Economics of the Family and Same-Sex Marriages

At a New Year’s dinner among friends, the subject of same-sex marriage came up. We discussed the economic theory of the family and applied it to shed light on the rationale for same-sex marriage from an economics perspective. My friends persuaded me to write up my analysis.

This holiday season I attended two weddings, a wedding anniversary, a memorial service of Ms. Poon, a great schoolteacher (a mother of seven, grandmother of eight and great grandmother of two), and celebrated the holidays together with members of my own family. Getting together for reasons of family is still a big part of holiday activities in modern society. In a globalized world people still travel vast distances to be with their family.

Changing Role of Family

Family activities were a big part of day-to-day life in pre-modern societies. Even in modern societies the family used to play a much bigger role until about half a century ago. According to the economic theory of the family, developed by Nobel economist Professor Gary Becker of the University of Chicago, three factors have made the family a progressively smaller part of our day-to-day lives. These are the discoveries of modern science and technology, the growth of the market economy, and the rise of the omnipresent state.

The discovery of modern medicine in particular improved health and sanitary conditions in society, making it possible to lower infant and child mortality rates significantly in the world. Less childbirth was needed to achieve the desired number of surviving children. Women therefore did not have to spend as much time in childbirth and childcare activities, making it feasible for them to enter the labor force.

In the early stages of industrialization, men dominated the best manufacturing jobs. Women who were not homemakers worked initially as domestic helpers, but they would later join the industrial economy. The new source of labor supply provided by women became one of the most important sources of growth of the expanding market economy in modern times.

With better job opportunities the incentive for women to raise children evolved. A process of substituting quality for quantity took place. Families re-optimized in two ways. They relied more heavily on resources and services purchased on the market to economize on the mother’s time required for raising children. The invention of electrical household appliances, in particular the television, became important substitutes for mothers’ household time. Families also sought to raise better quality children as an alternative to bringing up larger numbers of children so that women could have more time to work in the labor force. The market began to provide quality educational and learning services to young children at an early age that used to be provided within the family.

As more women joined the labor force the proportion of children receiving investment in their human capital also rose. The new generation became as a whole better educated and healthier and acquired more productive skills. The enhanced human capital further advanced economic growth. This positive feedback loop is famously known as the “demographic dividend”. Many successful developing economies were able to take advantage of this process to advance into prosperity, including Hong Kong.

Growing Role of the State

The rise of the modern market economy centered on jobs clustered in cities and towns. Life in dense living environments was made feasible with the growth of government capacity to provide urban services. The rise of the increasingly omnipresent state as the provider of numerous public services – housing, education, health, social welfare, social security, public safety, sanitation, transport, fire services, culture, entertainment, and others – has also impacted the family in many ways.

Many important activities that were provided by the family increasingly have been taken over by the state. Some of the more prominent examples include state-provided social security schemes as a substitute for family support care in old age, which is a prominent feature of many modern economies, state support for dependent children in the form of education and other benefits, state support for single parents with dependent children, and the list goes on. 

In the past we looked to our family for work, for comfort, for the care of dependents, for support in ill health, in poverty, in misfortune, in old age, and for knowledge and wisdom. The family was by far the most important institution in society. But today it is in decline with the state acting as a powerful competitor for the loyalty of its members. Its impact is in contrast to that of the market and technology, which are not competitors but instead encourage the substitution towards more quality and less quantity and indeed have brought hugely beneficial economic effects. I am not at all concerned about the effects of the market on family choices because market choices are always made on a voluntary basis. The state, however, has coercive powers to enforce legislation and regulations that seek to impose its will on the family, often with little room for choice.

These developments have brought us to the current state when the family is in decline. So why have members of the gay community embraced the institution of marriage?

My point is not whether they have the right to marry, but what might be the consequences. A warning should be flagged here. The consequences I discuss may not be in line with the wishes and motives of those who advocate same-sex marriage. It is not appropriate to impute motives on the basis of consequences. Public policy, however, must deal with the consequences and therefore decision makers have to be aware of them.

Social Value of the Family

Today, what activities that have traditionally been performed by the family cannot be provided by the market or the state? I think it would be difficult to find any. Most activities that take place in the family can also be purchased on the market and provided by the state. Some may think that love must take place in the family. But is this absolutely necessary? Perhaps it is, but again it is not fully convincing. There appear to be different kinds of love – love of country, love of nature, love of pets, romantic love – and surely examples can be found where such love takes place outside the family institution. This is not to say the family is not a good place for fostering these kinds of love; the question is whether it is absolutely necessary.

