Gary S. Becker Methodology Maximisation

Gary Stanley Becker: The Methodology

From the material surveyed so far it is possible to infer the common elements of Becker's methodological programme. He has however provided us with an essay (Becker, 1976b) which spells out his approach and offers a vigorous defence of it.

In his view, his method is applicable to all human behaviour; its core is 'the combined assumptions of maximising behaviour, market equilibrium and stable preferences, used relentlessly and unflinchingly' (Becker, 1976b, p. 5). Consider these assumptions in turn.


The individual, we have seen, is assumed to maximise utility subject to a budget constraint which, although taking a different form to the traditional one, is nevertheless closely related to it -indeed, subsumes it as a special case. It is important to note that this is not necessarily 'rationality' in the everyday sense of the term: it is not necessarily self-interest, nor are the sources of utility necessarily market goods and services. Becker has suggested that social distinction can be a source of utility, and he has gone so far as to claim (Becker, 1962) that even apparently random be­haviour by individuals can lead to the basic prediction of downward-sloping demand curves which is at the heart of economic reasoning.

Behind the maximising impulse, Becker has suggested, there ultimately lies the principle of natural selection. In a paper (Becker, 1976a) concerned with the origins of altruism he has expressed approval of the new science of sociobiology, arguing that a synthesis of economic reasoning and natural selection can explain the dominance of maximising behaviour. He also suggests that the basic tastes which determine preference patterns can be attributed to natural selection.

The principle of maximisation must be maintained as a central analytical device. 'When an apparently profitable opportunity ... is not exploited' we should not 'take refuge in assertions about irrationality, contentment ... or convenient ad hoc shifts in values' (Becker, 1976b, p. 7). Instead we should look for hidden costs -such as transaction costs, or costs of acquiring information-which render such opportunities unprofitable. This seems dangerously close to tautology, but the test, as good Chicago economists always tell us, is the predictive power of the hypotheses generated - and Becker is optimistic on this score.

Market Equilibrium

We have already seen the importance of this in Becker's approach. Even where explicit markets do not exist-as in the case of marriage - Becker insists that we operate on Chicago 'as if principles.

Note that Becker's approach throughout is to use partial equilibrium analysis. He has written with approval of Marshall's development of this apparatus for taking one problem at a time for analysis. This is revealing when we consider his usual reluctance to enter the arena of normative economics. The tradition of general equilibrium analysis instigated by Walras is associated with the normative position that unfettered competitive capitalism tends to produce an optimal allocation of resources. To do this it paints a grossly oversimplified picture of an economy without any of the subtleties of Becker's approach. Once we admit Becker's contention that preferences are based on home-produced commodities which are not sold in a market of the normal kind, it is less obvious that the traditional prescription of generalised laissez-faire is the appropriate one. The impli­cations of Becker's approach for general equilibrium remain to be determined.

Stable Preferences

We have seen how fixed 'tastes' play an important role in Becker's analysis. Such tastes are tastes for consumption activities rather than goods themselves, however, and this is a considerable step forward from the traditional view. Becker has, though, gone further than this, and in a paper written with George Stigler (Becker and Stigler, 1977) has tentatively sketched a theory of taste formation. As already suggested, some basic 'tastes' are probably biologically determined, but the behavioural form they take in a complex society needs further explanation. Becker and Stigler introduce an interesting model where tastes are learnt by exposure to new experiences - a special form of 'learning by doing'. Individuals repeatedly exposed to a stimulus acquire, as it were, 'consumption capital', a body of knowledge and attitudes which raises the 'marginal productivity' of consumption of the good in question, thus increasing demand for it.

Within this framework the success of advertising can be rationalised and some kind of explanation can be offered for the increasing stability of tastes as people get older -they are 'locked into' their accumulated consumption capital, and their reduced 'pay-off period' (life expectancy) discourages further 'in­vestment'. Again, this is all rather fanciful, but it illustrates once more the tenacity of Becker's commitment to the economic approach and his refusal to concede that economics might not have anything to say about some social phenomenon.