6 Economics
6.1 Explanatory framework
The economic approach stresses the concept of scarcity and the need to consider the costs and benefits of alternatives, since choices must always be made. Individuals are assumed to have stable goals and preferences and will strive consistently to achieve them, using all the information available, subject to the scarcity of resources.
The economic theory of the family is closely associated with Becker, who extended the applicability of economic theory in his analysis of relations among individuals outside of the market system (Becker 1991). The theory of the family covers decisions not only about the distribution of work and the allocation of time in the family, but also marriage, divorce, fertility and children. These activities are economic in that they confer benefits, but also involve costs and tradeoffs. The interpretation of behaviours such as childbearing, marriage and divorce as active choices by maximising agents rather than passive responses to social or cultural forces epitomises the economic approach (Pollak 2002).
This model provides a general theory for the household's allocation of time (Becker 1965). Becker’s theory is that a household can be regarded as a "small factory" which produces basic goods, such as meals, housing and entertainment, using time and goods bought on the market. The prices of goods include the direct costs of purchase in the market and the opportunity cost, wages multiplied by the time spent per unit of the good produced in the household. An increase in the wages of one family member changes the payoff to working at home or in the market. Furthermore, it becomes uneconomical for one member of the family to specialise in household production (for instance, child care) and some of the family's functions are shifted to other institutions such as schools. These factors explain not only the increase in the labour force participation of married women but also decreasing fertility and rising divorce rates (Becker and Tomes 1986).
The economic approach to human fertility emphasises parents’ income and the costs of bringing up children. Parents are assumed to have preferences regarding both the number and educational level of their children, where the educational level is affected by the amount of time and other resources that parents invest in their children. As wages rise, parents increase their investment in each child, but decrease the number of children. Becker uses this theory to explain the decline in fertility in industrialised countries.
Decisions to mate, form families and have children occur within a framework of laws and rules that cause behaviour to change in predictable directions. Legal and other policy instruments that affect incentives can influence behaviour and thus the formation, operation and dissolution of families (Cohen 2002, Dnes and Rowthorn 2002).