According to the economic theory of the family, the family institution appears to be absolutely necessary only for the provision of “own children”.

First, children take a long time to grow up and must be cared for intensively. Children in modern societies tend to take an even longer time to grow to independence as a result of the much larger investments in human capital parents make in them. The family continues to be the best available institution for producing “quality” children. Children from broken families have a higher probability of being of lesser “quality”. The term “quality” is used in a very general and broad sense covering cognitive, behavioral, health and other characteristics. 

Second, the market for adopted children is poorly developed. There are good reasons for why this is the case.  The “quality” of children is not easily observable when they are young. The identity of the parents of children available for adoption is not often known. The considerable uncertainty about the inherent “quality” of adopted children makes them poor substitutes for “own children”. The best predictor of the inherent “quality” of young children is often the “quality” of the parents, which is much better known.  

Of course, foster parents can invest in young adopted children to enhance their “quality”. This explains why most adopted children tend to be younger ones. But the initial uncertainty about “quality” would still remain. And it explains in part why there is a preference for “own children”. Most parents adopt children only when they experience difficulty having their own.

People who adopt children for altruistic reasons may care less about the inherent “quality” of the children. But then they are not trying to adopt children simply as substitutes for their “own children”. And indeed altruistic foster parents may derive more satisfaction from making a difference to the life of their adopted children.

The long period of time required for children to grow up and the uncertainty of the inherent “quality” of adopted children suggest that the family is the best and only choice of institution for producing “quality” children. The marital contract in all societies past and present are arranged to ensure long-term contractual stability and mutual commitment among marital partners and obviously in the interests of protecting children.

The marital contract safeguards not only the interests of children and their parents, but also the community at large and society as whole. By bringing up successive generations of “quality” individuals in family institutions producing “own children”, society ensures its long-term prospects of survival and progress in an uncertain world.

In Islamic societies, where polygamy is permitted, the Koran also meticulously provides a rigid formula for the division of assets among family members in a manner that is highly egalitarian to ensure that wives, sons and daughters all get a proportionate share upon the death of the patriarch. Divine authority is invoked to sanction the marital contract and to safeguard the interests of all members in the family.

Same-sex marriage by its very nature will not produce “own children”. The critical and essential condition for family formation and marriage is therefore absent. The institution of family (and marriage) that has evolved over thousands of years is built around this need to reproduce future generations using the best strategy known to human society. Family law and marriage law have also developed around this essential requirement. The involvement of the state, and its legislation and its many policies, has been largely developed with the intention to strengthen this central function of the family (although the consequences may be different).

Of course, as a result of state involvement, the family institution ceases to be an autonomous institution involving only its members. The laws, regulations and resources of the state are paid for by society as a whole. And they have been made available to the state with the consent of society in recognition of the essential role of the family in producing “own children”. Same-sex marriage falls outside this consensus understanding developed over thousands of years in all societies. It is therefore not obvious that the existing institutions – laws, rules, policies, and resource transfers – used to support the family institution could and should be equally applied to same-sex marriage. At the very least these institutions would have to be scrutinized and reexamined.

Gender and Marriage

For example, the state has laws and regulations governing conditions for marital separation, alimony payment, dependent child support, and so on. It has preferential social policies to provide public housing for married couples (especially with dependent children), but punitive social policies for couples that enjoy double benefits, and so on. These laws, regulations, and policies are traceable to the social desire to provide stability and long-term commitment to families with an indispensable role in producing “own children”. Without this role there is a risk that such laws, regulations and policies may be abused.

These deep-rooted motivations cannot be simply applied to same-sex marriage without a thorough appreciation of the family and the marital basis of a large number of state institutions built up around it over the centuries. The essential division of labor between spouses in a family is the production of “own children”. It cannot be simply dismissed. On this issue there is a sea of difference between same-sex and opposite-sex marriages.

The human condition is defined by two basic characteristics – the inevitability of human mortality and the need for both sexes in reproduction. Having “own children” is perhaps the socio-biological expression of the human desire to seek imperfect immortality through the reproduction of one’s own genes (see The Selfish Gene by Richard Dawkins). From a secular point of view, the family is man’s institutional creation to provide the best chance for this desire to be fulfilled so that the interests of future generations can be safeguarded. Marriage is the contractual arrangement that provides the best protection for the family to survive and thrive.

References:

Gary S Becker, A Treatise on the Family, Harvard University Press, 1981.

Richard Dawkins, The Selfish Gene, Oxford University Press, 1976.

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