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…

Dating advice from an economist?

Someone who just happens to stumble onto this blog might wonder about the name, since most of the time, my posts don't really have anything to do with economics. I tend to think that my take on life as a happily single woman is simply informed, but not determined, by the fact that I am also an economist. But every once in a while, I can actually offer something that explicitly shows what I mean by that, such as this clip from Tim Harford (the Undercover Economist):

Economists are not the most romantic people in the world

A quick Valentine's round-up:

Dear Economist: Should I marry my boyfriend?

Dear Economist: Should I forgive my selfish ex-boyfriend?

Recessions change love statistics (divorce down, dating up)

Children as 'investment goods'

Two Italian economists have a new study that asks why birth rates are falling in more developed countries. They look at an Italian policy change that decreased expected pension income for a lot of people, and found that couples with a bigger drop in future income prospects were significantly more likely to have a child. They conclude that children are more likely seen as "a source of future financial support for their retired parents, as opposed to the traditional 'consumption' motive which suggests that a reduced pension income should lead to a reduction in parents' consumption and, therefore, fertility." In other words, one way to see kids is as a future source of financial support (investment) or a drain on one's budget (consumption). I assume that the connection to lower birth rates in developing countries in general is that as people have higher incomes and better standards of living, there is less of a concern about having that future financial support.

Even if this makes sense, I have to say that it's stuff like this that makes people think we economists have no heart...

Choice and responsibility: self-help or just good economics?

A recent post on Zen Habits talks about taking responsibility, pointing out that many people fail to take responsibility for their lives; everything is someone else's fault. As a teacher, I see this all the time in my students (the excuses are generally more creative than 'the dog ate my homework' but they are excuses nonetheless). But as an economist, I have a hard time dealing with people who take this too far. Economics is the study of choices and what I try to get across to my students is that economists simply don't believe one can ever say, "I had no choice". Sure, some decisions are so trivial (do you get up when the alarm goes off or hit snooze?) or so easy (your money or your life) that we may not think twice about them but they are still choices - other people (or even you, on a different day) may choose a different option and when you do one thing when you could have done something else, then it's a choice to do what you did, conscious or not.

Usually when someone says they "had no choice", what they really mean is that the consequence of the alternative was so awful that the choice was obvious. But while it may be horrible to consider disappointing your parents or losing your job or even dying, that doesn't mean you have no choice about going to college or working overtime or handing over your wallet. Now I'm certainly not advocating that students drop out of school or employees tell their bosses to to jump in a lake. My point is just that when you realize that all your actions are choices, it's harder to play the victim, to avoid taking at least a little responsibility.

I don't want to sound like an unsympathetic hard-ass. I'm as likely as the next person to bitch and moan when faced with choices that suck. But the upside of seeing that everything is a choice is that although you can't avoid some responsibility, it also means you gain a lot of control, over the good AND the bad. As I like to tell my students: being between a rock and a hard place isn't fun but at least you have options! Making good decisions requires being clear about the costs and benefits of your options but first you have to recognize that you HAVE options. I often think that if I can just get this one idea across to my students, to get them to REALLY believe it, then I will not only have taught them some economics but I will have helped them to become better people.

Academia, parenthood and hard choices

A recent study found that academics are less likely than doctors or lawyers (i.e. other professions requiring years of training) to have kids, and the gap is bigger for women. There are a lot of things that could explain this - professors tend to be more liberal and less religious; although doctors and lawyers require a lot of training, it’s still a longer road for academics since it’s not just grad school but the six years of working toward tenure that tend affect the ability to settle down and have kids; while academia offers great flexibility (which would presumably make it easier to juggle work and kids), that flexibility also makes professors highly independent and we quickly get used to being able to do what we want, when we want (the economist way to put it is that the opportunity cost, in terms of loss of independence, is greater for academics). And having a traditional family and house-in-the-burbs lifestyle is not necessarily the norm for academics so there’s far less pressure to follow that path (which, by the way, is one of the things I love about being an academic!). But of course, as one of the comments over on InsideHigherEd points out, the key question is whether being an academic is incompatible with parenthood, or whether the type of people who become academics are less likely to want kids?

The question of why academics, particularly women, have fewer kids is not trivial because it affects whether we see this as a problem (which implies it needs fixing), or simply an interesting empirical correlation. But even if there is something about academia that makes it harder for women who want kids to have them, does that alone suggest changes should be made? This is one of those areas that I really struggle with as a feminist and an economist. The feminist in me wants to say that women should be able to have it all; the economist in me knows that there are always trade-offs. The feminist in me wants to say that no women should be discouraged from doing what she wants professionally because she also wants kids; the economist in me believes that if having kids is more important to some people than others, then those women should choose jobs that allow them to have the life they want, rather than requiring the jobs (including bosses and co-workers) to accommodate the women. And of course, the idealist in me wants to live in a world where no matter what your decision, you are supported, not judged for it…