Family economics

• 1. A Household Under the Microscope

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  Family economics treats the household as a small economy, where production, trade, and hard bargaining happen between people who share a roof. Its starting point is a worry that Adam Smith raised in The Wealth of Nations, in his chapter on wages. Smith argued that pay for even the humblest labor could not sink below a certain floor. Otherwise, he wrote, "it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation." Smith had named the family as fundamental. Yet economists who followed him mostly stepped around it for a long time. This documentary asks why they looked away, and what finally drew them back. It asks what changes when marriage, chores, children, and divorce are analyzed with the same tools used for factories and markets. And it asks who holds power inside a home, and how that power is won.

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• 2. Classical Roots

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  Thomas Robert Malthus took Smith's wage logic and followed it into the nursery. When wages are high, he argued, laboring families tend to have more children. Population then grows, and the larger supply of workers pushes wages back down.

  Marx, in Capital, Volume I, looked at the same problem from the side of class. He measured the labor time needed to reproduce a worker as equal in value to the income required to raise a replacement child. He called this necessary labor time. Any work beyond it he called surplus labor time. For Marx, the wage a family needs to survive was therefore one of the basic forces regulating the economy. But he meant market labor only. Capital says nothing about the production that happens inside the family itself. Some scholars link the demand for a family wage among working class men in the late 19th century to his ideas. Those men wanted pay high enough that their wives and children would not need market work.

  Friedrich Engels went where Marx did not, and he asked how class society shapes the family itself. In his account, the monogamous family of one man, one woman, and children was a creation of the class system. So were adultery and prostitution, which he saw as companions of that family form. Before capitalism, he wrote, came group marriage and pairing marriage. His explanation turned on property: "with the ponderance of private property over communal property and the interest in its bequeathal, father rights and monogamy gained supremacy."

  Engels pushed the comparison further. Inside the family, he said, men play the part of capitalists and women the part of the proletariat. He expected monogamy to fade with the end of capitalism. Full freedom for women, he argued, would come only when they were brought "back into public industry." Under socialism, household tasks would become public services, so women would no longer carry the double burden of wage work and unpaid housework. Bebel, Luxemburg, and Lenin, other Marxist writers of the late 19th and early 20th century, also argued that women had to be brought back into public industry.

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• 3. The Household Returns

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  Léon Walras, Stanley Jevons, and Alfred Marshall led the marginalist school of the late 19th century, and they pulled economics even further from the home. Their interest was market transactions, so work done in a household did not register. They treated either the individual or the household as the basic unit. When they chose the household, they did not ask how decisions were made inside it.

  In the 1920s and 1930s, a handful of economists objected. Eric Lindahl, Einar Dahlgren, Karin Kock, and Simon Kuznets argued that household production was a real part of national output. Without it, they said, GNP could not be a complete measure of what a nation produces. In the same years, Hazel Kyrk, Margaret Reid, and Elizabeth Hoyt tried to build a new field called consumption economics. It aimed to bring the household's roles in both consumption and production inside economics.

  The real revival came with the New Home Economics of the 1960s, founded by Gary Becker and Jacob Mincer, and it remains a main approach in the 21st century. Becker's article "A Theory of Allocation of Time" introduced household production functions, which economists now use to analyze many household choices. Theodore W. Schultz captured what the founders stressed. These were the production of human capital through investment in children, the upkeep of adults' human capital, the way family members split time between market and household work, and consumption choices.

  Since the 1970s, Marxists and radical feminists have added their own work. Marxism looks at how class relations and capitalism shape the family. Radical feminism looks at gender, patriarchy, and men's domination of women in marriages and households. Marxist-feminists then tried to join the two, showing how patriarchy and capitalism interact. One image kept surfacing in all these camps, and it was the marriage as a kind of firm.

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• 4. Marriage as a Firm

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  Shoshana Grossbard models husbands and wives as people who may each hire the other's work in household production. She calls this "spousal labor," or "Work-In-Household (WiHo)." If a husband employs his wife's WiHo and pays her only a low "quasi-wage," Marxist-feminist economists say she is being exploited, in much the way a worker is by an employer.

  Robert Ellickson turned the firm analogy toward ownership. He argued that the people who own the household's capital should have more say in its decisions than the people who work in its production. Grossbard proposed the opposite, giving more control to those who do the household's production. Her position and the Marxist-feminist one show a parallel between Chicago-trained feminist economists and Marxist-feminist economists.

  Other explanations for marriage borrow from the economics of firms in different ways. One stresses risk pooling, since a married pair can cut the risk of illness or of being out of work. Another points to marriage as a way to make specific investments, with children as the leading example.

  All of these views raise a practical question. When one spouse does domestic work that benefits the other, how is that work repaid? In economic terms, that is a question about terms of trade between two people who have specialized.

