01.09.2021
The subject of economic science according to Becker. Economic approach Economic approach and its elements
Economics has the status of a scientific discipline, where many methods of scientific and practical research are combined.
Method of scientific abstraction or associative methods
Like any scientific discipline, for example, mathematics, in economics there are a number of generally accepted scientific abstractions, axioms, theorems, which are accepted without proof for the purposes of scientific research.
The variant closest to everyday life is the theoretical substantiation (assumption) that every economic agent - a business, a household or an individual consumer - is a rationally acting subject. Those. it is assumed that the entrepreneur always strives to increase profits (which was well described in the work of K. Marx "Capital"), and that, for example, a buyer or trader in the stock market seeks to make a rational decision from all options.
Despite the fact that practice also proves some irrationality of behavior (“the effect of lemmings” or crowds), nevertheless, scientific abstraction in economics helps to create a set of universal models for analyzing the behavior of economic agents in a particular economic system.
Method of integration and differentiation (or method of induction and deduction)
This method is based on the study of a general phenomenon on the basis of a particular event, or vice versa, the study of a particular phenomenon on the basis of a larger one. This allows you to study economic systems, for example, the behavior of an individual as a consumer in the market, based on the analysis of the behavior of a group or segment of consumers (reference group analysis).
Similarly, if such methods are applied to the financial market, then judging by how the overall stock market index behaves, certain conclusions can be drawn about how the economy of the entire country is functioning. Or, on the contrary, according to how the exchange rate of a particular country behaves, it is possible to predict and analyze the work of a particular business by deduction, for example, to study the dynamics of the balance of payments of export-import companies.
Method of historical research and analogies
In economics, as in science, the method of comparing past events with the present is used very often. For example, all economic crises, starting with the history of tulip mania, have a certain development algorithm that repeats itself in historical retrospect. This is a good scientific basis for research, the result of which can be the ability to predict the onset of new crises and their main parameters.
Methods of statistical information processing
Economics, as a science, deals with a huge amount of data, which includes factors in the development of large and small economic systems - from studying the dynamics of consumer preferences and the amount of lending to individual households, to studying the parameters of the budget of a particular country.
The collection, analysis and preparation of ready-made solutions used in the economy is based on the statistical processing of information using special econometric models. They allow you to systematize the amount of information, filter random events and give the researcher a probabilistic outcome of events.
From a purely practical point of view, for example, in the financial market, a trader or investor is also studying the statistics of the number of exits of the price level of any asset (stocks, bonds or currencies) above (below) a certain level.
Modeling of processes in the economy
Modeling in economics occurs in the same way as it is used in theoretical physics or mechanics, when a model of a certain complexity is created to study a process, sometimes in the form of a set of mathematical functions.
The economy uses a large arsenal of such mathematical models, ranging from Monte Carlo-type models to complex systems of hundreds of equations. Such modeling is very often used not only in macroeconomics, but also in purely practical areas, for example, in insurance, where there are special models for analyzing the occurrence of certain insured events.
Graphical analysis methods
Since economics, as a science, deals with processes occurring in a certain space and time, the question naturally arises of the analogy of these events with cyclic or wave events. Any economic system, whether it is the economy of the country as a whole, the business of an individual enterprise or the price of a share in the stock market, develops in a certain cyclical sequence. So the price of a share cannot grow indefinitely upwards, since the economy of any country experiences phases of growth and decline (crises). Accordingly, for such a cyclic (wave) analysis, graphic-analytical methods are used.
Introduction
The article sets the task to expand the analytical field of what the scientist himself calls the economic approach to various social problems. The analysis of the role of the family, or family unit, in society is given. An attempt is made to explain the downward trend in fertility in industrialized countries and the difference in fertility levels between different countries and between urban and rural areas. The possibility of applying the proposed theory to the field of "crime and punishment" is shown.
Economic approach
In my research, I analyze social problems that go beyond the traditional subject of economics, using an economic approach. In the proposed article, this approach will be described and illustrated with examples from my past and current work.
The economic approach I use, unlike the Marxist one, does not assume that the behavior of individuals is determined solely by selfishness or greed. This is a method of analysis, not a premise about the motives of behavior. Together with my like-minded people, I tried to prove to economists that the basis of individual behavior is not narrow selfishness, but a wider range of values and preferences.
