A Treatise on the Family. G. S. Becker. Cambridge, MA: Harvard University Press. 1981. Gary Becker is one of the most famous and influential economists of the second half of the 20th century, a fervent contributor to and expounder of the University of Chicago free-market philosophy, and winner of the 1992 Nobel Prize in economics. Although any book with the word "treatise" in its title is clearly intended to have an impact, one coming from someone as brilliant and controversial as Becker certainly had such a lofty goal. It has received many article-length reviews in several disciplines (Ben-Porath, 1982; Bergmann, 1995; Foster, 1993; Hannan, 1982), which is one measure of its scholarly importance, and yet its impact is, I think, less than it may have initially appeared, especially for scholars with substantive interests in the family. This book is, its title notwithstanding, more about economics and the economic approach to behavior than about the family. In the first sentence of the preface, Becker writes "In this book, I develop an economic or rational choice approach to the family." Lest anyone accuse him of focusing on traditional (i.e., material) economics topics, such as family income, poverty, and labor supply, he immediately emphasizes that those topics are not his focus. "My intent is more ambitious: to analyze marriage, births, divorce, division of labor in households, prestige, and other non-material behavior with the tools and framework developed for material behavior." Indeed, the book includes chapters on many of these issues. One chapter examines the principles of the efficient division of labor in households, three analyze marriage and divorce, three analyze various child-related issues (fertility and intergenerational mobility), and others focus on broader family issues, such as intrafamily resource allocation. His analysis is not, he believes, constrained by time or place. His intention is "to present a comprehensive analysis that is applicable, at least in part, to families in the past as well as the present, in primitive as well as modern societies, and in Eastern as well as Western cultures." His tone is profoundly conservative and utterly skeptical of any constructive role for government programs. There is a clear sense of how much better things were in the old days of a genderbased division of labor and low market-work rates for married women. Indeed, Becker is ready and able to show in Chapter 2 that such a state of affairs was efficient and induced not by market or societal discrimination (although he allows that it might exist) but by small underlying household productivity differences that arise primarily from what he refers to as "complementarities" between caring for young children while carrying another to term. Most family scholars would probably find that an unconvincingly simple explanation for a profound and complex phenomenon. What, then, is the salient contribution of Treatise on the Family? It is not literally the idea that economics could be applied to the nonmarket sector and to family life because Becker had already established that with considerable success and influence. At its core, microeconomics is simple, characterized by a belief in the importance of prices and markets, the role of self-interested or rational behavior, and, somewhat less centrally, the stability of preferences. It was Becker's singular and invaluable contribution to appreciate that the behaviors potentially amenable to the economic approach were not limited to phenomenon with explicit monetary prices and formal markets. Indeed, during the late 1950s and throughout the 1960s, he did undeniably important and pioneering work extending the domain of economics to such topics as labor market discrimination, fertility, crime, human capital, household production, and the allocation of time. Nor is Becker's contribution the detailed analyses themselves. Many of them are, frankly, odd, idiosyncratic, and off-putting. …

A Treatise on the Family

As GDP is a measure of market capacity and not economic well-being, this report has been commissioned to more accurately understand the social progress indicators of any given state. Gross domestic product (GDP) is the most widely used measure of economic activity. There are international standards for its calculation, and much thought has gone into its statistical and conceptual bases. But GDP mainly measures market production, though it has often been treated as if it were a measure of economic well-being. Conflating the two can lead to misleading indications about how well-off people are and entail the wrong policy decisions. One reason why money measures of economic performance and living standards have come to play such an important role in our societies is that the monetary valuation of goods and services makes it easy to add up quantities of a very different nature. When we know the prices of apple juice and DVD players, we can add up their values and make statements about production and consumption in a single figure. But market prices are more than an accounting device. Economic theory tells us that when markets are functioning properly, the ratio of one market price to another is reflective of the relative appreciation of the two products by those who purchase them. Moreover, GDP captures all final goods in the economy, whether they are consumed by households, firms or government. Valuing them with their prices would thus seem to be a good way of capturing, in a single number, how well-off society is at a particular moment. Furthermore, keeping prices unchanged while observing how quantities of goods and services that enter GDP move over time would seem like a reasonable way of making a statement about how society’s living standards are evolving in real terms. As it turns out, things are more complicated. First, prices may not exist for some goods and services (if for instance government provides free health insurance or if households are engaged in child care), raising the question of how these services should be valued. Second, even where there are market prices, they may deviate from society’s underlying valuation. In particular, when the consumption or production of particular products affects society as a whole, the price that individuals pay for those products will differ from their value to society at large. Environmental damage caused by production or consumption activities that is not reflected in market prices is a well-known example.

