Lunch Panel - Gary Becker and Mike Milken on the Marketplace of Ideas

Conference Logistics & Announcements

• Governor Brown's Cancellation: Governor Brown canceled his scheduled session due to recent surgery; he is recovering but will remain out until stitches are removed.
• Venue Reallocation: The "Business of Sports" panel, originally scheduled for the International Terrace, has been moved to the Beverly Hills Ballroom (the former location of Brown's session).
• Milken Institute Staff Recognition: The conference organizers publicly thanked the internal Milken Institute staff and external partners, specifically the Baker Group, Expect Broke Services, and Milk and Family Foundation Creative Services, for their execution of the event.
• Upcoming Calendar Events:
  • State of the State Conference: Scheduled for October 13, 2011.
  • Partnering for Cures Conference: Annual event moving to New York from November 6 to 8, 2011.
  • New Jersey Conference: The institute's first-ever conference in New Jersey is planned.
  • London Conference: Scheduled for the week of November 14, 2011, at Heron Tower.
  • 15th Anniversary Global Conference: Scheduled for April 29 to May 2, 2012, at the Beverly Hilton Hotel.

Panel Context & Introductions

• Quiz Conclusion: The closing quiz regarding the favorite high school sport of panelist Gary Becker (Handball, Baseball, Football, Basketball, Lacrosse) was resolved with Handball as the correct answer; approximately one-third of the audience guessed correctly.
• Debate Resolution: The panel confirmed that Mike Milken largely "won" his historical debates with the late Merton Miller regarding the relevance of capital structure in real-world markets versus vacuum conditions, citing market volatility and irrational behavior as factors Miller's theories initially underestimated.
• Historical Anecdotes:
  • Gary Becker recalled meeting Albert Einstein as an 18–19-year-old undergraduate at Princeton; Einstein advised a student that the decision to become a conscientious objector was a personal moral choice.
  • Becker chose the University of Chicago for graduate school over Harvard to avoid following the "Princeton mold" and because he wanted to move to the Midwest, despite initially underestimating Milton Friedman's influence at the time.

Gary Becker's Economic Philosophy & Policy Positions

• Small Government Role: Becker advocates for a government limited to enforcing law, national security, basic research (which the private sector under-invests in due to non-excludability), and a safety net for the unemployed and low-income, while arguing that interest groups drive excessive government expansion.
• Universal Economic Principles: Becker maintains that basic economic rules (responding to incentives, competition over monopoly) apply universally regardless of culture or national borders, citing China's post-1991 growth and India's post-1991 reforms as evidence that culture does not override economic fundamentals.
• Education & Labor Supply:
  • Human Capital Shift: China has surpassed the U.S. in higher education enrollment, with 30–40% more college students currently than the U.S.; the U.S. lags specifically in male enrollment, which has been stable since 1975.
  • Teacher Reform: Becker supports merit pay, charter schools, and competition to improve K-12 education, noting that monopoly unions have often hindered teacher performance.
• Retirement Policy:
  • Systemic Mismatch: Current retirement ages (e.g., 65 in the U.S., 67 in France) are outdated relative to life expectancy increases (average U.S. lifespan rose from 61.7 in 1935 to 78.1 today).
  • Proposal: Becker recommends raising the retirement age to 70 and shifting toward individual retirement accounts for those not receiving direct government subsidies, arguing that current systems disincentivize work and threaten Social Security solvency.
• Healthcare & Incentives:
  • Cost of Lifestyle: Obesity costs the U.S. economy approximately $1 trillion annually (including absenteeism and medical costs); Becker argues that medical advances may encourage risky behaviors (like overeating) if long-term consequences are assumed to be manageable.
  • Market Mechanisms: Becker proposes that individuals with means be required to purchase their own health insurance at risk-adjusted premiums, rather than having the state cover lifestyle-related costs for all, thereby creating financial incentives for healthier behavior.
• Immigration Strategy:
  • Brain Drain Reversal: Restrictive U.S. immigration policies are causing skilled Asian and Indian graduates to return home rather than contribute to the U.S. economy.
  • "Visa Fee" Proposal: Becker suggests a $50,000 entry fee (financed via an "immigration loan program") for legal immigrants, which would generate $50 billion annually, offset the perception of "free-riding," and simplify the bureaucratic process to attract entrepreneurs.
• Misallocation of Capital: The panel highlighted that U.S. middle-class households misallocate resources by spending 50% of income on housing/transportation versus 16% in Asia, where families prioritize education (spending 50% more on tutoring than housing) and 16% on housing.

Historical Data & Global Trends

• Economic History: UN data indicates that China and India combined accounted for 45% of the global economy in 1820, with the U.S. currently holding 23.6% (adjusted for currency fluctuations).
• Growth Spikes: Economic historian Robert Fogel's charts show that global population and per capita income remained flat for 1,000 years until the Second Agricultural and Industrial Revolutions; the last 50 years have seen the most rapid economic growth in recorded history.
• Soviet Human Capital: The collapse of the Soviet Union released an estimated $1 trillion in human capital to the West; Israel, for example, now leads the world in college graduation rates, largely due to the influx of highly educated Russian immigrants.
• Central Planning Failure: Becker asserts that fully centrally planned economies have universally failed or stagnated, noting that even China's growth is driven by its private sector while state enterprises remain sluggish without subsidies.