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When The Wake Up Call Is From The Nobel Committee


Economic Viewpoint

WHEN THE WAKE-UP CALL IS FROM THE NOBEL COMMITTEE

At 5:30 in the morning of Tuesday, Oct. 13, I was awakened from a deep sleep by my wife. "There's a phone call from Sweden," she said. I mumbled that she should let me sleep, but she kept repeating the same phrase. Finally, I got up to take the call that changed my life. The Royal Swedish Academy of Sciences informed me that I had just been awarded the 1992 Nobel prize in economics.

Since then, I have had a constant barrage of congratulatory phone calls, telegrams, and faxes from relatives, friends, would-be friends, and former and present students. Although I'm not a person who easily expresses his feelings, I tried to tell them how overjoyed I was. In interviews with newspapers, magazines, and radio and television programs, I was asked to present my ideas in general terms: Often, the reaction was that they were either obvious or far out.

I have also been asked to comment on all kinds of questions. Suddenly, I am treated as an expert on everything. Although that is a tempting notion, I've tried--not always successfully--to stick to the areas where I have expertise.

I have been annoyed in the past when Nobel laureates in economics have used their honor as a pulpit from which they launched sermons against political candidates they opposed. If economics has any claim to be a science and to belong in the Nobel award structure--and I firmly believe that it does--then this should be an occasion to avoid political propaganda and to convey to the public some flavor of the scientific quality of economics.

CHICAGO LIGHTNING. One of the questions most frequently put to me is whether I was surprised to receive this award. I knew that I was on the list of economists being considered. I also knew that in a poll of many U.S. economists, I had been favored to win for the past few years.

But this year, when the week for the selection rolled around, I didn't think I had the slightest chance. That was because last year the prize was won by a colleague from the University of Chicago, Ronald H. Coase; and the year before that, another Chicagoan, Merton H. Miller, shared the award with two others. Since it seemed inconceivable that the award would go to Chicago three years in a row, I was sleeping soundly when lightning struck.

I am constantly asked what we are going to do with the prize money--$1.2 million before Uncle Sam takes his very large bite. The answer to that is a simple lesson in economics. Wants always expand to take advantage of new opportunities, which explains why consumers in rich countries feel no more satiated than do those in poor countries. My wife and I won't have the slightest difficulty spending the prize money. We have already been inundated by suggestions from a host of stockbrokers, car salesmen, and others who are quite happy to help us resolve any uncertainty we may have.

I won the award for applying economic analysis to social problems, especially race and gender discrimination, investments in education and other human capital, crime and punishment, and the formation, structure, and dissolution of families. Everyone recognizes that most people respond to costs and benefits in deciding how much to buy of simple goods such as fruit, clothing, or a car. I claim that this common-sense idea applies to all human decisions.

CRIME AND MARRIAGE. Yet, some of the implications are fiercely resisted. For example, this view implies that criminals also respond to incentives, so crime increases when potential miscreants believe they won't be punished much for robbery and other crimes. This is more than a law-and-order message, for the analysis also implies that crime increases when legal jobs are hard to get, perhaps because of extensive unemployment or because teenagers leave school with few skills.

According to my approach, people marry when they expect to get more pleasure from marriage than by remaining single and continuing to search for a better mate. The number of children a couple has depends on the costs and benefits of child rearing: Therefore, couples tend to have fewer children when the wife works and has a better-paying job, when subsidies from the government through child allowances and tax deductions for dependents are smaller, when the cost of educating and training children rises, and so forth.

By the same token, couples divorce when they no longer believe they are better off by staying married. In particular, divorce rates grow when women's earnings are higher compared with those of men; the gain to such women of remaining married is thus diminished. And the no-fault divorce laws that have become so common tend to worsen the plight of divorced women with children.

What I have tried to do in these columns during the past 6 1/2 years is to apply the same kind of analysis to policy and social issues that are of general interest. I hope that my Nobel prize doesn't delude me into thinking I have all the answers, and I hope that my columns can continue to analyze the many social issues where the economic way of looking at life has something valuable to say.GARY S. BECKER


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