The hidden economy that love and mothers generate

The dismal science leaves out half the economy.

Patrick F. Fagan | Nov 6 2017 | comment

In his book, Redeeming Economics, John Mueller, of the Ethics and Public Policy Center, formerly an economic forecaster with many Fortune 500 clients, traces the suppression and loss of the fourth law of economics – the law of distribution.

In the Middle Ages, when the study of economics boomed — along with the boom in the European economy -- Thomas Aquinas had synthesised these laws as follows: production, justice in exchange, utility (including consumption), and justice in the final distribution of goods.

Adam Smith tried to reduce the laws to one, failed and ended up with production and exchange, having suppressed the other two. Others since have added back the third. The fourth has yet to be “rediscovered”, if one does not count Mueller’s work.

The distribution of the income of a firm, a family or an individual goes a very long way in adding to the economy of the firm, family or individual. One basic example is how much spending vs saving vs charitable giving goes on. Some in the family often forego their share to take care of others (the law of the gift — of redistribution, freely undertaken).

Charitable giving at the right moment can make a huge difference to the life of someone in need; saving to send a child to college or to private school is another form of the gift. There are myriad.

But going to the family level, the mother at home raising her children is involved in multiple gift-giving all the time, and Nobel Laureate Gary Becker says makes a greater contribution to the economy than her husband working out in the marketplace.

That mother has a hidden and powerful effect on the money her husband brings home to the family. She can make it go much further if she is wise. The husband who has such a wife is much wealthier than the husband with the same income but a wife not as wise or selfless. With a little thought you can identify women on both sides of this divide.

How large is that mother’s contribution? We get some idea from the research of a colleague of mine at Catholic University, Dr. Sophia Aguirre. Drawing on multiple federal economic surveys she has demonstrated that when the mother goes out to work she has to reach pretty high levels of income to replace the lost “amplifying redistribution” effect, as well as making up for the extra costs involved in going to work (clothes, transportation, increased taxes and child care to name but a few). Aguirre’s conclusion:

“Yet, we also find that for the most part, the net income is [on average] economically insignificant. Furthermore, the results suggest that the lower the income and the education of the secondary earner, the higher the probability of the net contribution to the total income of the household to be zero, or possibly negative.”

In other words, the net contribution of most mothers to the family income is not great, unless she is very well educated and can command a significant income ($100,000 +, 10 years ago when the study was done). Though this is disappointing news for many, looked at differently it is fantastic news for most:

The mother at home makes enormous economic contributions to her family and multiplies the income her husband brings home – and that does not even address the huge educational, psychological and social benefits of her presence to her children and their future earnings capacity (which was the basis of Gary Becker’s insight of her contribution to the economy being much greater than her husband’s. That conclusion depends on the time frame used to judge her contribution. In a world of quarterly reports that contribution is totally missed.)

Now back to John Mueller: At a recent conference when he presented on the major insights of Redeeming Economics I asked him how much of the economy is hidden by the law of redistribution (the law of the gift, which among other gifts includes the mother’s contribution at home). His public answer: “About 50 percent”. That is, our GDP is twice as big as we think it is.

Mueller’s analysis and Aguirre’s analysis, coming from totally different perspectives, end up in pretty much the same place. A mother can virtually double the family’s economic benefit!

If one were to include the costs to the economy of increases in crime, addiction, school failure, ill health and mental illness — all resulting from “anti-gifts”, starting with the absence of the gift of marriage to the children — with the depletion from the economy (crime, stealing, robbery, fraud, and all costs that would be avoided were all children raised in married families), this changes the picture yet more.

There is a long research road to hoe before this basic insight will be absorbed by the academy, by economists, by professors and their students, by legislators and those interested in wealth (investors and bankers), but the preliminary evidence is very, very big.

It is amazing how learned we can be yet how ignorant at the same time. No wonder economics is the “dismal science” when it leaves out 50 percent of its field, all because it leaves out the gift of love in its most basic form: married family life.

Pat Fagan is the director of the Marriage and Religion Research Initiative at The Catholic University of America. He is publisher and editor of Marripedia.org. Republished from the MARRI blog with permission.

November 6, 2017

One of the themes of the current furore over sexual harassment is that men have to change their attitude to women. What the finer points of the new attitude should be is not quite clear. But if sexual behaviour is to improve, writes Martin Fitzgerald today, it will take more than a new rule book to make it happen. Only the cultivation of virtuous habits across the board will produce the kind of restraint necessary for mutual respect to flourish, and that process has to start in childhood, in a family formed by virtuous parents. After 50 years of sexual liberation there’s an awful lot of work to do.

Voting in Australia’s postal plebiscite on same-sex marriage closes tomorrow (November 7) and the results will be released on November 15. At this late hour a new study has cast doubt on a supposed consensus among gays on this subject. The study, of older gay men, shows many do not support the push for same-sex marriage, writes Michael Cook. They fear that it is turning gays and lesbians into “pseudo straights.” A revealing read.