Economist Gary Becker died on Saturday, May 3. Becker’s great contribution, for which he won the Nobel Prize in Economics in 1992, was to extend economic analysis into areas that were not normally considered economics. Becker applied the economic way of thinking to the study of crime, family, education, and racial discrimination. He showed that in these areas, too, incentives matter. The Library of Economics and Liberty’s Concise Encyclopedia on Economics describes Becker’s work on racial discrimination—a topic much in the news lately—this way:
Among other things, Becker successfully challenged the Marxist view that discrimination helps the person who discriminates. Becker pointed out that if an employer refuses to hire a productive worker simply because of skin color, that employer loses out on a valuable opportunity. In short, discrimination is costly to the person who discriminates.
Becker showed that discrimination will be less pervasive in more competitive industries because companies that discriminate will lose market share to companies that do not. He also presented evidence that discrimination is more pervasive in more-regulated, and therefore less-competitive, industries. The idea that discrimination is costly to the discriminator is common sense among economists today, and that is due to Becker. [“Gary Stanley Becker,” in The Concise Encyclopedia of Economics]