Wednesday, September 18, 2013

Where is the market failure in marriage?

In honor of National Unmarried and Single Americans Week, I’m going to put on my economist hat and ask: Is there an economic rationale for government incentives to get married? By ‘government incentives to get married’, I’m talking about all the ways in which the government (and society in general) privileges married people. One widely-cited statistic is that there are over 1000 benefits, rights and protections in Federal laws that are based on marital status. Given my current situation, I’ve been doing a lot of research on some of those benefits. Some can still be obtained by the unmarried, with additional work (e.g., I can manually change the beneficiary for my retirement accounts or sign an advanced health directive so my partner can make medical decisions for me) but many are simply not available to unmarried people, period. It’s no wonder that single-sex couples are so eager to gain access to legal marriage (completely aside from the social acceptance aspect, of course).

But as an economist, I wonder: why should people have to get married to get these benefits in the first place? Is there any economic rationale for government policies that confer benefits on the married? In my Intro classes, I teach my students that government intervention may be warranted in situations of market failure; that is, where the market outcome may be “inefficient” for some reason. In econ-speak, an “inefficient” outcome is one where benefits to society do not line up with costs. In most markets for traditional goods, the costs and benefits only go to the people buying and selling the goods (e.g., when I eat a hamburger, the person who benefits is me and the price I pay covers the costs for the company selling the hamburger). In some markets, there may be costs or benefits for people other than the buyer or seller and if those external costs or benefits are not reflected in the price of the good, then the market may be inefficient because there will be ‘too much’ of some goods (when there are external costs) or ‘too little’ (when there are external benefits). The classic example is smoking – when I consume cigarettes, I create costs for people other than just me and if those costs don’t get built into the price of cigarettes, then I’ll buy more cigarettes than society wants me to.

These external costs or benefits are one justification for government intervention in markets; basically, taxes or subsidies can reflect the social costs or benefits so the ‘price’ reflects the full costs or benefits. If the government taxes cigarettes than the price goes up and I buy fewer cigarettes. Applying this to the marriage ‘market’, one would have to argue that there are external benefits of marriage so the government needs to provide extra incentives to get people to 'consume more’ marriage. So people other than a particular couple must presumably benefit somehow from that couple being married. I guess the conservative argument is that married couples are more “stable” and better behaved (?) and this is therefore better for society than if those people were running around just cohabitating or being single. I don’t know that there is really much evidence of this – a quick Google search turned up lots of rhetoric along the lines of ‘family values’, and studies about how marriage benefits the people IN the marriage (though the psychologist Bella DePaulo has also written a lot about how those studies often don’t actually show causality), but I couldn’t find anything showing that marriage, per se, has external benefits, such as causing people to act any better (for society) than before they were married. The closest I could find was arguments about the impact on children (i.e., kids do better when their parents stay together) but if that’s the basis for government intervention, then all the benefits should only go to couples with kids, not just anybody who is married.

Although I can’t think of a good argument for marriage benefit policies based on the standard idea of economic efficiency (i.e., the market ‘underprovides’ marriage so the government needs to provide incentives to boost consumption/production), I can imagine an argument based on administrative efficiency – i.e., some policies were probably adopted simply to reduce paperwork (e.g., most people would name their spouse as their beneficiary/spokesperson in most situations anyway so making that the default saves time and effort), or because “legal spouse” seems like an easy shortcut to identify “Very Important Person in my life”. But given that 46 percent of American households are now maintained by unmarried men or women (including 6.7 million specifically ‘unmarried-partner’ households), and the increasing trend in the percentage of couples choosing cohabitation over marriage, it seems like perhaps we should starting questioning whether marriage as the ‘default’ is really the most efficient way to go…

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