Economic in a Family Way

Ted Bergstrom ()

Papers from University of Michigan, Department of Economics

Abstract: This paper is an advertisement for some facts and ideas that I think likely to lead to a richer theory of the economics of the family. The discussion references many papers from anthropology and biology. Because of the intimate connection between the family and reproduction, it should not be surprising that there is much to be learned about the economics of the family from the study of evolutionary biology. Given the increased prevalence in recent decades of unwed parenthood, divorce with sequential monogamy, and ``non-traditional'' family arrangements, it also seems plausible that anthropo logical studies of alternative family structures would help us to understand our own. The first section presents an evolutionary theory of interpersonal sympathy among family members. It discusses the genetic theory of {\em kin selection}\/ and its implications for human preferences and relate these ideas to theories of the {\em cultural evolution}\/ of preferences. The next section takes an evolutionary viewpoint in exploring the riddles posed by the {\em demographic transition}\/ and the question of intergenerational flows of wealth. The third section discusses non-monogamous family structures in our own culture and in other cultures. The final section draws on a more traditional source of inspiration for economists. This section outlines an approach to bargaining theory within the family based on recent discoveries in non-cooperative game theory and discusses ways of integrating the theory of spousal bargaining with the theory of marriage markets. Gary Becker's ``Rotten Kid Theorem'' asserts that if all family members receive gifts of money income from a benevolent household member, then even if the household head does not precommit to an incentive plan for family members, it will be in the interest of selfish family members to maximize total family income. We show by examples that the Rotten Kid theorem is not true without assuming transferable utility. We find a simple condition on utility functions that is necessary and sufficient for there to be the kind of transferable utility needed for a Rotten Kid Theorem. While restrictive, these conditions still allow one to apply the strong conclusions of the Rotten Kid Theorem in an interesting class of examples.opology Servers

Date: 1995-06
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Published in the Journal of Economic Literature

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Related works:
Journal Article: Economics in a Family Way (1996)
Working Paper: Economics in a Family Way (1996)
Working Paper: Economics in a Family Way
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Persistent link: https://EconPapers.repec.org/RePEc:wop:michec:_028

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