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Nobel Prize winner: Becker Part 3 (Becker's model: Fertility and…
Nobel Prize winner: Becker Part 3
Becker's model: Fertility and family
“A theory of the Allocation of Time” (1965)
19th century: high income families were larger than low income families.
20th century: pattern reversed.
--> Becker: income effect + time cost effect
“An Economic Analysis of Fertility” (1960)
Becker: Family is a ‘factory’ which produces goods it wants to
consume --> 𝑈 = f(𝑥 , 𝑡 )
Becker's model: Fertility and family
Relation to Malthus’ population growth theory
Mincer (1963) – importance of the price of women’s time as
a relevant opportunity cost.
Becker formalized this idea in a household production function:
Theory that treated children as household outputs valued in final utility, where mother’s time was a leading input.
Malthus’ theory not consistent with facts.
Becker departed from the Marshallian script when using dynamic general equilibrium theory to generalize Malthus’ population theory:
Including nonmarket activities
Tradeoff child quantity – quality (Becker, 1991).
Becker's model: Crime
Costs of committing crime:
Labor costs of engaging the activity itself
Costs associated with expected penalty
Engage in crime if:
Expected benefit > (Prob. of detection)*(Penalty) + labor cost
Criminals make rational decisions ― It’s incentives and prices that matter!
Becker's model: Crime
Marginalists:
Marginal utility concept
MB = MC
Pigou:
Fines on criminal activities can equate private costs to social costs
Externalities