Answer to the Freakonomics Quiz: What Gary Becker Says Economics Is All About

Last week, I offered up a quiz asking what Gary Becker thought the only purpose of economics was. His answer was so surprising to me, that just to make sure I had it right, I asked him again after I made the post.

He confirmed his answer, and said that it is the same answer he would have given 50 years ago when he started studying economics.

As surprising as the answer was to me, commenter #24, Abe, got it right when he guessed, “to understand and alleviate poverty.” Congratulations to Abe.

What’s surprising about Becker’s comment — and I believe he is telling the truth and not just being politically correct when he says helping the poor is the point of economics, because he never worries about political correctness — is that he is a staunch Republican and a firm believer in markets. There is no reason why that belief in markets can’t go hand in hand with really wanting to help the poor, it just usually doesn’t.

In a market economy, there are inevitably winners and losers. So most folks who worry about the poor are turned off by markets, believing that some other system could do a better job for the worst off. Becker, however, would argue that markets, especially when combined with access to good education, are the best shot the poor have.

If you think globally, the poorest countries in the world stand to gain the most by the adoption of modern technologies like vaccines, the development of new strains of crops, easier access to information, etc. Lack of education, isolation, and bad governments slow the process, but faced with the choices of a) grinding out a subsistence-based economy forever, or b) inventing these things themselves, or c) living in a world in which these advances have already been made and now just have to be adopted, option “c” has to be the best scenario for developing countries.

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  1. Proudhon says:

    ” or c) living in a world in which these advances have already been made and now just have to be adopted, option “c” has to be the best scenario for developing countries.”

    Except when these advances are “adopted” through a huge influx of foreign “aid,” which binds these nations and their illegitimate governments to the whims of western gov’ts and corporations. Roads, buildings, schools, hospitals, etc. are paid for by western States and corporations in exchange for guarantees and concessions by the poor nations’ gov’ts.

    That isn’t a path to healthy free markets or alleviating poverty. Its a path to colonialism and imperialism. There is no real competition among the native economic actors. And the markets are most assuredly not free, thanks the native gov’ts acquiescence to foreign pressure (and the allure of greed gained through corruption)

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  2. frankenduf says:

    i find this post to be too abstract- the fact is that the global markets are tilted towards the wealthy countries via the domination of the markets by private corporations- e.g. the choice of “grinding out” subsistence-based agriculture v. expropriating land for monoculture/export products has shown to be a devastating one for local farmers in poor countries- saying that an ideal market would benefit the greatest good cannot be confused with the reality of the current marketeering viz. the IMF, where privatization programs have increased stratification and poverty- the irony is that now the wealthy countries must step back from privatization (nationalizing banks and large manufacturers)in order to save their economies, while we prohibit the poor countries from doing so

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  3. Michael F. Martin says:

    I think many people assume too much about economists’ motivations from their methodological quirks.

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  4. Mike says:

    Well let me be the first to say, economics is doing an awful job at what it’s “all about”.

    What do econ majors do when they get out of school?

    What percentage of them contribute to alleviating poverty? 3%? 5%? 1%?

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  5. Joe D says:

    The crucial elements are twofold: Education of the participants (so they can recognize what is truly in their own best interests) and transparency of the market. Without both elements, you get the “invisible sleight of hand” of collateralized debt instruments, upfront profit for mortgage brokers with all the risk remaining in the back end when rates adjust and balloons come due, and sweetheart deals between energy companies and corrupt government entities.

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  6. M says:

    2nd welfare theorem is a very elegant concept, however, I am a bit skeptical about its’ empirical application. Although it’s one of the best alternatives available……

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  7. TJ says:

    This is a wise view, as it essentially advocates that developing contries adopt a ‘first follower’ strategy.

    Let the wealthy countries do the heavy lifting, then adopt the technology and processes once they have been more commoditized.

    The problem remains that we continually try to engineer social outcomes instead of trusting the market process to do so. So by twisting it to try and help the poor, we actually make it harder for them to see the fruits of such adoption.

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  8. Matt says:

    @ #4 Mike
    I think economics is doing it’s job pretty well via China and India. Basic principles are being implemented there, and poverty is being reduced.

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