According to this approach, people maximize what they perceive as wealth, whether they are selfish or altruistic, sadistic or masochistic. Their actions are thought out and coordinated in time. So, they try to predict the unknown consequences of their actions as accurately as possible. The roots of their foresight, however, may lie in the past, for the past leaves a deep imprint on the worldview and values of a person.
A person's freedom of action is limited by his income, time, imperfection of memory and computing abilities and other limited resources, as well as the opportunities that the economy presents to him. The breadth of these opportunities is determined by the actions of other individuals and their organizations.
The most important of all constraints is time. The progress of economics and medicine, which has greatly increased life expectancy, has been powerless to do anything with the flow of time, which always limits a person to 24 hours a day. Thus, although the volume of goods and services in rich countries has increased enormously, the volume of time has remained unchanged.
Therefore, desires remain unsatisfied in both rich and poor countries. Although the increasing abundance of goods reduces the value of the additional good, time becomes more valuable as the goods become more and more abundant. Maximizing utility in a utopian society where all needs are fully satisfied is meaningless, but the immutability of the time stream makes such a utopia impossible. Here are some of the problems explored in the works of G. Bakker and S. Linder.
The following sections of this article illustrate the application of the economic approach to four very different subjects. To understand the problem of discrimination against minorities, it is necessary to include such feelings as prejudice and hatred towards certain groups of people as factors determining preferences. The economic analysis of crime makes it possible to find rationality in illegal, antisocial actions. The theory of "human capital" reveals the links between labor productivity and investment in education, the acquisition of skills and knowledge. The economic approach to the family interprets marriages, divorces, fertility, and intra-family relationships in terms of maximizing long-term utility.
Until now, economic theory has studied human behavior in the economic sphere, looking for answers to the questions: “What, for whom and how to produce?”. The Nobel laureate G.S. Becker in his research uses an economic approach to study the behavior of people in areas that, as a rule, are not of interest to economists.
The economic approach assumes maximizing behavior over a wider range. This does not require that individual agents are necessarily aware of their desire for maximization. The economic approach is comprehensive: it is applicable to any human behavior - monetary and shadow prices, one-time and repeated decisions, emotionally loaded goals and neutral ones, the behavior of people with any income level, any profession. We will apply the approach in the social, legal, and everyday spheres of society.
In the social sphere, the concept of the economy of discrimination stands out. If a person has a preference for dealing with certain groups of people, then his propensity to do so can be measured by comparing it with the cost of contacting a particular group. Accordingly, the discrimination coefficient (DC) is the link between the monetary and net costs of the transaction between the entrepreneur and the employee. Discrimination can generate differences in wage levels between two groups. Market Discrimination Coefficient (MDC) can be defined as the ratio between these levels:
Where πw and πn are the equilibrium wages of groups W and N, which are substitutes for each other. Exactly how discrimination affects group incomes is shown in the graph:
Point p0 corresponds to the income ratio with no discrimination, point p1 corresponds to the income ratio with complete segregation, and curve p0wp1 corresponds to the income ratio with different levels of discrimination by W. As discrimination increases, the total MDC against N increases.
The economic approach in the legal sphere is connected, first of all, with the fact that crimes cause material damage to the state. In other words, crime is a source of costs. Obviously, the amount of harm to other members of society increases with the number of crimes committed. The price of the gain that criminals receive also increases with the growth of the number of crimes. Based on this, the net cost of society is measured by the difference between the harm caused and the gain received. The relationship between the performance of law enforcement agencies can be represented as a function A=f(m, r, c), where A is the result of their activities, and m is the amount of wages, r is other costs and c is capital costs. We get the production function f. The activation of the law enforcement system implies an increase in costs. In general terms, the level of law enforcement activity can be judged by the level of solved crimes. An increase in the probability of solving crimes and an increase in the number of crimes lead to an increase in total costs.
A more realistic approach involves dropping the assumption that the level of activity is measured only by the detection of crimes and that p (probability of solving a crime) and O (number of crimes) have equal elasticities. This allows using a more general relationship A=h(p, O,a), where a is the number of arrests and other results that characterize the activities of the law enforcement system. Hence the average cost per crime: 
.
