Gary Becker:

A Treatise on the Family

(Harvard 1981)
 

(I've been cyber-sniping at economists for some time now, mostly at Adam Kotsko and at Crooked Timber. Computer death and travel interrupted my series, but I'm ready to start up again. This time I'm writing about an actual work by an actual economist.

(More at The Sayings of Chairman Becker.)

In 1992 Gary Becker received the quasi-Nobel Prize for economics: "Gary Becker's research contribution consists primarily of having extended the domain of economic theory to aspects of human behavior which had previously been dealt with - if at all - by other social science disciplines such as sociology, demography and criminology." The press release specifically mentions Becker's Treatise on the Family, published only 11 years earlier, summarizing it as follows: "A basic idea in Becker's analysis is that a household can be regarded as a "small factory" which produces what he calls basic goods, such as meals, a residence, entertainment, etc., using time and input of ordinary market goods, "semi-manufactures", which the household purchases on the market."

However, this is a bowdlerized version of what Becker actually said. In the section "Household Production Functions (pp.7-8), he writes

In other words, the family is a small factory producing commodities, such as children. It's not hard to understand why the Bank of Sweden Nobel Committee cleaned up Becker's language a bit.

Now, taunting and throwing down snark are important tools in the economist's rhetorical kit. If you can get the layman huffy and indignant (for example, by defining children as commodities, or talking about "child-markets"), he'll be softened up for the second punch in the combination: a lot of math which the poor sucker is unable to understand. The economist then looks coolly at the hapless, innumerate, sputtering fool with his conventional, sentimental, Luddite ideas about children, explains how important it is to "learn to think like an economist", and proceeds with his exposition while the preppy audience applauds uproariously.

The Bank of Sweden people probably thought that Becker went a little too far here, so they subsumed the child-commodities under the harmless catchall "etc." But this is more than a rhetorical bug to be remedied with a simple patch. The supposed child-commodity marks a major problem with Becker's theory.

Imagine someone raising goats, which are in fact commodities. You put money and time into your goats, and with luck you can sell them for a profit. Or you can kill or eat them. Or if they become a nuisance, you can give them away or have them put to sleep. Commodities don't really cause a big nuisance. Children, on the other hand, are strictly money down the drain. You can never sell them, and you can't eat them or get rid of them. They impose major legal obligations, because you are responsible both for their care and for their behavior -- yet once they become adults, they no longer have any obligation to you.

When the child-commodity turns eighteen, it becomes independent. At that point the little child-commodity producing psychic income turns into "human capital" -- i.e., an independent adult selling labor on the market. At this point the parental unit of human capital loses everything. The child-commodity upon which he lavished so much money and time is gone forever, to be replaced by an independent, competing unit of human capital.

If children are commodities, they're the worst commodity imaginable, more comparable to losing lottery tickets than to anything else (except that you have no legal obligations toward lottery tickets). At one point (p. 194) Becker puts in a patch explaining that parents get "psychic income" from kids, but that's a risky move: if you let me allege "psychic income", I will be able to claim that Albania is the richest nation in the world. There are good reasons to think that childraising is irrational.

A question Becker does not ask is "Why would any rational modern individual choose to raise any children at all?" In the worst case, which is not rare, a married couple choosing to have children effectively renounces the possibility of accumulating non-human capital in favor of producing new, autonomous human capital. This new human capital which also is without non-human capital (i.e., has no net worth) -- and  this process continues generation after generation. Children are tremendously expensive, especially in opportunity cost, and furthermore, at age 18 they're lost to you. "Psychic income" is a rather feeble kludge, and it isn't really income anyway, because it isn't any more fungible than children themselves are. There are many good non-economic explanations of why people have children -- religious duty, family duty, community spirit, love, etc -- but Becker is trying to replace non-economic explanations of this kind, sentimental and Luddite as they are, with rational economic explanations. Furthermore, most non-economic motives for having children involve group membership rather than individual rationality, and except when speaking of child-raising, economists always strongly favor individualist motives and forms of organization.

What Becker tries to do is rescue parental rationality by analyzing childraising in terms of the rationality of a multi-generational family optimizing its human and non-human capital.  However, economics normally speaks of individuals, and in American society "the family" effectively consists of one adult generation and one dependent generation (which to Becker is a collection of commodities), and the family thus liquidates when the last child turns eighteen. (I am mostly leaving aside the question of whether a dependent non-working wife exists for economic analysis, or whether she is subsumed in the husband: "Man and wife are one person, and that person is the man".) Multigenerational family  rationality would be a useful tool for analyzing Chinese society, for example, but an American  father who thinks in terms of  multigenerational rationality is being suckered. American kids are free riders.

