Three of the nation’s foremost economists honored Gary Becker’s pioneering work in the study of human capital by making outstanding arguments for investing in education.
Robert E. Lucas Jr. of the University of Chicago and Claudia Goldin and Edward Glaeser of Harvard contributed fresh perspectives in a panel moderated by Becker Friedman Institute director Lars Peter Hansen.
Lucas, John Dewey Distinguished Service Professor of Economics, kicked off the presentations with a look at how increased access to education has thwarted Malthusian assumptions that increases in income would lead to massive increases in fertility.
He showed data from Nigeria, a country that has significantly increased its productivity over the past few decades, but has not managed to increase income levels. Then he contrasted Nigeria with Japan, which has also increased its productivity but which has significantly raised income levels.
The difference, Lucas explained, were choices about fertility. After experiencing increased GDP, “Nigerian families responded with larger families.” In contrast, the population in Japan is not growing at all. “Successful economies around the world look like Japan,” Lucas said. “Which leads to the central question of growth theory: how do you move your country to be like the economies of Japan and other successful countries?”
The answer, Lucas said, is to make education available to more people. He cited Becker’s 1990 article coauthored with Kevin Murphy and Robert F. Tamura that modeled transforming a Nigerian-type economy into a Japanese-type economy. They demonstrated that once investment in education is viewed as essential, the fertility rate drops because families choose to invest more in each child, leading in turn to sustained growth and productivity.
Next, Claudia Goldin took the stage to discuss “How to Make a U-Turn: Development, Human Capital and Women.” The economic role of women as societies develop over time forms a U-shaped curve, explained Goldin, the Henry Lee Professor of Economics at Harvard.
In more agrarian economies, entire families work together near home, fertility rates are high, and women contribute to family incomes. However, as societies shift to more manufacturing, men exit for better pay outside the home and women stay home to care for families, thus no longer bringing income into the family.
“The question is, when we are at the bottom of the U, do we form social norms to keep women out of the labor force?” Goldin said. “At the beginning, these norms work in a functional manner and are acceded to by all parties, but do they remain in place beyond their usefulness?”
Goldin noted that in the western world in the 1800s, factories were viewed as places so filthy and dangerous that women were strongly discouraged from working in them, or working outside the home at all. “Unfortunately, as work outside the home became increasingly white collar, the norms persisted,” she said.
The women who managed to change the view that they should not work outside the home were those who got educations. Although they began by doing office work and teaching, women more fully joined the work force in the second half of the 20th century due to the significant increase in women’s education.
Goldin closed by noting that even in severely oppressive countries like Saudi Arabia, females who are highly educated work outside their homes as teachers.
In the panel’s final presentation, “Human Capital, Wealth and the State,” Edward Glaeser mentioned that Gary Becker “was particularly interested in the power of education to shape almost anything, and the connection between education and politics.”
Glaeser, the Fred and Eleanor Glimp Professor of Economics at Harvard, showed that each year of schooling offers a 42 percent return. This clearly shows “human capital is a good thing,” he concluded, but also asked, “How is it possible that you can have social returns that are so in excess of private returns?”
He answered by explaining that countries that are better educated tend to be better governed and that there is less corruption in more educated areas. “Society is human capital; it is intimately tied to the education of the group,” Glaeser said. “[The revolution of] 1776 could not have happened without men with such good educations.”
Fundamentally, the impact of education does not stop at the labor markets, because as Becker proved, it changes everything socially and politically as well. Such a powerful tool can only continue to help nations become stronger and better, but only so long as societies continue to place a premium on it.