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• 5. Dividing the Work

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  Economists who study household work sort it into two kinds. Housework, such as laundry or cleaning, benefits the whole family. Carework is done for one member who cannot do the task alone, and its two basic forms are child care and elder care. Cooking or laundry that benefits a spouse more than the person doing it can fall somewhere in between.

  Gary Becker analyzed the split through comparative advantage. He generally assumed that women hold the advantage in household production and men in work outside the home. If each specializes and they share the results, he argued, both maximize their utility. Many feminist economists have tended to dismiss Becker's analyses of marriage for this reason.

  Critics also point to the risks of complete specialization. Domestic work may shrink once the children grow up. A woman who has fully specialized at home may struggle to earn a decent wage when she returns to the market. Barbara Bergman wrote that full-time housewives often face financial insecurity and a higher likelihood of domestic violence than women who earn wages. When both spouses have some domestic experience, each is more independent after a divorce or a death.

  Women's participation in the labor market grew dramatically in the 19th and 20th centuries. Jeremy Greenwood, Ananth Seshadri, and Mehmet Yorukoglu credit the arrival of time-saving appliances in the home. Rules and campaigns held that growth back. In England in the second half of the 19th century, working class men supported a campaign to restrict women's market jobs. The United States had laws barring married women from employment, and Japan still has quotas on employing women or married women. Grossbard has also written on how marriage markets influence whether women join the labor force.

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• 6. Bargaining and Altruism

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  In Becker's picture, a single altruistic head of household makes the decisions, and that altruism pays off for everyone. Because he weighs the welfare of others, he keeps them in the household and makes them more willing to contribute. This is the setting for Becker's rotten kid theorem. Even if one member wanted to harm another, the altruistic head can arrange the sharing of resources so that the troublemaker gains more from higher family income than from hurting the envied relative.

  Becker's model has a blind spot, because it leaves out the conflicts that one person's decisions create for the others. Bargaining models start from those conflicts. They treat household choices as the result of bargaining between husband and wife, or between parent and child. A conflict arises when an outcome gives one party more utility while the alternative favors the other.

  Kaushik Basu formalized the role of power in his paper "Gender and Say: A Model of Household Behavior with Endogenously Determined Balance of Power." In his approach, a partner with greater earning power holds a stronger bargaining position. The outcome then feeds back and strengthens the winner's power even more.

  Amartya Sen added that bargainers may misjudge both their own contributions and their own interests. He named two further factors, "the perception of contribution" and "the perception of self-interest." In his view, women who do market work improve their bargaining power, partly through sharper perceptions of both. He used this framework to explain the "missing women" problem. Where women have less paid work, he argued, they have weaker bargaining power, less access to food, care, and health services, and are less likely to survive. A last group of models skips bargaining entirely and treats household members as independent decision-makers, some of whom made choices before the household formed.

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• 7. Children and Fertility

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  Malthus was the first to examine how income relates to fertility decisions. He pointed to two factors: the age at which people marry, and how often married couples have sex.

  Gary Becker recast the question as a tradeoff between the quantity and quality of children. Many people assume that higher income leads to more children, but studies have found that fertility is negatively correlated with income. Becker made two assumptions, about preferences and about quantity versus quality. Without the idea of quality, children might look like an inferior good. Yet children have no close substitutes. When he compared how income affects each dimension, he found that quantity had low elasticity and quality had high elasticity.

  The birth control pill changed the decision itself. It let women pursue careers while still marrying. It also pulled apart two choices that had been tied together, when to marry and how often to have sex. Before, women often held back from sex even within marriage to avoid an unplanned pregnancy, which could cost them their place in the workforce.

  The workforce penalty for children is real. Mothers must take time off to care for infants, and after returning they suffer a decrease in pay. Fertility also moves with the economy at large, because it has a negative correlation with the business cycle.

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• 8. Marriage and Divorce

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  Becker's rule for marriage is simple: two people marry when the benefit of being together is greater than the benefit of staying single. Part of that gain comes from the division of household labor. Another part comes from sharing costs that each person once paid alone, which lowers expenses for both. Economies of scale grow as the pair produces together. Marriage itself can be expensive, so couples are advised to weigh income and financial position first.

  Once married, the pair must decide which spouse stays home and which works. In effect, they are deciding how much labor to supply to the market. Any excess in the labor market's balance of supply and demand can open the opportunity for divorce.

  Education has changed the odds. The risk of divorce has fallen as education levels have risen, and people now weigh factors known to lead to it, including education and income differences. Even so, divorce rates have gone up, and the rise is more apparent among lower income people.

  Divorce is costly for the couple, but third parties can gain. For lawyers and others drawn into the process, a divorce creates work.

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