Showing papers by "Gary S. Becker published in 2016"

Altruism, Egoism, and Genetic Fitness: Economics and Sociobiology

Abstract: ECONOMISTS generally take tastes as "given" and work out the consequences of changes in prices, incomes, and other variables under the assumption that tastes do not change. When pressed, either they engage in ad hoc theorizing or they explicitly delegate the discussion of tastes to the sociologist, psychologist, or anthropologist. Unfortunately, these disciplines have not developed much in the way of systematic usable knowledge about tastes. Although economists have been reluctant to discuss systematically changes in the structure of tastes, they have long relied on assumptions about the basic and enduring properties of tastes. Self-interest is assumed to dominate all other motives,' with a prominent place also assigned to benevolence toward children2 (and occasionally others), and with self-interest partly dependent on distinction and other aspects of one's position in society.3 The dominance of self-interest and the persistence of some benevolence have usually been explained by "human nature," or an equivalent evasion of the problem. The development of modern biology since the mid-nineteenth century and of population genetics in the twentieth century made clear that "human nature" is only the beginning, not the end of the answer. The enduring traits of human (and animal) nature presumably were genetically selected under very different physical environments and social arrangements as life on earth evolved during millions of years. It is not difficult to understand why self-interest has high survival value under very different circumstances,4 but why should altruistic behavior, sometimes observed among animals as well as human beings, also survive? This kind of question has been asked by some geneticists and other biologists especially during the last two decades. Their work has recently been christened "sociI For example, Adam Smith said, "We are not ready to suspect any person of being defective in selfishness" [9, 1969, p. 446], and "it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest" [10, 1937, p. 14]. 2According to Alfred Marshall, ". . . men labor and save chiefly for the sake of their families and not for themselves" [6, 1920, p. 228]. 3Nassau Senior said, "the desire for distinction . . . may be pronounced to be the most powerful of human passions" [8, 1938, p. 12]. 4Ronald Coase argues convincingly that Adam Smith, especially in his Moral Sentiments, was groping toward an explanation of the importance of selfinterest in terms of its contribution to viable social and economic arrangements (see Coase [5, 1976]).

Rational Addiction and the Effect of Price on Consumption

Abstract: Legalization of such substances as marijuana, heroin, and cocaine surely will reduce the prices of these harmful addictive drugs. By the law of the downward-sloping demand function, their consumption will rise. But by how much? According to conventional wisdom, the consumption of these illegal addictive substances is not responsive to price. However, conventional wisdom is contradicted by Becker and Murphy's (1988) theoretical model of rational addiction. The Becker-Murphy (B-M) analysis implies that addictive substances are likely to be quite responsive to price. In this paper, we summarize B-M's model of rational addiction and the empirical evidence in support of it. We use the theory and evidence to draw highly tentative inferences concerning the effects of legalization of currently banned substances on consumption in the aggregate and for selected groups in the population. Addictive behavior is usually assumed to involve both "reinforcement" and "tolerance." Reinforcement means that greater past consumption of addictive goods, such as drugs or cigarettes, increases the desire for present consumption. But tolerance cautions that the utility from a given amount of consumption is lower when past consumption is greater. These aspects of addictive behavior imply

Welfare Measurement in the Household Production Framework

Abstract: The household production approach to consumer behavior, developed from the work of Gary Becker, William Gorman, and Kelvin Lancaster, has considerable descriptive appeal in modelling the decisions of households The approach derives from the observation that households frequently purchase market goods that do not yield utility directly, but are combined to produce commodity service flows which the household values Thus observed behavior is determined by household production technology as well as by tastes The advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology, though we rarely possess useful a priori information regarding tastes The putative advantages of the household production approach are questioned on empirical and conceptual grounds by Robert Pollak and Michael Wachter (1975) They show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology, raising serious econometric difficulties in the estimation of commodity demand functions In addition, since commodity prices become functions of the commodity bundle consumed, the analogy to traditional demand theory breaks down Joint production occurs when a good enters several production processes simultaneously, or, equivalently, when a good in one production process also enters directly into the individual's utility function The most common example is time, which provides the context for all production processes and is often associated with the production of several commodities simultaneously Since joint production in the household is likely to be pervasive, the critique by Pollak and Wachter cannot be ignored In response to the comment by William Barnett, Pollak and Wachter (1977) suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices This approach confounds tastes and technology, but it eliminates the troublesome concept of commodity prices as parameters when, in fact, they are likely to be endogenous In this paper we show that results from positive analysis, such as the critique by Pollak and Wachter, have implications for the use of the household production framework for welfare analysis The household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas (Gardner Brown, John Charbonneau, and Michael Hay; Elizabeth Wilman) Yet traditional approaches to welfare measurement are frequently inapplicable We argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology We extend Pollak and Wachter's results by demonstrating that Marshallian demand functions for commodities cannot be uniquely defined Thus Marshallian functions cannot be used to derive exact compensated functions in the manner of Jerry Hausman, and of George McKenzie and I F Pearce, nor can compensating and equivalent variation measures be bounded by Marshallian consumer's surplus estimates following Robert Willig In fact, duality results that normally allow us to move between Marshallian and Hicksian functions are not *Assistant and Associate Professors, respectively, Department of Agricultural and Resource Economics, University of Maryland, College Park, MD 20742 This paper is Scientific Article No A3404, Contribution No 6476, of the Maryland Agricultural Experiment Station We wish to thank Darrell Hueth, James Opaluch, V Kerry Smith, and Elizabeth Wilman for comments on an earlier draft