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Gary Becker As Seen from Prague

English Pages, 11. 2. 2011

President Zimmer, Ladies and Gentlemen, Dear Gary,

It is a great pleasure and honor to be here and to get a chance to contribute to the 80th birthday celebration for Gary Becker, whom I – and I am sure all of us – consider one of the most important economists of the current era. When, on November 16, I sent him a letter congratulating him on his birthday, I didn’t expect that six days later I would get an email from Prof. Lazear with the invitation to deliver this address. In spite of all my presidential duties, I accepted it without hesitation.

Nevertheless, I feel being at a disadvantage here, in this group of people. I am not Gary Becker’s lifelong colleague or collaborator and to my great regret I was not a student of his, even though implicitly, or at a distance, I do consider myself to be one. The only formal connection between us is that he was a member of the Professorship Review Committee at the Prague School of Economics, which – 16 years ago – recommended my full professorship at that school.

I am pleased to have personally known him for more than 20 years now, which corresponds with the fall of communism in my country and elsewhere when the Iron Curtain fell and we finally became free to establish and build contacts with the rest of the world. I had known his writings, of course, for a much longer period of time. I have always been an admirer of the Chicago school of economics and especially of the three big names: Friedman, Stigler and Becker. In the communist era, these were only names and I had never dreamt about meeting the bearers of these names in person.

I am proud that this is already my third speech at the University of Chicago devoted to one of these three personalities. In 1998, I gave one of the three George Stigler Memorial Lectures[1] (the other ones were given by George Schulz and Milton Friedman). In January 2007, I spoke at Milton Friedman Memorial Service at the Rockefeller Chapel[2]. And now it is Gary Becker’s turn. In my last year’s November letter, I wished Gary “sound health and much happiness” and myself “the possibility to continue reading his articles, papers and publications in the years to come.” I am sure I am not alone in this wish.

Prof. Becker is the main proponent, as well as advocate of “the economic approach to human behavior” (which is the title of his fundamental book from 1976)[3] and of “the economic way of looking at life” (which is the title of his Nobel lecture in December 1992)[4].

I follow his advice and try to look at life through economic eyes, which now forces me to search for my comparative advantages when talking about him vis-à-vis this distinguished audience. I feel like saying that I don’t have any but this would demonstrate my lack of understanding of this crucial concept of economic theory. The search for comparative advantages is costly in time and I stopped when I found two of them. Both are connected with the place from where I looked at Gary Becker – with Prague, communist Czechoslovakia, Central and Eastern Europe, where – by the way – Gary’s mother was born.

My first comparative advantage (and I do not consider it a disadvantage!) is the fact that my formal economic education was based solely on Marxist political economy, not on economics as we understand it. In that era, Marxist political economy was an official and obligatory doctrine in the countries of the Soviet empire and due to it, the knowledge of mainstream economics in our part of the world practically did not exist. I had to struggle to get rid of it and to learn and in my innermost self accept the alternative theory. It was not easy intellectually and it was made difficult by the then existent, quite threatening political and ideological pressures.

Our coming across Samuelson’s elementary textbook (I don’t speak about his Foundations of Economic Analysis) in the middle of the less dogmatic 1960s was a revelation. My generation studied the book in Prague on its own; there was no one to teach us. It is there where we discovered modern economics and very soon became strong and unconditional believers in it. Our Marxists tried to enrich their original doctrine by using arguments of all kinds of modern opponents of standard economics, including various versions of institutionalism, and we needed stronger ammunition than we could find in the mainstream literature.

We found it in Chicago, in Milton Friedman’s “The Methodology of Positive Economics”[5] and other works, in George Stigler’s and Gary Becker’s writings. I remember being very much impressed by Stigler’s and Becker’s article “De Gustibus Non Est Disputandum”[6] where they stressed that an economist should continue “to search for differences in price and income to explain any differences or changes in behavior” (p. 76), and that he should not passively wait for the explanation of all kinds of economic phenomena from other behavioral sciences. They also claimed that their “hypothesis is trivial, for it merely asserts that we should apply standard economic logic as extensively as possible” (p. 89). I try to consistently apply this approach in spite of being “consistently” considered narrow-minded.

