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This the eighth lecture in the "Lectures on Human Capital" series by Gary Becker. This series of lectures recorded during the Spring of 2010 are from ECON 343 - Human Capital, a class taught every year by Gary Becker at the University of Chicago. In this class, Becker expounds upon the theory of Human Capital that he helped create and for which he won the Nobel Prize. Please see attached lecture notes, video annotations, and reading list for more information.
In the first hour of the lecture, Professor discusses the preference transmission model that he discussed in his Nobel Prize Lecture. However, in this lecture he deepens the analysis: he offers necessary and sufficient conditions for "investment in guilt to happen", he points out the plausibility of corner solutions in some of the choice variables, and he goes through the insights offered by the first order conditions of this rational choice model.
Then, he turns into what he calls a "much more traditional human capital problem" by introducing investment in education. He proposes a model in which the individuals face the decision whether or not to go to college. In this model, the individuals compare the lifetime earnings differential of going to college versus the foregone earnings plus the tuition costs. The ratio of the benefits with respect to the costs is defined as the return of going to college.
Key concepts: bequest, foregone earnings, investment in guilt, lifetime earnings differential, returns to education, schooling decisions.
Main discussions: • Lecture 8, (00:00-01:02:50): Professor Becker develops the preference transmission model that is discussed in his Nobel Prize Lecture. • Lecture 8, (30:00-40:40): Professor Becker set ups the context in which he analyses the investment in education problem.
Main quotes: • "You arrive at age 18 with a certain amount of human capital (...) maybe that's why it's such a free game to blame your parents for anything".
References: • Gary Becker. 1992. Nobel Prize Lecture: The Economic Way of Looking at Life. http://home.uchicago.edu/~gbecker/Nob... • Chapter V: Rates of Return form College Education in Becker, Gary. 1974. Human Capital. Third ed. pp. 161-204.