Friday, January 25, 2008
Be Cheery
Be cheery, says The Economist magazine. Extreme poverty is plummetting world wide. I agree.
Monday, January 21, 2008
Marriage, Outsourcing, and the Gains from Trade
Here's a fun post from Friday's "Free Exchange" blog at www.economist.com. It talks about the "old days" marriage based on specialization and domestic division of labor: it turns out there were economic gains from the chauvanistic structure of men bringing home the bacon, taking out the trash and fixing the car but women staying home with the kids, cooking, and cleaning house. People got married, according to The Economist, and real-life economists Betsey Stevenson and Justin Wolfers of Penn, to exploit gains from trade and specialization on the production side.
But now we trade more. We outsource a lot of responsibilities, such as child care, car repair, and food preparation (people seem to eat out a lot more than my parents did). I have a trade deficit with my mechanic, but am I worried that his shop will become all-powerful and gradually begin to overtake and crush my very existence? No: as long as the economic value of what I produce is about the same as the value as the economic value of what I purchase, things will peter along allright. So what's the value of families and spouses (try not to chuckle, married readers)?
Well, the above-referenced authors boil it down to "complementarities in consumption." Actually, they are more "externalities in consumption," because they are explained by the fact that somethings are just more enjoyable with a partner or group. In other words, we get married, now more than ever, because we like it and because we like our mate (stop that sophomoric chuckling!).
But I think there's more to it. Yes, all of the things above are great things, but why did we evolve this way and what else has it done for us. First, things probably evolved this way because our incomes were rising over the last 200 years. With higher and higher market wages and smaller and smaller family sizes, the benefits of market production began to tip over the benefits of remaining "self-sufficient" in "home production," so women entered the workforce in droves during the 1970s. Second, it's made our lives better, on the whole. Amazingly, labor markets have absorbed women who "immigrated" into the labor market and managed to sustain wage growth. Finally, life is somewhat less risky for women. They are no longer as beholden to their marriage contract for their economic well-being (in terms of income) because they have marketable skills. So, if the louse cheats (or something tragic happens) he's more expendable.
But now we trade more. We outsource a lot of responsibilities, such as child care, car repair, and food preparation (people seem to eat out a lot more than my parents did). I have a trade deficit with my mechanic, but am I worried that his shop will become all-powerful and gradually begin to overtake and crush my very existence? No: as long as the economic value of what I produce is about the same as the value as the economic value of what I purchase, things will peter along allright. So what's the value of families and spouses (try not to chuckle, married readers)?
Well, the above-referenced authors boil it down to "complementarities in consumption." Actually, they are more "externalities in consumption," because they are explained by the fact that somethings are just more enjoyable with a partner or group. In other words, we get married, now more than ever, because we like it and because we like our mate (stop that sophomoric chuckling!).
But I think there's more to it. Yes, all of the things above are great things, but why did we evolve this way and what else has it done for us. First, things probably evolved this way because our incomes were rising over the last 200 years. With higher and higher market wages and smaller and smaller family sizes, the benefits of market production began to tip over the benefits of remaining "self-sufficient" in "home production," so women entered the workforce in droves during the 1970s. Second, it's made our lives better, on the whole. Amazingly, labor markets have absorbed women who "immigrated" into the labor market and managed to sustain wage growth. Finally, life is somewhat less risky for women. They are no longer as beholden to their marriage contract for their economic well-being (in terms of income) because they have marketable skills. So, if the louse cheats (or something tragic happens) he's more expendable.
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