FAMILY ECONOMICS Family Economics can be defined as the branch of economics that is attempting to explain the economic aspects of the family. It explains both how the basic economic concepts like division of labor, distribution of wealth, decision making occur within the family and try to explain some concepts unique to family, like marriage, decision of having children, and number of children using economic concepts. The family, although recognized as fundamental from Adam Smith on, received little systematic treatment in mainstream economics before the 1950s. A significant exception was Thomas Malthus's model of population growth.[1] Within Marxist and Feminist economics on the other hand, the structure of family is anaylsed srarting with the pioneering work of Friedrich Engels.[18] Within the mainstream economics, economists like Gary Becker, Jacob Mincer, created the first major works. The work of Gary Becker, Jacob Mincer, and their students initiated contemporary research on family economics with the application and extension of microeconomic theory and empirical methods.[2] Later contributions include those of Theodore Bergstrom.[3] Standard aspects include: • fertility and the demand for children in developed and developing countries[4] • child health and mortality[5] • interrelation and trade-off of 'quantity' and 'quality' of children through investment of time and other resources of parents[6] • altruism in the family, including the rotten kid theorem[7] • sexual division of labor, intra-household bargaining, and decision making through the household production function and outside the household.[8] • mate selection,[9] search costs, marriage, divorce, and imperfect information[10] • family background and opportunities of children • intergenerational mobility and inequality,[11] including the bequest motive.[12] • human capital, social security, and the rise and fall of families[13] • macroeconomics of the family.[14] The study of family economics within the mainstream economics, which has become after the end of 19th century the Neoclassical Economics, has been within the branch of New Household Economics. In addition the the work done within the New Household Economics, scholars working within the Feminist Economics and Neo Marxist Economics traditions also continue to write on family economics. Several surveys, treatises, and handbooks are available on the subject.[15][3]) HISTORY OF FAMILY ECONOMICS The early economists were mostly interested how much individuals contribute to social production, which will translate to how much labor they supply in the labor market, and how much they need to take from what is produced socially in order to survive, i.e. the wage. The production in the household was not a subject that received systematic treatment by early economists. In the Wealth of Nations, Adam Smith alludes to the importance of the family in his chapter on Wages. Accordingly the wage received by the worker must be high enough to support the family in order to ensure the intergenerational reproduction of the working class. This explanation mainly contains the basic link how early economists relate economics to the family.
Adam Smith wrote in his chapter on Wages: “But though in disputes with their workmen, masters must generally have the advantage, there is, however, a certain rate below which it seems impossible to reduce, for any considerable time, the ordinary wages even of the lowest species of labour. A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more; otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation.” [17] Malthus adds to this analysis in his theory of population growth, where he argues that when wages are high laboring families tend to have more children, causing increase in population and reduction in wages.[1] The reproduction of labor force, namely the way workers reproduce heir own labor force and raise children to replace themselves is one of the central issues in Marxists Theory. Marx in Capital Volume 1 argues amount of labor time that is necessary for the reproduction of workers, namely amount necessary for them produce products equal in value to the income they need to sustain a family which will raise a child to replace the worker. This amount is called necessary labor time. He name labor time workers spend in addition to necessary time as surplus labor time. The surplus labor time was according to him source all of income except wages in the economy. In other words amount of wage workers need to sustain their families is one of the basic factors that regulate the economy according to him. When he defines necessary labor time, however, the emphasis of Marx is on the market labor necessary to earn the money income the workers should bring to home, so that their family can survive. There is nothing on the production occurring within the family in Capital.[16] Engels wrote[18] how the economic structure of family shaped by the capitalist system. He argues that the monogamous family, the family that consists of one man, one woman and children is something created by capitalist system and will probably disappear after capitalism. He wrote that within the family men are like capitalists, and women are like proletariat. Also according to Engels full freedom for women can only be possible if women will be brought back into public industry, which will be done under socialism. Under socialism women will not face double burden of work they should do in public industry and work they should do in the households, since what they produce by doing the household tasks will be supplied publicly. Other Marxist economists of late 19th and early 20th century like Bebel, Luxemburg and Lenin also wrote on the necessity of bringing women back into the public industry.[19] The marginalist school, developed in the late 19th century, moved the focus of economics further away from family. On the one hand, the focus of early marginalists like Leon Walras, Stanley Jevons, Alfred Marshall, was market transactions, so any work done in the household was not of interest to marginalists. On the hand the basic economic unit was either the individual or household, and when they took the household as the basic unit, they were not interested how the decisions were made within a household.