1968) saying that his economic approach does not assume that decision units are necessarily conscious of their efforts to maximize or can verbalize or otherwise describe in an informative way reasons for their systematic patterns in their behavior. Thus he claims that his thesis is consistent with the subconscious in modern psychology and with the distinction between manifest and latent behavior in sociology. (p. 7.)

In his paper "Methodology of Positive Economics" Friedman defends the rationality postulates by recognizing that while businessmen do not actually calculate marginal cost or marginal revenues, they must act as if they do, or they will not stay in business. Thus in Friedman's paper rationality is a condition to which outcomes must comply regardless of the participant's psychology. But Becker proposes subconscious rationality, which the reader is left to ponder, which is the approach/psychology ambiguity enabled by his identifying "rationality" with "functionality." He also claims that rational-choice theory is consistent with Robert Merton's distinction between manifest and latent functions, whereas in fact it is the negation of it.

Becker's ambiguity would be eliminated, if at the outset "rational" were explicitly defined as psychological behavior that is both consciously purposeful and effectively functional to achieve an intended outcome. Then "functional" is anything else that has a rational outcome. I view Becker's reliance on neoclassical rationality to explain everything as contortionist as Freud's comparable reliance on sexuality.

More fundamentally social science need not be a social psychology ("rational" or otherwise) referencing incentives or other mental states. The rational-theory-of-choice view of social science is an atavism from the anachronistic romantic philosophy of science. In contrast the contemporary pragmatist philosophy of science admits only the empirical criterion for testing, and neither requires (like romantics) nor rejects (like positivists) reference to mental states. Thus contrary to Becker rational choice theory is just one among many possible strategies for developing hypotheses.

I view rational choice theory as doctrinaire and as egregiously lacking empirically - as blackboard economics at its worst, as a descent of neoclassical economics into a Scholastic decadence.

Google my History of Twentieth-Century Philosophy of Science at my web site philsci with free downloads.

Thomas J. Hickey, Econometrician