What factors influence the number of crimes? The economic approach assumes that a person makes a choice in favor of a crime when the expected utility from committing a crime is higher than the expected utility in case of a different pastime. There is a function that sets the ratio between the number of crimes and the probability that the offender will be caught, the severity of the punishment. It can be represented as Oj=Oj(pj, f, uj), where Oj is the number of crimes committed by the j-th criminal, pj is the probability of his capture, fj is the punishment for each crime, uj is a variable reflecting the combined effect of all other factors. The total number of crimes is denoted O (the sum of all possible Oj), in which case the function takes the form O=O(p, f, u).
G. Becker's economic approach
Gary S. Becker, instead of defining the subject of economics, defines a special approach to economics. He argues that economics as a scientific discipline differs most of all from other branches of the social sciences not in its subject, but in its approach.
Many forms of human behavior are the subject of study of several disciplines at once. Thus, the problem of childbearing forms a special branch of sociology, anthropology, economic theory, history, human biology and, perhaps, even political science. G. Becker argues that the economic approach is unique in its power, because it is able to integrate many different forms of human behavior.
Economic approach
The economic approach assumes maximizing behavior in a more explicit form and in a wider range than other approaches, so that it can be a matter of maximizing the utility or wealth function, whether by family, firm, trade union, or government agencies. In addition, the economic approach presupposes the existence of markets that, with varying degrees of efficiency, coordinate the actions of different participants - individuals, firms, and even entire nations, in such a way that their behavior becomes mutually consistent.It is also assumed that preferences do not change much over time and do not differ greatly between rich and poor, or even among people belonging to different societies and cultures.
Prices and other market instruments regulate the distribution of scarce resources in society, thereby limiting the desires of participants and coordinating their actions. In the economic approach, these market instruments perform most, if not all, of the functions that sociological theories attribute to "structure."
Stability of preferences is assumed not in relation to market goods and services like oranges, cars or medical care, but in relation to the basic objects of choice that each household produces using market goods and services, its own time and other resources. These deep preferences are determined by people's attitudes towards fundamental aspects of their lives, such as health, prestige, sensual pleasures, benevolence or envy. However, preferences do not always remain stable in relation to specific goods and services, the choice of which is determined by the cultural structure, and not by the natural needs of a person.
The premise of the stability of human preferences provides, according to G. Becker, a reliable basis for predicting reactions to change. The stability of preferences prevents the researcher from being tempted to simply postulate a necessary shift in preferences, thus "explaining" any apparent discrepancies with his predictions.
Maximizing behavior and stability of preferences are prerequisites, but can be derived from the concept of natural selection of suitable behaviors in the course of human evolution. Indeed, the economic approach and the theory of natural selection developed by modern biology are closely interrelated. They, according to some scientists, may represent different aspects of a single, more fundamental theory.
Linked together assumptions about maximizing behavior, market equilibrium and stability of preferences, carried out firmly and adamantly, form the core of the economic approach in the understanding of G. Becker. They are at the heart of many theories that grow out of this approach, such as the following:
1. An increase in price leads to a reduction in the volume of demand.
2. An increase in price leads to an expansion in the volume of supply.
3. Competitive markets are more efficient than monopolized markets in satisfying consumer preferences.
4. Establishing a tax on any product leads to a decrease in its production.
Scope of applicability of the economic approach
The scope of applicability of the economic approach according to G. Becker is not limited to goods and needs, or the market sector. Prices—whether the money prices of the market sector or the imputed prices of the non-market sector—reflect the opportunity cost of using scarce resources.The economic approach predicts the same type of reactions to changes in both imputed and market prices. For example, a person may have a single rare resource - time. A person divides time between the production of various products and leisure in order to maximize overall utility.
Even outside the market sector, every good, directly or indirectly, has a marginal imputed price. This refers to the time required to produce one additional unit of such a good. Under equilibrium conditions, the ratio of these prices should be equal to the ratio of the marginal utilities of the corresponding goods. Most importantly, an increase in the relative price of the time it takes to create a unit of that good will lead to a reduction in its consumption.
The economic approach does not assume that all participants in each market necessarily have complete information or make transactions that require no costs to conclude them. However, incomplete information or transaction costs should not be confused with irrationality or inconsistent behavior.
The economic approach has led to the development of a theory of the optimal or rational accumulation of expensive information, which implies, for example, a greater investment in obtaining information when making important decisions compared to insignificant transactions. For example, buying a house or getting married requires more information than buying bread or a sofa.
The information collected is often far from complete because it is costly to obtain. This fact is used in the economic approach to explain those forms of behavior that in other approaches are understood either as irrational or inconsistent behavior, or as traditional, or as "irrational".