[19] In 1920s and 30s economists like Eric Lindahl, Einar Dahlgren, Karin Kock, Simon Kuznets argued that production within the household was an important part of national production, and without including them in the GNP, GNP cannot be a complete indicator of national production level. At the same period Hazel Kyrk, Margaret Reid and Elizabeth Hoyt tried to develop a new field called consumption economics, trying to bring consumption and production roles in the household within the sphere of economics. [19] In 1965 Gary Becker brought household production into the neoclassical economists with his article “A Theory of Allocation of Time.” Becker wrote that households were not only units of consumption but were also units of production for certain goods within themselves. Another important economists working on family economics field was Theodor Schultz. Shultz wrote there are four aspects of family that is important for the whole economy. These are the production of human capital, the way children are raised, and adults maintain and develop their human capital, the way members of family allocate their time between market and household work, production function within household and the consumption decisions of the family. “[20] Theodor W. Shultz and Gary Becker can be held the founders of the new economic field called New Household Economics, the field within neoclassical economics focusing on family economics. Today New Household Economics is one of the approaches in the field of family economics; Marxists and radical feminists offer other two approaches to family economics. While Marxism focuses on how class relationships and capitalism shapes family structure, focus of radical feminism is gender and patriarchy and on domination of women. Marxists feminists try to integrate the last two approaches by trying to show how patriarchy and capitalism interact with each other.[21] ECONOMICS OF MARRIAGE According to Engels modern form of marriage is product of current economic system.[18] Engels wrote "We thus have three principal forms of marriage which correspond broadly to the three principal stages of human development. For the period of savagery, group marriage; for barbarism, pairing marriage; for civilization, monogamy, supplemented by adultery and prostitution."[30] Engels wrote that the family that is founded by marriage of male and female is a capitalist form of family. Earlier in the history of family took forms of group marriage, and pairing marriage. In the case of group marriage Engels argues, every female member of a society was married with every male member. In the case of pairing marriage, marriage was not a way to found a family but it was a way to enlarge it. Engels argues, “with the ponderance of private property over communal property and the interest in its bequeathal father right and monogamy gained supremacy.”[22] Both Marxists and Feminists view marriage of woman and man as analogous to the employment relationship in a capitalist society. A worker who doesn’t own any means of production is similar to a woman who can’t earn enough income without a husband, so the husband in a family is like the capitalist of a company.[23] Neoclassical Theories of Marriage, on the other hand, focus on the idea that wife and husband have different comparative advantages and marriage allow them to specialize in areas where they have comparative advantage and share whatever they produce. Gary Becker wrote, “We assume marriage occurs if and only if, both of them are made better of that is increase their utility.”[24] Becker defines a marriage market, where women and men with different comparative adventages and utility functions are looking for a pair, to maximize their utility. Using the model he calculates optimal sorting between males and females who are looking for a pair in that market. Other explanations for marriage emphasize risk pooling where the risks of illness, or being unemployed is reduced with marriage, or marriage specific investments, like children, are undertaken.[21] DIVISION OF LABOR WITHIN THE FAMILY The primary division of labor within a family occurs between the division of household work and market work. Each family decides how much time will be allocated for doing household tasks, how much time will be allocated to market work and earning income. A second decision involves on which member of the family will do which task. Household work is usually divided into two different work types. The first type of work is called housework, which includes activities benefiting the whole family like laundry or cleaning. The second type of work is carework, which is activities that are done specifically for another member of the household, usually because that member is not able to do that work for himself or herself.[21] Two basic form of carework is child care and elder care. Neoclassical Theory According to neoclassical theory, the division of labor between household and market work is related to the utility function of the individuals within the family. In case family has greater preference for the goods that can be bought from the market, they can allocate more time to market work and buy goods from the market. In case they have tastes for goods that are produced in the household they may prefer to do more household work and consume goods produced within the household. [21] In neoclassical theory it is assumed that women have comparative advantage in domestic work, which means they are able to produce more within the household, while men have comparative advantage in market work, which means that they are able to earn more compared with women. When women specialize in household production and men specialize in market production, and share what they produce, both man and women maximize their utilities. [21] Complete specialization however can bring some risks and disadvantages, as also noted y the critics of neoclassical theory. First the need for domestic work might decrease especially when children in a family grow up. However in case woman have completely specialized in household work, they might not be able to gain much wage when they spend more time for doing market work, so having some experience might increase the income a family earns later in their life time, when they would need to allocate less time for domestic work. Secondly when men have some experience in domestic work, and women some experience in market work, this would make them more independent in case their spouse dies, or in case they divorce.