Sunday, February 19, 2006

 

I Now Pronounce You Contractual Partners

This story reminded me of a conversation I had with my wife before we got married.

About a year ago, my then-fiancé and I were "pondering" the institution of marriage. The conversation found its focus when she rolled over and asked me "why do you think people get married, at all?" It was a good question. After all, anything you can do as a married couple you can do as a unmarried couple (ignoring social convention and taxes). So why go to the trouble of cementing things by getting married? Luckily, I already had an answer prepared, inspired by the Economics and Law course I was taking at the time. Here's how it went:

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Two people "get together" for a variety of reasons, mainly to have kids, provide each other emotional support, and to take advantage of comparative advantages by specializing in various household tasks (maybe the wife cooks, the husband fixes the car or visa versa). In other words, they partner to start a "family". But one could create this "family" without a marriage license. So why bother?

After a while, the couple becomes very specialized to this particular relationship. "No one else knows me like my husband does." "No irons my shirts the way wife does." "No one else could be the mother of our children" etc. If one thought of the family as a firm, one could say the couple was acquiring "firm specific capital".

The fact that this capital is so specialized could allow one of the couple to threaten the other that they would leave the relationship if they were not compensated to stay. This hold-out problem is well known in economics, and one way of mitigating it is using long-term contracts. The relevant long term contract in this case, we call marriage.

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Apparently, this wasn’t the answer she was looking for.
"So, you're just marrying me because you think I'm a blackmailing bitch?"
"Well, uh..."
I think she wanted something more whimsical.

Three hours and three hundred apologies later, I was thankfully still engaged. Later it turned out my argument wasn't even novel. Talk about all pain and no gain. It's these types of conversations that me think I should have stuck with the history major.

Comments:
In my experience, girls don't like "relationship economics."

But I agree; you can't let your wife extract any of those appropriable quasi rents.

At the same time, although she may not have the vocabulary, I'm sure your wife is glad that you can't get at those rents either.
 
Here is a novel love story. The economist and his wife:

It is a Mises Daily Article
http://www.mises.org/story/2058
 
This comment has been removed by a blog administrator.
 
Chris, hahhaa indeed. nice story. that was actually the story that inspired me to write my post. ;) I should have gave a shout out to Marginal Revolution for the link.
 
I'm actually starting to wonder if making divorce easier might be making the contract less useful for protecting spouces from opportunistic behavior.

If the marriage contract is becomming less effective, it's unclear (to me) what the cosequences might be.

On one hand, It could be that since it's easier to get out of a "mistaken" marriage, couples might get married earlier ("what the hell, we can always get divorced").

On the other hand, divorce might make hold out threats more credible, since if a spouce leaves they might be leaving with more than just their "specialized assets". They might take half your stuff with them too. To avoid this situations, people might take other actions to protect themselves from opportunistic behavior. Namely, they might wait longer to get married--taking more time to make sure their mate will not try to hold them up later in the relationship.

So the obvious way to test which effect is more powerful would be to see if people are getting married younger or older. I havn't looked at any stats, but my "armchair impression" is that people are waiting longer to get married.
 
You should check out this guy:

Dear Economist,
http://www.timharford.com/deareconomist/
2005/12/i-only-fancy-my-girlfriend-after-few.html

This specifically is a guy asking a question about him and his girlfriend.
 
Getting a little neo-classical, the age of marriage is likely a function of many more things than just ease of breaking the contract.

People are living longer, getting into their careers later (more school), making more money (more to lose) and there is less pressure in general to get married to someone you're dating than before.

Remaining neo-classical, if you can assume those to be constant, you may be on to something. When in doubt, run a multiple regression.
 
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