https://andrewoswald.com/docs/stiglitz20report_commission20final20200920sept.pdf

Report by the commission on the measurement of economic performance and social progress

For good reasons, economists have had a long-standing preference for studying peoples' revealed preferences; that is, looking at individuals' actual choices and decisions rather than their stated intentions or subjective reports of likes and dislikes. Yet people often make choices that bear a mixed relationship to their own happiness. A large literature from behavioral economics and psychology finds that people often make inconsistent choices, fail to learn from experience, exhibit reluctance to trade, base their own satisfaction on how their situation compares with the satisfaction of others and depart from the standard model of the rational economic agent in other ways. If people display bounded rationality when it comes to maximizing utility, then their choices do not necessarily reflect their "true" preferences, and an exclusive reliance on choices to infer what people desire loses some of its appeal. Direct reports of subjective well-being may have a useful role in the measure

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Developments in the Measurement of Subjective Well-Being

A recent “revisionist” literature characterizes the pronounced rise in U.S. wage inequality since 1980 as an “episodic” event of the first half of the 1980s driven by nonmarket factors (particularly a falling real minimum wage) and concludes that continued increases in wage inequality since the late 1980s substantially reflect the mechanical confounding effects of changes in labor force composition. Analyzing data from the Current Population Survey for 1963 to 2005, we find limited support for these claims. The slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) inequality—which has increased steadily since 1980, even adjusting for changes in labor force composition—and lower-tail (50/10) inequality, which rose sharply in the first half of the 1980s and plateaued or contracted thereafter. Fluctuations in the real minimum wage are not a plausible explanation for these trends since the bulk of inequality growth occurs above the median ...

Trends in U.S. Wage Inequality: Revising the Revisionists

https://www.nber.org/system/files/working_papers/w25018/w25018.pdf

Difference-in-Differences with Variation in Treatment Timing

The "Easterlin paradox" suggests that there is no link between a society's economic development and its average level of happiness. We reassess this paradox, analyzing multiple rich datasets spanning many decades. Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to that between subjective well-being and income observed within countries. Finally, examining the relationship between changes in subjective well-being and income over time within countries, we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness. ********** Economic growth has long been considered important goal of economic policy, yet in recent years some have begun to argue against further trying to raise the material standard of living, claiming that such increases will do little to raise well-being. These arguments are based on a key finding in the emerging literature on subjective well-being, called the "Easterlin paradox," which suggests that there is no link between the level of economic development of a society and the overall happiness of its members. In several papers Richard Easterlin has examined the relationship between happiness and GDP both across countries and within individual countries through time. (1) In both types of analysis he finds little significant evidence of a link between aggregate income and average happiness. In contrast, there is robust evidence that within countries those with more income are happier. These two seemingly discordant findings--that income is an important predictor of individual happiness, yet apparently irrelevant for average happiness--have spurred researchers to seek to reconcile them through models emphasizing reference-dependent preferences and relative income comparisons. (2) Richard Layard offers an explanation: "people are concerned about their relative income and not simply about its absolute level. They want to keep up with the Joneses or if possible to outdo them." (3) While leaving room for absolute income to matter for some people, Layard and others have argued that absolute income is only important for happiness when income is very low. Layard argues, for example, that "once a country has over $15,000 per head, its level of happiness appears to be independent of its income per head." (4) The conclusion that absolute income has little impact on happiness has far-reaching policy implications. If economic growth does little to improve social welfare, then it should not be a primary goal of government policy. Indeed, Easterlin argues that his analysis of time trends in subjective well-being "undermine[s] the view that a focus on economic growth is in the best interests of society." (5) Layard argues for an explicit government policy of maximizing subjective well-being. (6) Moreover, he notes that relative income comparisons imply that each individual's labor effort imposes negative externalities on others (by shifting their reference points) and that these distortions would be best corrected by higher taxes on income or consumption. Evaluating these strong policy prescriptions demands a robust understanding of the true relationship between income and well-being. Unfortunately, the present literature is based on fragile and incomplete evidence about this relationship. At the time the Easterlin paradox was first identified, few data were available to allow an assessment of subjective well-being across countries and through time. The difficulty of identifying a robust GDP-happiness link from scarce data led some to confound the absence of evidence of such a link with evidence of its absence. …

