JOSEFINO R. GOMEZ

ECONOMICS is based on the belief that humans are rational. Therefore, we should not expect economists to discuss irrational subjects, such as love and marriage.

The late Gary Stanley Becker begged to differ, however. He revolutionized economics by applying microeconomic analysis to a wider range of human behavior and interaction including youve guessed it love and marriage. In a series of research papers in the 1970s, Becker laid out the framework for analyzing love and marriage. He showed that what seemed to be irrational life choices could be explained by rational choice theory. For a while, social scientists initially ignored, then mocked Beckers ideas on the nature of marriage before finally accepting it. In 1992, he won the Nobel prize for economics.

So, what presumptions and conclusions did he arrive at? Beckers approach was naturally based on rational individuals. Its based on two principles. According to him, people tie the knot because they get higher satisfaction (utility) from getting married than remaining single. Second, there is a marriage market, in the sense that men and women compete as they seek mates. Each person tries to find the best mate subject amid restricted market conditions.

Becker theorizes that each person will tend to pair with someone with whom the chances of maximizing their household production of goods and services are the highest. The set of household goods and services include tangible goods, as well as non-market goods, like shared hobbies and the thrill of raising kids.

If the couples level of satisfaction is determined by both market and non-market earnings, the time and effort spent on raising market earnings can reduce non-market earnings, and vice versa. This means you only have a limited resource, such as time, and spending time making money will mean less time in doing chores and with kids. Each couple will then try to allocate this limited resource. So if men are better at earning money in the labor market and women are better at taking care of the home and children, it then makes sense for them to combine forces through marriage so they can then specialize in what they each do best. Other things being equal, a high-earning male is more likely to marry a low-earning female, and vice versa.

Couples are most likely to have different earnings, but both theory and empirical evidence suggested one attracts more when it comes to other attributes, such as education or physical attractiveness. Becker argued that attributes like education or beauty are complementary inputs in the production of non-market goods and services, whereas wage income could be substituted and that a lack of complementary attributes might explain a huge number of separations among couples.

Gains from marriage are determined by how the division of labor occurs. If a lot of energy is spent on checking if a partner is performing his or her assigned role, then the net gains will be relatively less. Effort checking and auditing your partner are called transaction costs.

The gains also depend on whether a huge fraction of the output generated after marriage can be jointly shared. Love enhances the gains from marriage because each partner then cares about the utility (satisfaction) of the other. With love, transaction costs are lowered and the gains from marriage are increased. Love also increases the likelihood of increased production of shared family goods, thereby increasing these gains.

A paper titled The Essential Economics of Love by Martin Zelder asked the questions: Are economics and love compatible? And can an enduring connection be forged? It then concludes that [f]ew would argue that love is profound, although sometimes tragic.

Perhaps, the same assessment can be made of this endeavor to understand love with economics. This paper has argued that love is indeed produced, although perhaps not in the more organized or concerted fashion that other household commodities are produced.

As a consequence, love, by virtue of the special circumstances under which it is produced and consumed, is fraught with special problems, problems which, on the one hand, make it hard to produce as much love as is desirable, and on the other hand may imply that love is overproduced. But there is undoubtedly still much for economists to learn (and teach?) about love.

As for me, to increase the gains from marriage, we can learn the following from Beckers paper: contribute our skills and time to the household with our best ability (maximizing returns). Do it with love (less transaction costs) and finally share and acquire things that can be used and enjoyed by the household. (jointly sharing of output).

Finally Ill leave you with a quote from Benjamin Franklin: In times of stress, the three best things to have are an old dog, an old wife and ready money. Happy Hearts Month!

Josefino Gomez is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 82nd RFP program in March. For inquiries, email info@rfp.ph or text at 0917-9689774.

Read more:
Of economics and love The Manila Times - The Manila Times