Family economics applies economic concepts such as production, division of labor,

distribution Distribution may refer to: Mathematics *Distribution (mathematics), generalized functions used to formulate solutions of partial differential equations * Probability distribution, the probability of a particular value or value range of a vari ...

, and decision making to the

family Family (from la, familia) is a group of people related either by consanguinity (by recognized birth) or affinity (by marriage or other relationship). The purpose of the family is to maintain the well-being of its members and of society. Idea ...

. It is used to explain outcomes unique to family—such as marriage, the decision to have children, fertility, polygamy, time devoted to domestic production, and dowry payments using economic analysis. The

, although recognized as fundamental from Adam Smith onward, received little systematic treatment in

economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...

before the 1960s. Important exceptions are

Thomas Robert Malthus Thomas Robert Malthus (; 13/14 February 1766 – 29 December 1834) was an English cleric, scholar and influential economist in the fields of political economy and demography. In his 1798 book '' An Essay on the Principle of Population'', Ma ...

' model of population growth

, 1798. '' An Essay on the Principle of Population''. Full text on WikiSource. and

Friedrich Engels Friedrich Engels ( ,"Engels"
'' Friedrich Engels, 1981, The Origin of the Family, Private Property and State, International Publishers, pp 94-146 pioneering work on the structure of family, the latter being often mentioned in Marxist and

feminist economics Feminist economics is the critical study of economics and economies, with a focus on gender-aware and inclusive economic inquiry and policy analysis. Feminist economic researchers include academics, activists, policy theorists, and practition ...

. Since the 1960s, family economics has developed within mainstream economics, propelled by the

new home economics Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...

started by

Gary Becker Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...

Jacob Mincer Jacob Mincer (July 15, 1922 – August 20, 2006), was a father of modern labor economics. He was Joseph L. Buttenwieser Professor of Economics and Social Relations at Columbia University for most of his active life. Biography Born in Tomaszó ...

, and their students. Standard themes include: * Altruism in the family, including the

rotten kid theorem Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...

. * Child health and mortality. * Family organization, background, and opportunities for children. *

Fertility Fertility is the capability to produce offspring through reproduction following the onset of sexual maturity. The fertility rate is the average number of children born by a female during her lifetime and is quantified demographically. Fertili ...

and the demand for children in developed and developing countries.Jeremy Greenwood, 2019. ''Evolving Households: The Imprint of Technology on Life,'' The MIT Press. * Human capital,

social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...

, and the rise and fall of families. *

Intergenerational mobility Social mobility is the movement of individuals, families, households or other categories of people within or between social strata in a society. It is a change in social status relative to one's current social location within a given society ...

and inequality, including the

bequest motive {{Short description, Justification for leaving money to others A bequest motive seeks to provide an economic justification for the phenomenon of intergenerational transfers of wealth. In other words, to explain why people leave money behind when th ...

. * Interrelation and

trade-off A trade-off (or tradeoff) is a situational decision that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where one thing increases, and anot ...

of 'quantity' and 'quality' of children through investment of time and other resources of parents. * Macroeconomics of the family. *

Mate selection Mate choice is one of the primary mechanisms under which evolution can occur. It is characterized by a "selective response by animals to particular stimuli" which can be observed as behavior.Bateson, Paul Patrick Gordon. "Mate Choice." Mate Choic ...

, search costs,

marriage Marriage, also called matrimony or wedlock, is a culturally and often legally recognized union between people called spouses. It establishes rights and obligations between them, as well as between them and their children, and between ...

divorce Divorce (also known as dissolution of marriage) is the process of terminating a marriage or marital union. Divorce usually entails the canceling or reorganizing of the legal duties and responsibilities of marriage, thus dissolving the ...

, and

imperfect information In economics, perfect information (sometimes referred to as "no hidden information") is a feature of perfect competition. With perfect information in a market, all consumers and producers have complete and instantaneous knowledge of all market pri ...

. * Sexual division of labor,

intra-household bargaining Intra-household bargaining refers to negotiations that occur between members of a household in order to arrive at decisions regarding the household unit, like whether to spend or save, whether to study or work. Bargaining is traditionally defined ...

, and the

household production function Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function. It is these goods that they value. The idea was originally proposed by Gary Becker, ...

