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3of19 - Human Capital, and Intergenerational Mobility - The basic model (2of2)

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Published on Jan 6, 2011

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GARY BECKER

This the third 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.

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Professor Becker continues to discuss the model developed in Lecture 2. He gives intuitive and technical insights about the forces that cause capital market imperfections (and how the rate of return of investment in kids is affected by these). Also, he explains the individual household and social consequences of these kinds of market failures. Afterwards, he gives some public policy recommendations with this respect.

Becker then returns to the discussion on intergenerational income mobility and explains the technical details of how it can be measured. He also contrasts the measurement of the intergenerational income mobility with the measurement of income equality.

Finally, he returns to the model developed in Lecture 2 and makes two comparative statics model: he investigates how the choice variables change when the parents experience an exogenous increase in their taste for altruism and when the parameter that converts the human capital of the kids into earnings increases.
Key concepts: capital market imperfections, income (in) equality, intergenerational income mobility, rate of return.

Main discussions:
• Lecture 3, (26:50-30:10): Professor Becker contrasts the measurement of the intergenerational income mobility with the measurement of income equality.
• Lecture 3, (38:00-40:50): in order to give an example of public policy programs that attempt to lower capital market imperfections, Professor Becker discusses Progresa- Oportunidades, a conditional cash transfer social policy program in Mexico.

Main quotes:
• "(..) The Rockefellers are still rich; I wouldn't feel sorry for them". (on how regression to the mean doesn't completely wipe out wealth)
• "(..) Let me put it in a little more controversial way: richer people tend to be more altruistic than poorer people... that doesn't sound so good, right?"
• "I'm not saying rich makes you more altruistic... I'm saying more altruistic makes you rich... maybe they are against it [people] but they don't understand what's going on".

References:
• Chapter 7: Inequality and Intergenerational Mobility in Becker Gary. A Treatise on the Family. Enlarged ed. pp. 201-237.
• Supplement to Chapter 7: The Rise and Fall of Families in Becker Gary. A Treatise on the Family. Enlarged ed. pp. 238-276.

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Lecture Notes:
https://mindonline.uchicago.edu/media...

Reading List:
https://mindonline.uchicago.edu/media...

Video Annotations:
https://mindonline.uchicago.edu/media...

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