When clearly advantageous opportunities are missed by a firm, worker, or household, there is no need to assume that they are irrational, content with existing wealth, or convenient shifts in preferences. The economic approach postulates the existence of costs, monetary or psychological, of trying to take advantage of these favorable opportunities - costs that reduce the perceived benefits, and which are not easily "seen" by outsiders.
The postulation of such costs "closes" or "completes" the economic approach in the same way that the postulation of energy costs closes the energy system and saves the law of conservation of energy in physics. Systems of analysis in chemistry, genetics, and other fields close in a similar way.
The main question is how fruitful this or that way of “completing” the system is. The most important theorems that follow from the economic approach show that it closes in a way that is much more productive than simple theorizing, in large part because the premise of preference stability provides a basis for predicting responses to a wide variety of changes.
The economic approach does not require that individual agents necessarily be aware of their desire for maximization. Thus, it coincides in this with modern psychology, which attaches special importance to the subconscious, and sociology, which singles out explicit and latent functions. The economic approach does not make a conceptual distinction between important and unimportant decisions, between the decisions of people with unequal wealth, education or social background.
G. Becker came to the conclusion that the economic approach is comprehensive. Becker believes that it applies to all human behavior in terms of market or implied prices, repetitive or one-time, important or unimportant decisions, emotionally charged or neutral goals; it applies to the behavior of rich and poor, patients and doctors, businessmen and politicians, teachers and students.
The scope of the economic approach, understood in this way, is so wide that it closes the subject of economics, if we follow the definition given earlier, which speaks of limited means and competing ends. It is this understanding that is consistent with this broad, unqualified definition.
The economic approach to human behavior is not new, even in the non-market sector. Adam Smith often took this approach in explaining political behavior.
The economic approach is not always equally successful in penetrating the essence of various forms of human behavior and explaining them. But behaviors as difficult to interpret as childbearing, child-rearing, labor force participation, and other family decisions have been enriched by the systematic application of the economic approach.
The economic approach is used to analyze an infinitely diverse set of problems. Among them are the development of the language, church attendance, political activity, the legal system. This is altruism, and social interactions, marriage, fertility, divorce, crime.
According to G. Becker, human behavior should not be divided into some separate compartments, in one of which it has a maximizing character, in the other - no, in one it is motivated by stable preferences, in the other - by unstable ones, water leads to the accumulation of an optimal amount of information , does not result in the other.
All human behavior is characterized by the fact that participants maximize utility with a stable set of preferences and accumulate optimal amounts of information and other resources in a variety of different markets. If we accept the concept of G. Becker, then the economic approach provides a holistic scheme for understanding human behavior, which many economists have long, but unsuccessfully, sought to create.
Methods of psychotherapy.
The theoretical premise of the economic approach is based on the assertion that any psychological activity can be expressed in terms of mental energy available (and required) for these processes; The economic approach describes the distribution of energy and amount of excitation within the mental apparatus, and also serves to describe cathexis. The economic view of the psyche understands it as a system controlled by the energy of instincts, and the differences between the conscious (ego) and unconscious (id) areas are understood through the prism of differences in the level and form of energy distribution between these areas.
According to the economic approach, the distribution of energy is considered in the context of its final object, source and voltage level. As defined by Borness Moore and Bernard Fine, this approach postulates: “Laws other than intentionality also operate within the psyche.” An example of an economic perspective is the concept of the defense mechanism of sublimation.
see also
Notes
Literature
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economic- (adj.), ECONOMY German: цkonomisch. French: economique. English: economic. Spanish: econf mico. Italian: economico. Portuguese: economico. Everything related to the hypothesis that mental processes are exchange and redistribution ... ... Dictionary of Psychoanalysis
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ECONOMIC IMPERIALISM, the extension of the methodology of neoclassical economic theory (see NEOCLASSICAL DIRECTION) to the study of processes and phenomena traditionally attributed to the domain of other social disciplines of sociology, ... ... encyclopedic Dictionary
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Books
- Economic analysis of economic activity. Textbook, Markaryan Eduard Aramovich, Gerasimenko Galina Petrovna, Markaryan Sergey Eduardovich. The textbook consists of three sections, which reflect a systematic approach to the analysis of the economic and financial activities of commercial organizations. The first section outlines the methodology...