. Several surveys,

treatise A treatise is a formal and systematic written discourse on some subject, generally longer and treating it in greater depth than an essay, and more concerned with investigating or exposing the principles of the subject and its conclusions." Tre ...

s, and handbooks are available on the subject.• 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.,
vol 1A
pp
21-75
Elsevier.

History

Early economists were mostly interested in how much individuals contribute to social production, which translated into how much labor they supply in the labor market. Production within the household was not a subject that received systematic treatment by early economists. In ''

The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', generally referred to by its shortened title ''The Wealth of Nations'', is the '' magnum opus'' of the Scottish economist and moral philosopher Adam Smith. First published in ...

'', Adam Smith alludes to the importance of the family in his chapter on Wages. Smith wrote: "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." Accordingly, the wage received by the worker must be high enough to support the family in order to ensure the inter-generational reproduction of the working class. Malthus added to this analysis in his theory of population growth, where he argued that when wages are high laboring families tend to have more children, causing increase in population and reduction in wages. The reproduction of the labor force, namely the way workers raise children to replace themselves, is a central issue in Marxist Theory. In ''

Capital, Volume I ''Capital. A Critique of Political Economy. Volume I: The Process of Production of Capital'' (german: Das Kapital. Kritik der politischen Ökonomie Erster Band. Buch I: Der Produktionsprocess des Kapitals) is the first of three treatises that ma ...

'', Marx argues that the amount of labor time that is necessary for the reproduction of workers is 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 calls surplus labor time the labor time that workers spend in addition to necessary time. This implies that for Marx the wage that workers need to sustain their families is one of the basic factors that regulates the economy. When he defines necessary labor time, however, Marx means the market labor necessary to earn the income that workers need so that their family can survive. Some connect working class demands for a

family wage A family wage is a wage that is sufficient to raise a family. This contrasts with a living wage, which is generally taken to mean a wage sufficient for a single individual to live on, but not necessarily sufficient to also support a family. As a st ...

in late 19th century to Marx's ideas: male workers demanded that their wages be at a level sufficient to eliminate the need of wives and children to do market work. There is nothing on the production occurring within the family in ''Capital''.

Friedrich Engels Friedrich Engels ( ,"Engels"
'' family Family (from la, familia) is a group of people related either by consanguinity (by recognized birth) or affinity (by marriage or other relationship). The purpose of the family is to maintain the well-being of its members and of society. Idea ...

is shaped by the structure of class society. According to Engels, the monogamous family, consisting of one man, one woman and children, is something created by the class system. So are adultery and prostitution, institutions that go together with the monogamous family system. Pre-capitalistic forms of marriage discussed by Engels were group marriage and pairing marriage. Engels argued, "with the ponderance of private property over communal property and the interest in its bequeathal, father rights and monogamy gained supremacy".Friedrich Engels, 1981, The Origin of the Family, Private Property and State, International Publishers, pp 142 He expected monogamy to disappear with the demise of capitalism. He wrote that within the family men are like capitalists and women are like the proletariat, and full freedom for women can only be possible if women will be brought "back into public industry", (p. 138) as he expected would happen under

socialism Socialism is a left-wing Economic ideology, economic philosophy and Political movement, movement encompassing a range of economic systems characterized by the dominance of social ownership of the means of production as opposed to Private prop ...

. In his view under socialism women would not face the

double burden A double burden (also called double day, second shift, and double duty) is the workload of people who work to earn money, but who are also responsible for significant amounts of unpaid domestic labor. This phenomenon is also known as the Seco ...

of wage work and unpaid household work, since he expected household tasks to be provided as public services. Other Marxist economists of the late 19th and early 20th century like Bebel,

Luxemburg Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small land ...

, and Lenin also wrote on the necessity of bringing women back into the public industry. The marginalist school, developed in the late 19th century, moved the focus of economics further away from family. The focus of early marginalists like Léon Walras,

Stanley Jevons William Stanley Jevons (; 1 September 183513 August 1882) was an English economist and logician. Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method in eco ...