[21] Barbara Bergman wrote that specializing in household labor, namely being a fulltime housewives creates high risks for women. Housewives don’t have financial security, become disadvantaged as their children grow and the need for domestic work within the family decreases. Bergman also claims that housewives are more likely to be subject to domestic violence compared with the women who work in the market and earn wages. Bergman concludes that being a housewife is not choice of women but result of the social conditions.[27] One of the central questions with respect to division of labor is how the decision of allocation of labor is made within a household. One way of decision-making is to have a single decision maker.[29] In case the head of the household is altruistic, he will get some satisfaction when he made decision by taking into account the benefit of other household members. Gary Becker argues that altruism of the decision maker of the household also benefits the decision maker of the household, because as a result of altruism he will make his decisions by taking into the benefits of other members. By doing this he will keep them within the household, and increase their willingness to contribute more to the family. Also according to Becker’s Rotten Kid Theorem even if one of the household members would want harm another household member, by contributing less to the family, then the altruistic decision maker in the family might prevent that particular member from harming the other member. In such a case, altruistic decision maker might arrange distribution within the household in such a way, that utility the rotten kid get from the increase of family income will be more than the utility he gets from the harm the decrease of family income cause on the family member he envies.[21] According to Sen models of decision making like Becker’s model, don’t take into account possible conflicts on the decisions made that could occur within the households. Bargaining models are the models that focus how decision-making process might be within the household with such conflicts.[29] Marxists and Feminist Theories Marx doesn’t write on domestic work, he only concentrates on market work. According to Marx that the amount of market work male workers have to do doesn’t only depend on the amount of income they individually need, but also to the income they need to support their wives and children. In case the income male workers earn is less then that amount their wives and in some cases children would also need to do market work. Based on this idea expressed by Marx, in late 19th century there was a campaign for increasing wages of male workers to a certain level, which was called, “the family wage” campaign, which would be enough to support their wives and children, so that the traditional family structure can be protected.[25] Engels argues, that even though the household tasks were the responsibility of women in pre-capitalist family forms, before in pre-capitalist family forms there were many women in the family who do the work together. According to Engels, in pre-capitalist societies household work was also a form of public work. In Monogamous family there is only one woman to do household work, so when she does the housework she become isolated from the society, and the work she does transforms into a private service. Engels argue that traditional domestic tasks, both household work and carework should produced publicly, so that women will be able to work in the public realm and their isolation within the household will end.[22] Heidi Hartman argues that capitalism participation of women in the labor market was always limited by the market conditions. In the second half of 19th century England there was a campaign, supported by the working class men to restrict female employment in the market. As a result, the specialization of women in domestic production was not the choice of women but a result of working class struggles of the late 19th and early 20th Centuries.[26] Bargaining Approach Bargaining approach, assumes household decisions are made by a bargaining process between husband and wife. According to the neoclassical bargaining models, different type of decisions result in different outcomes, where both husband and wife get different amount of utility. If it is assumed that husband and wife are trying to decide between two options A and B, A will be eliminated, in case both husband and wife is better off by choosing B. The conflict arise in case outcome of decision A gives more utility to wife, and outcome of decision B gives more utility to husband. In such conflicts the agent that has greater bargaining power is more advantageous. The neoclassical bargaining models assume that every agent has clear perception both on the contribution they make to the household, and on their own personal interests. So the only factor that determines the outcome of bargaining process is the breakdown point, namely how much each person has to lose in case the couples divorce. In case the loss of welfare the wife will experience is more compared with the husband, she will be the weaker party in the bargaining process. [29] According to the Amarta Sen, in some cases the agents of bargaining process might not have full perceptions on their contributions and interests. Based on this possibility he adds two more factors, that are according to him affecting the outcome o the bargaining process, the perception of the contribution and perception of the self-interest. If a party knows his or her interests more he or she will be get with more benefits in the bargaining process. Also if a person has a sense of the value of his or her contribution to the family his or her power in the bargaining process will increase.[29] According to Sen when women do market work, their breakdown point and their perceptions of contribution and self interest will improve, as a result their bargaining power and the outcome of the bargaining process improves. Women will have more control on decision-making process; also the decisions made will benefit them more. Sen applies this framework to interpret the shortfall of women in the population in some parts of the world. He suggest that missing phenomena that contributes to the weaker bargaining power of women in the household is the outcome of the limited participation of women in paid work.
