Entertaining economy from Nobel laureate Gerry Becker
I would venture to continue the day of an entertaining economy on Habr ...
In the comments to the previous topics, many joked about what will happen if we take a rational approach to family matters? Well, you will not believe it, but many scientists took up this issue quite seriously ...
Unlike other authors, I will not post some of my everyday calculations that have nothing to do with real life. And I’ll tell you about real science - namely, the economic approach of Nobel Laureate in Economics Gerry Becker . In turn, I will be based on his work The Economic Approach to Human Behavior for which he actually received the Nobel Prize.
What is new and original G. Becker presented to us?
In short - he extended the economic approach to the analysis of any human or even animal (sic!) Behavior!
For example, it turned out that suicide may well be absolutely rational from an economic point of view ...
It is known that the economic approach involves some assumptions (completeness of information, selfishness, independence of an individual) that have been challenged many times. However, one assumption always remains: a person is assumed to be a rational being, i.e. constantly maximizing its utility functions (preferences are always stable).
Several important consequences follow from this. For example, the law of demand and the law of supply. However, before Gerry Becker, economists applied their principles only to analyzing markets for goods and services. G. Becker decided to try these principles for the analysis of any behavior.
But enough theory - let's look at a couple of examples:
1. The economic approach implies that there is an “optimal” life expectancy at which the usefulness of an additional year of life is less than the utility lost as a result of using time and other resources to achieve it.
According to the economic approach, thus, most deaths (if not all!) Are to some extent suicides - in the sense that they could be delayed if more resources were invested in prolonging life.
2. According to the economic approach, a person decides to marry when the expected usefulness of the marriage exceeds the expected usefulness of a single life or the additional costs that arise when continuing to search for a more suitable pair. In the same way, a married person decides to terminate it when the expected utility of returning to idle status or entering into another marriage exceeds the loss in utility associated with divorce (including due to separation from children, sharing of acquired property, judicial expenses, etc.). Since many people are busy finding a suitable couple for themselves, we can talk about the existence of a marriage market. Everyone is trying to do everything that only he or she is capable of, despite the fact that everyone else behaves in the same way in this market.
3.The economic approach is based on the premise that criminal activity is the same profession to which people devote full or part-time work, like carpentry, engineering, or teaching . People decide to become criminals for the same reasons that others become joiners or teachers, namely because they expect that the “profit” from the decision to become a criminal is the present value of the total difference between the benefits and costs, both non-monetary and monetary , - surpasses the "profit" from occupation in other professions. The increase in benefits or the reduction in the costs of criminal activity increase the number of people who become criminals, increasing - compared with other professions - the “profit” from offenses.
And I must say that these are not just words. All this allows us to really “consider” human behavior and draw many practical conclusions.
If you want to look at real numbers and formulas - here is a list of references:
1. Becker GS Altruism, Egoism, and Genetic Fitness: Economics and Sociobiology //
Journal of Economic Literature, 1976, v.14, p.817–826 and others articles by
2. Schultz TW (ed.). Economics of the Family: Marriage, Children, and Human Capital.
Chicago: University of Chicago Press for the NBER, 1974.
3. Hamermesh D. and Soss NM An Economic Theory of Suicide // Journal of Political
Economy, 1974, v. 82, p. 83–98. (I especially like this one)
PS Everything written above is a brief retelling of the scientist's ideas and in no way agrees with the point of view of the author of the topic.
In the comments to the previous topics, many joked about what will happen if we take a rational approach to family matters? Well, you will not believe it, but many scientists took up this issue quite seriously ...
Unlike other authors, I will not post some of my everyday calculations that have nothing to do with real life. And I’ll tell you about real science - namely, the economic approach of Nobel Laureate in Economics Gerry Becker . In turn, I will be based on his work The Economic Approach to Human Behavior for which he actually received the Nobel Prize.
What is new and original G. Becker presented to us?
In short - he extended the economic approach to the analysis of any human or even animal (sic!) Behavior!
For example, it turned out that suicide may well be absolutely rational from an economic point of view ...
It is known that the economic approach involves some assumptions (completeness of information, selfishness, independence of an individual) that have been challenged many times. However, one assumption always remains: a person is assumed to be a rational being, i.e. constantly maximizing its utility functions (preferences are always stable).
Several important consequences follow from this. For example, the law of demand and the law of supply. However, before Gerry Becker, economists applied their principles only to analyzing markets for goods and services. G. Becker decided to try these principles for the analysis of any behavior.
But enough theory - let's look at a couple of examples:
1. The economic approach implies that there is an “optimal” life expectancy at which the usefulness of an additional year of life is less than the utility lost as a result of using time and other resources to achieve it.
According to the economic approach, thus, most deaths (if not all!) Are to some extent suicides - in the sense that they could be delayed if more resources were invested in prolonging life.
2. According to the economic approach, a person decides to marry when the expected usefulness of the marriage exceeds the expected usefulness of a single life or the additional costs that arise when continuing to search for a more suitable pair. In the same way, a married person decides to terminate it when the expected utility of returning to idle status or entering into another marriage exceeds the loss in utility associated with divorce (including due to separation from children, sharing of acquired property, judicial expenses, etc.). Since many people are busy finding a suitable couple for themselves, we can talk about the existence of a marriage market. Everyone is trying to do everything that only he or she is capable of, despite the fact that everyone else behaves in the same way in this market.
3.The economic approach is based on the premise that criminal activity is the same profession to which people devote full or part-time work, like carpentry, engineering, or teaching . People decide to become criminals for the same reasons that others become joiners or teachers, namely because they expect that the “profit” from the decision to become a criminal is the present value of the total difference between the benefits and costs, both non-monetary and monetary , - surpasses the "profit" from occupation in other professions. The increase in benefits or the reduction in the costs of criminal activity increase the number of people who become criminals, increasing - compared with other professions - the “profit” from offenses.
And I must say that these are not just words. All this allows us to really “consider” human behavior and draw many practical conclusions.
If you want to look at real numbers and formulas - here is a list of references:
1. Becker GS Altruism, Egoism, and Genetic Fitness: Economics and Sociobiology //
Journal of Economic Literature, 1976, v.14, p.817–826 and others articles by
2. Schultz TW (ed.). Economics of the Family: Marriage, Children, and Human Capital.
Chicago: University of Chicago Press for the NBER, 1974.
3. Hamermesh D. and Soss NM An Economic Theory of Suicide // Journal of Political
Economy, 1974, v. 82, p. 83–98. (I especially like this one)
PS Everything written above is a brief retelling of the scientist's ideas and in no way agrees with the point of view of the author of the topic.