, and Alfred Marshall was market transactions, so any work done in the household was not of interest to marginalists. The basic economic unit was either the individual or the household, and when they took the household as the basic unit, they were not interested in how decisions were made within a household. In the 1920s and 30s, economists like Eric Lindahl, Einar Dahlgren, Karin Kock, and Simon Kuznets argued that production within the

household A household consists of two or more persons who live in the same dwelling. It may be of a single family or another type of person group. The household is the basic unit of analysis in many social, microeconomic and government models, and is i ...

was an important part of national production, and without its inclusion

GNP The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...

cannot be a complete indicator of national production level. During the same period

Hazel Kyrk Hazel Kyrk (1886–1957) was an American economist and pioneer of consumer economics. Early life and education Hazel Kyrk was born in 1886 in Ashley, Ohio and was the only child of Elmer Kyrk, a drayman, and Jane Kyrk, a homemaker. Before ente ...

, Margaret Reid and Elizabeth Hoyt tried to develop a new field called consumption economics, trying to bring

consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...

and production roles in the household within the sphere of economics. The

New Home Economics Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...

developed in the 1960s and continues to be one of the main approaches in the field of family economics in the 21st Century. The household production functions introduced by Gary Becker in his article "A Theory of Allocation of Time" are used in the analysis of many household decisions. Theodore W. Schultz captured aspects of family that are important for the whole economy and that were emphasized by Becker and Mincer, the founders of the NHE: the production of human capital in the form of investing in children, the maintenance of adults' human capital, the way members of family allocate their time between market and household work, and consumption decisions in the family." Contemporary family economics has also been enriched by contributions of Marxists and radical feminists written since the 1970s. While Marxism focuses on how class relationships and capitalism shapes family structure, the focus of radical feminism was on gender, patriarchy and men's domination of women in marriages and households. Marxist-feminists subsequently sought to integrate these two approaches by trying to show how patriarchy and

capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, priva ...

interact with each other.Blau, Ferber, Winkler, 2010. "The Family as Economic Unit", The Economics of Women, Men, and Work Ch. 3., pg. 33-75

Marriages as firms

The idea that marriages are like firms can be found in the work of New Home economists, Marxists, and feminists. Some Marxists and feminists view marriage of woman and man as analogous to the employment relationship in a capitalist society. For example,

Shoshana Grossbard __NOTOC__ Shoshana Grossbard (born October 23, 1948; also known as Shoshana Grossbard-Shechtman, Amyra Grossbard-Shechtman, and Amyra Grossbard) is an economist and professor of economics emerita at San Diego State University. She is also a member ...

models both men and women as possibly hiring each other's work in household production, which she calls "spousal labor" or "Work-In-Household (WiHo)". To the extent that husbands employ their wives' WiHo and pay them a low "quasi-wage" women can be considered as being exploited by their husbands, as claimed by Marxist-feminist economists. Legal ownership of the household is a question related to the analysis of marriages as firms.

Robert Ellickson Robert C. Ellickson is an American property law scholar. He is the Walter E. Meyer Professor of Property and Urban Law at Yale Law School, and was formerly on the faculty at the USC Gould School of Law and Stanford Law School. He is a fellow of t ...

has argued that owners of the household's capital should have more influence on decision-making related to the household than those who work in the household's production. In contrast, Grossbard has proposed that those doing the household's production should have more control over decisions than owners of the household's capital. This is another example of parallels between Chicago-trained feminist economists and Marxist-feminist economists. The question of how work in domestic production by one spouse is compensated by the other spouse who benefits from the work amounts to establishing terms of trade in a situation of specialization and division of labor. Gary Becker has analyzed division of labor in the household in terms of comparative advantage, generally assuming that women have a comparative advantage in household production and men in production outside the home. This has led to a tendency for feminist economists to dismiss Becker's analyses of marriage. Other economic explanations for marriage that have parallels in standard economic analyses of firms include explanations emphasizing risk pooling and consequently reductions in the risks of illness or being unemployed as a result of marriage, and the role of marriages in facilitating specific investments such as children.

Division of labor within the family

Family members divide their time between work inside the household and market work. The family as a unit may decide on which member of the family will do which task. Household work can be categorized in terms of whether the whole family benefits or only some members of the household. Some call 'housework' activities benefiting the whole family like laundry or cleaning and 'carework' 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. Two basic forms of carework are

child care Child care, otherwise known as day care, is the care and supervision of a child or multiple children at a time, whose ages range from two weeks of age to 18 years. Although most parents spend a significant amount of time caring for their child(r ...

and

elder care Elderly care, or simply eldercare (also known in parts of the English-speaking world as aged care), serves the needs and requirements of senior citizens. It encompasses assisted living, adult daycare, long-term care, nursing homes (often call ...

