Nobel Prize Laureate Gary Becker is recognized as one of the most influential economists in the world. He has tackled issues such as racial discrimination, the economic motivations behind crime, human capital, time allocation, fertility and the legalization of drugs. According to economist Steven Levitt, “He has come up with the big ideas that have changed how we look at the world.” In this conversation with Michael Milken, Gary Becker discusses how to attack the problems with immigration, social security, human capital, education and various other concerns that we face as American citizens.
Below is a summary of the panel from the Milken Institute Global Conference- to watch the full video please click here: View the Video
General
- Becker: Smaller Government is the answer- government needs to police, protect against terrorism and provide national security. Need government to provide a safety net. Problem has been the government has been doing so many things that the private sector could do better and because it has it’s hand in so many places it isn’t focused on what’s important. The reason why it’s doing so many things is because there are a lot of powerful industry groups (education, oil, energy). The interest groups are the ones creating so many areas of government.
- Becker: Basic Economics applies everywhere- “People Respond to Incentives” for example if you give people an incentive to not work hard, they won’t work hard.
- Competition is always better than Monopoly
- Most of the growth in the world has occurred in the last 50 years
Entitlements:
- Problem: People are living longer and retiring earlier.
- The problem with the current system is that we give people a disincentive to work because of the way social security kicks in at early ages, so if they work longer they are not gaining as much in present value as if they retired early and collected social security.
- Becker’s Solution: Raise the retirement age to 70 years of age because when social security was introduced in 1935 the average life span in the U.S. was 61.7 years. In 2009, life expectancy in the U.S. reached 78.1. We need to adjust for the growth in life expectancy.
Education:
- The problem with the American School system: We are not rewarding better teachers
- We need to try to introduce merit pay
- The U.S. is lagging in the fraction of men that go into higher education; our challenge is how we can get more young men finishing high school and going and completing higher education.
- 25-30% of young men are dropping out of high school
Human Capital
- Human capital is the largest asset class
- Just educating people but not applying them to the right areas or productive areas of society- misallocating human capital is a tremendous drag on society.
- Central planning has lost out as a strategy.
- The 21st century will see a worldwide competition for human capital.
Health Care
- 70% of health-care spending about 2.5 trillion is spent on lifestyle-related diseases. 30% is spent on hereditary diseases
- Failure to address chronic diseases adequately costs the U.S. economy more than $1 trillion annually.
- A lot of young people are counting on medical advances as an excuse for living an unhealthy lifestyle.
Immigration
- The problem in recent years- we’ve become much more restrictive on the people who can come immigrate to the United States (legal –skilled people).
- 1/3 of all doctoral students in the U.S. are foreign born, up from one in ten 30 years ago.
- 84% of doctorates in engineering and the sciences are foreign born
- Immigration we could fix today, all we have to do is shift the emphasis toward more skills opportunities- skilled and entrepreneurial immigrants are crucial to the United States Prosperity.
- “I believe the best policy for the United States would have be to have a price like $50,000, barring terrorists and others alike, where anyone could come to the to U.S. and if they don’t have the money set up something equivalent to the student loan program we could call it the immigration loan program where you would put $10,000 down and they pay back the rest. If they work for a company in the U.S. we’ll help them pay it back or we could take money out of their paychecks.” –Gary Becker, Nobel Prize Laureate- Economics
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