My second comparative advantage (again, paradoxically, not disadvantage) was the fact that I lived in a centrally planned, command or centrally administered economy, as it used to be called, which the economists of all colors and persuasions considered a non-market economy. It was evident that the Marxist political economy was not able to say anything to it and that traditional, somewhat narrowly understood economics was considered relevant for market economy only. In spite of that, we wanted to be economists. We were not satisfied with our powerlessness, with mere empiricism or historicism. We understood that even the communist type of economy was based on human behavior, on rational choice, on utility maximization, on stable preferences, and that the economic instrumentarium, the economic box of tools, was the best available method how to analyze it. Gary Becker’s “economic approach to human behavior” was a great help even though he did not publish anything about such an economy, at least as far as I know.

He used his approach when “seeking to understand human behavior in a variety of contexts and situations”[7] because he considered it a method which had many applications – not only in connection with the explicit markets. I very much agree with his position that “what most distinguishes economics as a discipline from other disciplines in the social sciences is not its subject matter but its approach”[8] and that “the combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, forms the heart of the economic approach”.

These ideas helped us to defend economics in the extremely hostile communist environment. My speech in Prague about George Stigler’s Nobel Prize in 1982 led to a series of investigations against me by the police. But in spite of the fact that the Western, non-Marxist, bourgeois – as it used to be called – economics was not taken for granted in our political and intellectual setting and in spite of the allegedly non-market economy in our reality, the appeal of Gary Becker and other Chicago economists in the circles of Czech non-establishment economists was significant. We felt that Gary was speaking directly to us.

After the fall of communism comes Gary Becker’s role in the era of transformation towards political pluralism and market economy. He was well-known to us not only for his contributions to economic science, but also for his decisive defense of liberal (in European sense) doctrine and laissez-faire philosophy. He was twice in Prague and every year the Gary Becker’s Prize for the best student’s thesis in economics is awarded at the Prague School of Economics. In his last Business Week column, in July 2004,[9] he wrote that “the end of the Cold War and the retreat of communism was not only the defining event of the second half of the 20th century, but it also brought an opportunity to test whether all our preaching and analysis about the importance of incentives really make a large difference.” I am convinced that the developments in the former communist countries during the last two decades persuasively proved that his stress on the power of incentives was more than correct.

Thanks to the Chicago school, our vision where to go was clear and straightforward: we did not search for any third way but for capitalism and market economy with minimum state intervention. That’s why Chicago, rather than Harvard. That’s why deregulation, desubsidization, liberalization of markets, privatization as the main building blocs of our transformation process.

I should also mention the important role that was played in this era by the Mont Pelerin Society, the President of which, in the years 1990 – 1992, was none other than Gary Becker. I met him for the first time at the MPS General Meeting in Munich in 1990, then in 1991 at the MPS European Regional Meeting in Prague and in 1992 at the MPS General Meeting in Vancouver, when we even had the opportunity to play tennis together. In the course of the last two decades we have met in various places, from Chicago to Vancouver, from Prague to Tokyo. I have always enjoyed these encounters and hope they will continue with the same frequency in the years to come.

Václav Klaus, Honoring Gary S. Becker: A Conference, University of Chicago Law School, Chicago, February 11, 2011

[1] “The Preaching of George Stigler and His Impact upon the End of Communism and the Formation of Free Society”, George Stigler Memorial Lecture, University of Chicago, May 4, 1998, www.klaus.cz/clanky/1641.

[2] “Remarks at Milton Friedman Memorial Service”, University of Chicago, Rockefeller Chapel, January 29, 2007. www.klaus.cz/clanky/133.

[3] Gary S. Becker, The Economic Approach to Human Behavior, The University of Chicago Press, Chicago, 1976.

[4] Gary S. Becker, “The Economic Way of Looking at Life”, Nobel Lecture, Stockholm, Dec 9, 1992, http://home.uchicago.edu/~gbecker/Nobel/nobellecture.pdf  

[5] Milton Friedman, “The Methodology of Positive Economics”; In: Essays in Positive Economics, University of Chicago Press, Chicago, 1953; pp. 3-43.

[6] George J. Stigler & Gary S. Becker, “De Gustibus Non Est Disputandum”, The American Economic Review, Volume 67, No 2, March 1977, pp. 76-90.

[7] Gary S. Becker, “The Economic Approach to Human Behavior”, in: The Economic Approach to Human Behavior, The University of Chicago Press, 1976; p. 3.

[8]  Ibid., p. 5.

[9]  Gary S. Becker, “A 19-Year Dialogue on The Power of Incentives”, Business Week. New York: July 12, 2004; p. 28, http://home.uchicago.edu/~gbecker/Businessweek/BW/2004/07_12_2004.pdf


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