. Household work benefiting the spouse more than the individual could include cooking or laundry as well as carework for spouses able to do the work themselves. According to some neoclassical theories, the division of labor between household and market work is related to the utility function of the individuals within the family. In case a family has a 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. If 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. Becker stated that women have a

comparative advantage In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade. Comp ...

in domestic work, while men have a comparative advantage in market work. According to such viewpoint, when women specialize in household production and men specialize in market production, and they share what they produce, both men and women maximize their utilities. However, complete specialization can bring some risks and disadvantages: the need for domestic work might decrease (especially when children grow up)and women who have completely specialized in household work might not be able to gain a decent wage when they return to market work; when both spouses have some experience in domestic work they can be more independent in case of divorce or death of a spouse. Barbara Bergman wrote that women's complete specialization in household labor, namely their being full-time

housewives A housewife (also known as a homemaker or a stay-at-home mother/mom/mum) is a woman whose role is running or managing her family's home—housekeeping, which includes caring for her children; cleaning and maintaining the home; making, buying an ...

, often leads to women's financial insecurity and increases their likelihood of being subjected to domestic violence relative to situations of women working in the market and earning wages. The game theoretic bargaining model offers an alternative framework to analyze the dynamics between household members in choosing consumption and production outcomes through a process of either explicit or implicit bargaining, conflict and/or cooperation. The bargaining model assumes that there is some gain to be made from entering into or remaining marriage, but how each partner's labor time is distributed and how the goods and services they produce are distributed are a direct result of bargaining. Bargaining processes with power considerations are formalized in Kaushik Basu's paper "Gender and Say: A Model of Household Behavior with Endogenously Determined Balance of Power". In this approach, power is distributed by the individual utility maximization function (if one partner has greater earning power, then that partner will have a better utility maximization position), and the outcomes through bargaining feedback into the process by endogenously affecting the balance of power. If the outcome favors one partner's position, than that partner's power will be even more strengthened relative the other partner. Participation of women in the labor market, indicating that couples do not follow a traditional division of labor, grew dramatically in the 19th and 20th Century. This has been attributed b
Jeremy Greenwood
Ananth Seshadri and Mehmet Yorukoglu to the introduction of time-saving appliances in the home. This growth in participation has been limited by institutional factors such as quotas on how many women can be employed in certain industries. For example, in England in the second half of the 19th century there was a campaign, supported by working class men, to restrict female market employment. Similarly, there have been bars on women's employment in the United States, including laws preventing women from being employed after marriage. In some countries like Japan, there are still some quotas on the market employment of women or on the employment of married women. Shoshana Grossbard has written on how marriage markets influence women's labor force participation.

Decision-making in the family

Economists have different models of decision making regarding the allocation of labor within households. Some assume that there is a single decision maker in the household. If the head of the household is

altruistic Altruism is the principle and moral practice of concern for the welfare and/or happiness of other human beings or animals, resulting in a quality of life both material and spiritual. It is a traditional virtue in many cultures and a core asp ...

, he will get some satisfaction when he makes a decision that takes into account the benefit of other household members. Gary Becker argues that altruism of the decision maker of the household also benefits other members of the household, because as a result of altruism he will make his decisions by taking into consideration 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. According to Becker's

, even if one of the household members were want to harm another household member, then the altruistic decision maker in the family prevents that member from harming the other member. In this a case, an altruistic decision maker might arrange distribution within the household in such a way that the utility the rotten kid gets from the increase of family income will be more than the utility he gets from the harm to the family member he envies. However Models of decision-making like Becker's altruism model do not take into consideration of conflicts that decisions made by a of the household's members would create for the other members. Bargaining models are models that focus on how decision-making within the household may possibly proceed when such conflicts are taken into account. These models assume that household decisions are made by a bargaining process. They apply to bargaining between husband and wife, or between parent and child. Conflicts arises in case the outcome of a decision gives more utility to one party while the alternative decision is more advantage to the other party. According to