/pdf/economic-growth-and-subjective-well-being-reassessing-the-3bs7gl5lle.pdf

Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox

The family is not a static institution. In recent decades, marriage rates have fallen, divorce rates have risen, and the defining characteristics of marriage have changed. The economic approach to the family seeks to explain these trends by reference to models that can also explain how and why families form. Gary Becker’s (1981) Treatise on the Family proposed a theory based on “production complementarities,” in which husband and wife specialize in the market and domestic spheres, respectively. Production complementarities also arise in the production and rearing of one’s own children. However, production complementarities—at least as initially described—are decreasingly central to modern family life. Increased longevity and declining fertility mean that most of one’s adult life is spent without one’s own children in the household. Also, the rise in marital formation at older ages, including remarriage, means that many families form with no intention of producing children. Moreover, increases in female labor force participation suggest that household specialization has either declined or, at least taken on a different meaning. These changes have come about as what is produced in the home has been dramatically altered both by the emergence of labor-saving technology in the home and by the development of service industries that allow much of what was once provided by specialized homemakers to be purchased in the market. The availabil

/pdf/marriage-and-divorce-changes-and-their-driving-forces-2ad25osaye.pdf

Marriage and Divorce: Changes and their Driving Forces

The "Easterlin paradox" suggests that there is no link between a society's economic development and its average level of happiness. We re-assess this paradox analyzing multiple rich datasets spanning many decades. Using recent data on a broader array of countries, we establish a clear positive link between average levels of subjective well-being and GDP per capita across countries, and find no evidence of a satiation point beyond which wealthier countries have no further increases in subjective well-being. We show that the estimated relationship is consistent across many datasets and is similar to the relationship between subject well-being and income observed within countries. Finally, examining the relationship between changes in subjective well-being and income over time within countries we find economic growth associated with rising happiness. Together these findings indicate a clear role for absolute income and a more limited role for relative income comparisons in determining happiness.

/pdf/economic-growth-and-subjective-well-being-reassessing-the-w7ww9zmr55.pdf

Many scholars have argued that once “basic needs” have been met, higher income is no longer associated with higher in subjective well-being. We assess the validity of this claim in comparisons of both rich and poor countries, and also of rich and poor people within a country. Analyzing multiple datasets, multiple definitions of “basic needs” and multiple questions about well-being, we find no support for this claim. The relationship between well-being and income is roughly linear-log and does not diminish as incomes rise. If there is a satiation point, we are yet to reach it.

/pdf/subjective-well-being-and-income-is-there-any-evidence-of-42o4b4vcxr.pdf

Subjective Well‐Being and Income: Is There Any Evidence of Satiation?

By many objective measures the lives of women in the United States have improved over the past 35 years, yet we show that measures of subjective well-being indicate that women's happiness has declined both absolutely and relative to men The paradox of women's declining relative well-being is found across various datasets, measures of subjective well-being, and is pervasive across demographic groups and industrialized countries Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men These declines have continued and a new gender gap is emerging - one with higher subjective well-being for men

Betsey Stevenson

Papers

Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox

Marriage and Divorce: Changes and their Driving Forces

Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox

Subjective Well‐Being and Income: Is There Any Evidence of Satiation?

The Paradox of Declining Female Happiness