See also • Demographic economics • Economic imperialism (economics) • Economics of marriage • Hypergamy • Cost of raising a child • Partner effects • Economics of Marriage • Thomas Robert Malthus • Friedrich Engels • Gary Becker • Rotten Kid Theorem • Family • New Household Economics • Patriarchy • Feminist Economics • Marriage Notes 1. ^ Thomas Robert Malthus, 1798. An Essay on the Principle of Population. Arrow-searchable text. 2. ^ • Theodore W. Schultz, ed., .1974. Economics of the Family: Marriage, Children, and Human Capital, chapter-download links. Chicago, University of Chicago Press.
• Amyra Grossbard, 1976. "An Economic Analysis of Polygamy: The Case of Maiduguri." Current Anthropology 17:701-7 [1]. • Michael C. Keeley 1979. "An Analysis of the Age Pattern of First Marriage." International Economic Review [2] 320:527-44. • Gary S. Becker, .1981, Enlarged ed., 1991. A Treatise on the Family. Cambridge, MA: Harvard University Press. ISBN 0-674-90698-5. Publisher's description & links to chapter previews. • Amyra Grossbard-Shechtman, 1984. "A Theory of Allocation of Time in Markets for Labor and Marriage." Economic Journal 94:863-82[3]. • Gary S. Becker, 1987. "family," The New Palgrave: A Dictionary of Economics, v. 2, pp. 281-86. Reprinted in Social Economics: The New Palgrave, 1989, pp. 65-76.
3. ^ a b • Theodore C. Bergstrom, 1996. "Economics in a Family Way," Journal of Economic Literature, 34(4), pp. 1903-1934.
• _____, 1997. "A Survey of Theories of the Family," ch. 2 in Handbook of Population and Family Economics, M. R. Rosenzweig and O. Stark, ed., v. 1A, pp. 21-75. Elsevier. • Google scholar search of Theodore Bergstrom family.
4. ^ • Alicia Adsera, 2008. "fertility in developed countries," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• T. Paul Schultz.2008. "fertility in developing countries," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
5. ^ Janet Currie, 2008. "child health and mortality," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. 6. ^ • Gary S. Becker and Nigel Tomes, 1976. "Child Endowments and the Quantity and Quality of Children," Journal of Political Economy, 84(4, Part 2), pp. S143-S162.
• Eric A. Hanushek, 1992. "The Trade-off between Child Quantity and Quality," Journal of Political Economy, 100(1), pp. 84-117. • Theodore W. Schultz, 1981. Investing in People: The Economics of Population Quality, University of California Press. Description and scroll to chapter-preview links.
7. ^ Theodore C. Bergstrom, 2008. "Rotten Kid Theorem," The New Palgrave Dictionary of Economics, 2nd Edition, Abstract. 8. ^ • Olivier Donni, 2008. "collective models of the household." The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• Shelly Lundberg and Robert A. Pollak, 2008. "family decision making," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
9. ^ Hao Li, 2008. "assortative matching," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. 10. ^ Yoram Weiss, 2008. "marriage and divorce," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. 11. ^ Gary Solon, 2008. "intergenerational income mobility," " The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. 12. ^ • Laurence J. Kotlikoff and Lawrence H. Summers, 1981), "The Role of Intergenerational Transfers in Aggregate Capital Accumulation." Journal of Political Economy, 89(40), pp. 70 6-732.
• John Laitner, 2008. "bequests and the life cycle model," The New Palgrave Dictionary of Economics, 2nd Edition.Abstract. • Kathleen McGarry, 2008. "inheritance and bequests." The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
13. ^ • Oded Galor, 2008. "human capital, fertility and growth," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• John Ermisch, 2008. "family economics," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
14. ^ • Gary S. Becker, 1988. "Family Economics and Macro Behavior," American Economic Review, 78(1) , pp. 1-13. 15. ^ • Gary S. Becker, 1987. "family," The New Palgrave: A Dictionary of Economics, v. 2, pp. 281-86. Reprinted in Social Economics: The New Palgrave, 1989, pp. 65-76.
• _____, 1981, Enlarged ed., 1991. A Treatise on the Family. Cambridge, MA: Harvard University Press. ISBN 0-674-90698-5. Publisher's description & links to chapter previews. • John Ermisch, 2008. "family economics," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. • _____, 2003. An Economic Analysis of the Family, Princeton. Description, Chapter 1 "Introduction" (press +), chapter-preview links. • Mark R. Rosenzweig and Oded Stark, ed., 1997. Handbook of Population and Family Economics. lst-page ch. links, v. 1A, Elsevier. Description, v. 1A preview, and ch. 1 link.