Amartya Sen Amartya Kumar Sen (; born 3 November 1933) is an Indian economist and philosopher, who since 1972 has taught and worked in the United Kingdom and the United States. Sen has made contributions to welfare economics, social choice theory, econom ...

in some cases the bargaining agents might not have proper perceptions of either their economic contributions to the household or their interests. Based on this possibility he adds two more factors that, according to him, will affect the bargaining outcomes: "the perception of contribution" and "the perception of self-interest". If a person has a better sense of the value of his or her contribution to the family his or her power in the bargaining process will increase. According to Sen, when women do market work their bargaining power will improve, in part due to better perceptions of contribution and self-interest. As a result, decisions made will benefit women more. For example, Sen has applied this bargaining framework to explain the shortfall of women in the population in some parts of the world ("the missing women" problem): in view of their more limited participation in paid work women have weaker bargaining power in the household, more limited access to resources (food, care, health access) within the household relative to men, and are therefore less likely to survive than in other parts of the world where women participate more in market work. Others still model household members as independent individual decision-makers who possibly made decisions before the household was formed.

Fertility Decision

Malthus was the first to discuss fertility decision and its relationship with income. Malthus attributed two factors to fertility decisions: the first was the age at which people get married and the second is how often married couples engage in sexual activities. Gary Becker further discusses this topic. Gary Becker talks about quantity and quality of children based on income. There is a perception that higher income tends to lead to the decision of having children, but studies have found that fertility is negatively correlated with income and that there is no economic relation between the two. In order to better compare the effects of income and fertility on economics, Becker makes two assumptions: preferences and quantity-versus-quality. Without quality, children could be considered an inferior good. However, by definition, there are no close substitutes to children. Becker used different comparisons to determine the level of elasticity of income on quantity and quality. He found that, relative to income, quantity had a low elasticity while quality had a high elasticity. The introduction of birth control greatly affected fertility decisions and mitigated problems involved with unplanned pregnancy. The innovation of the pill paved ways for women to pursue their career while still getting married. Contraceptives have also increased the breadth of decision making with families. The pill allowed a separation between the two decision: when to get married and how often to engage in sexual activities without the repercussion they faced back then. Before, women would restrain from sexual activities, even in marriages in order to avoid any unplanned pregnancy which could lead to a decline of women in the workforce. Having children hinders women’s advancement in the workforce. They must take time off the workforce to care for the infants and once returning, they suffer a decrease in pay. The decision of when to have a baby is important within the family and there are many other factors to consider. Fertility might also be affected by business cycles. There is a negative correlation between fertility and business cycle.

Effects of Marriages and Divorces

Becker discusses that marriages occur when the benefit of the two combined exceeds the benefit of them remaining single. The gains can be attributed to division of labor within the household production and deciding who has the comparative advantage between the two. Marriages provide a greater advantage in the sense that expenses that were once paid by single people could now be split among the two people. It creates lower costs for both people now than it did before. Economies of scale will increase now that the savings in cost has increased due to the level of production by two people compared to one. Marriages effect the economy because now they create a division of labor. Once married, they must decide which spouse would be more beneficial staying at home and which spouse would be better off working. The time spent in the market compared to household chores will be decided on who has the comparative advantage in each one. The two individuals are essentially deciding how much labor to supply to the market. Marriage costs can be expensive. It is important that both individuals consider income and their financial position before making a big decision. Marriage tends to happen at equilibrium when looking at the labor market. Anything in excess of the demand and supply of labor will give rise to the opportunity for divorce. The risk for divorces has decreased since the education level have increased. People are now making decision based on other factors that once have proven to lead to divorce. Some of which includes education level and differences in income. Despite the benefits of marriages and the rate it is increasing, divorce rates have also increased. This is more apparent in lower income people. However, divorce is not all bad depending on which perspective you are looking at. Divorce helps the economy if looking at the point of view from third parties. They are costly to the couples that are involved in the divorce, but they open job opportunities for lawyers and other parties involved.

Notes

References

* * * * * * * * * * * *

External links

Family Facts DatabaseFamily PlatformSocial Policy and Development PolicyFamily Research LaboratoryJournal of Family and Economic Issues
{{Authority control Demographic economics

Economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...