Becker's families seem to function as firms, but the people in firms always relate to the firms as individuals: either as owners or part-owners or as employees, with these relationships embodied in individual property ownership (wages, stocks, titles to property, etc.) which make individual rationality intelligible. But in the family such relationships are impossible to define. When members of a family become individuals, the family ceases to exist -- in particular, when the child-commodity is emancipated and becomes independent human capital. Before that happens, however, the child-commodity does not exist economically as an agent, but only a cost or luxury expenditure.

These are not trivial questions. On the theoretical side they have to do with the origins of human capital (what used to be called labor). The production of human capital is presently entrusted to an archaic, anti-individualist, sentimental, irrational Luddite form of organization: the family. It's a prime assumption of economics, however, that all humans are rational, so that the system which would work best if rational action by all individuals in the system were assumed would be the best system.  But if our system is dependent for the production of labor on irrational parent behavior, the economist's description of the system is flawed in its own terms. This is in fact a vulnerability of the system. In the developed world there is a real problem with fertility, which has fallen below replacement in many countries. It seems that, if people are free either to have children or not, they will have fewer of them. (By "people" I primarily mean women, of course -- though childraising is costly to fathers too).

Becker distinguishes his "economic analysis" of the family from the more conventional analysis of "economic aspects" of the family. (This is what he means when he talks about "implicit markets": he's concocting fictitious markets which, if they existed, would account for what he sees actually happening.) This sort of economic imperialism is the opposite of the normal kind, and actually amounts to a kind of glorified scholastic surrender. Historically, when economists looked at economic organization, tax policy, fiscal policy, international trade, or other areas of human life, they compared the existing practice with an already-existing concept of economic rationality, and if the existing practice fell short, economists were not shy to propose that it be changed.

But when Becker tries to extend the scope of economics to the family, which has not previously been treated in terms of rational choice, he works in the opposite direction. He looks at the (recent) traditional American family and finds economic explanations why it is already rational -- he rationalizes existing practice, in the bad sense of the word. It's rational and fair to favor the boys over the girls, it's rational and fair to favor the elder son over the others, and it's rational and fair for the wife to stay at home. (In asides, he also explains that the American class system and the system of international trade are also rational and fair.)

Becker's scheme didn't really work very well -- his theory is shoddy and unpersuasive. And that's why we see Becker's political allies, Pat Robertson and James Dobson, riding to the rescue. If childraising is, in fact, economically irrational for the parents, then we need some other way to convince women to produce units of human capital. And Robertson and Dobson and their allies can do this -- if they're allowed to rewrite a few laws, and if they can persuade husbands and wives that their duties are written in the Bible.

For my own purposes, based on autocritiques I've read by dissident economists, I've learned to divide economics three ways. One part is mathematical virtuosity, which may or may not have something to do with actuality, and which often serves as a barrier to understanding and form of mystification and intimidation. The second is ideological skew -- highlighting some things, leaving out others, and misrepresenting still others in order to make the best case for the economic way of life (which, contrary to what economists claim, is not rationality but property-accumulation). And third, there is the actual scientific knowledge economists do have -- the things that we really should understand and take seriously. Becker's book is mostly ideological skew, with a fair bit of mathematical mystification. I imagine that it would be possible to come up with a 20 page summary of valid and interesting points in Becker, but the book is 250 pages long and is full of ludicrous definitions and wild assertions.

The world would be a better place if economists themselves would sort out their field and share the actually-valuable part of the field with the rest of us, separating it from the crap, but even the nice ones seldom do this. The field elicits loyalty from its members, and for good reason. Economics is the king of the social sciences, and looks down on the humanities with scorn. Economists always have jobs, and only the densest of political leaders (e.g. Dubya) dare to ignore them. If I were writing in 1550 I'd be writing against scholasticism and canon law, but this is the twenty-first century, and it's the economists who are in command now.

Frankly, it bothers me that Becker is as well-respected as he is in a field as powerful as economics, and even more so that he got a Nobel Prize of sorts primarily for this snarky, rather deranged book.

CODA

When I say that childraising is an irrational activity, I'm using the old analysis of "economic aspects of the family" which Becker is transcending. When Becker applies his new "economic analysis" to the family or any other form of actual human activity, he is always able to prove that the behavior is rational. Spending 30% of your income on lottery tickets is rational too, because of the psychic income you get. A junkie dying in a gutter is rational -- he just has a different utility curve than you and me. The idea that it might be possible to evaluate the quality of others' lives and decide that they made the wrong choices, or decide that the world did not do well by them, threatens the universality of economics, so the possibility of making such judgments must be ruled out.

Another necessary activity which seems fundamentally irrational from the individual economic point of view is military service in combat units. Economics does not deal plausibly with life and death questions -- or with the kinds of financial problems that destroy families and reduce their members to beggary either.

(Crossposted at Adam Kotsko)

More at "The Sayings of Chairman Becker"

My economics reading: I study economics from the outside, not the inside

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