16. Karl Marx, 1999, “The Production of Surplus Value”, Capital A Critique of Political Economy”, http://www.marxists.org/archive/marx/works/1867-c1/index.htm 17. Adam Smith, 2000, “On Wages” “The Wealth of Nations”, http://www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/index.htm 18. Friedrich Engels, 1981, The Origin of the Family, Private Property and State, International Publishers, pp 94-146 19. Therese Jefferson and John King. 2001. “‘Never Intended to be a Theory of Everything:’ Domestic Labor in Neoclassical and Marxian Economics” Feminist Economics, 7(3): 71-101. 20. ________, 2001. “‘Never Intended to be a Theory of Everything:’ Domestic Labor in Neoclassical and Marxian Economics” Feminist Economics, 7(3): 79 21. Blau, Ferber, Winkler, 2010. “The Family as Economic Unit”, The Economics of Women, Men, and Work Ch. 3., pg. 33-75 22. Friedrich Engels, 1981, The Origin of the Family, Private Property and State, International Publishers, pp 142 23. Elaine McCrate, 1987, “Trade, Merger and Employment: Economic Theory on Marriage”, The Economics of the Family, the International Library of Critical Writings in Economics’,1996, pp154-171 24. Gary Becker, 1973, “A Theory of Marriage: Part 1”, The Economics of the Family, the International Library of Critical Writings in Economics, page 5-6 25. Jane Humphries and Carmen Sarasua. 2012. “Off the Record: Reconstructing Women’s Labor Force Participation Rates in 18th and 19th Centuries Europe” Feminist Economics, 18(4) 26. Heidi Hartmann. 1979. “Capitalism, Patriarchy, and Job Segregation by Sex” in Zillah Eisenstein (ed.) Capitalist Patriarchy and the Case for Socialist Feminism, New York: Monthly Review Press. 27. Barbara Bergmann,1981. “The Economic Risks of Being a Housewife” in in Mutari and Figart, Women and the Economy: 101-107. 28. Gary Becker, 1981, “Alturism in the Family and Selfishness in the Market Place”, “The Economics of the Family, the International Library of Critical Writings in Economics”,1996, pp 71-97 29. Sen, Amartya. 1990. “Gender and Cooperative Conflicts” in Irene Tinker (ed.) Persistent Inequalities New York: Oxford University Press, 123–49. 30. Friedrich Engels, 1981, The Origin of the Family, Private Property and State, International Publishers, pp 138 References • Yoram Ben-Porath, 1982. "Economics and the Family-Match or Mismatch? A Review of Becker's A Treatise on the Family," Journal of Economic Literature, 20(1) (March), pp. 52-64. • Theodore C. Bergstrom and Mark Bagnoli, 1993. "Courtship as a Waiting Game," Journal of Political Economy, 101(1), pp. 185-202. • Richard A. Berk, 1987. "household production," The New Palgrave: A Dictionary of Economics, v. 2, pp. 673-75. • Francine Blau, Marianne Ferber, Anne Winkler, 2010. “The Family as Economic Unit”, The Economics of Women, Men, and Work Ch. 3., pg. 33-75 • Friedrich Engels, 1981, The Origin of the Family, Private Property and State, International Publishers, pp 94-146 • Nancy Folbre, 1996, The Economics of the Family, the International Library of Critical Writings in Economics • Therese Jefferson and John King. 2001. “‘Never Intended to be a Theory of Everything:’ Domestic Labor in Neoclassical and Marxian Economics” Feminist Economics, 7(3): 71-101. • Heidi Hartman. 1979. “Capitalism, Patriarchy, and Job Segregation by Sex” in Zillah Eisenstein (ed.) Capitalist Patriarchy and the Case for Socialist Feminism, New York: Monthly Review Press. • Amartya Sen. 1990. “Gender and Cooperative Conflicts” in Irene Tinker (ed.) Persistent Inequalities New York: Oxford University Press, 123–49. External References Family Facts Database, http://www.familyfacts.org/ Family Platform, http://www.familyplatform.eu/ Social Policy and Development Policy, http://social.un.org/index/Family.aspx Family Research Laboratory, http://www.unh.edu/frl/ OECD Family Database, http://www.oecd.org/social/socialpoliciesanddata/oecdfamilydatabase.htm Journal of Family and Economic Issues, http://www.springer.com/social+sciences/journal/10834 Women and The Economy, http://www.unpac.ca/economy/ecofem.html