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The Hidden Economy that Love and Mothers Generate

economics, family, marriage, mothers No comments

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 the loss of the Fourth Law of Economics – the law of distribution.  This law had been well known to economists of the Middle Ages when the study of economics boomed — along with the boom in the European economy   (Adam Smith tried to reduce the laws  to one, failed, and ended up with two, but suppressed 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 is 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 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 +, ten 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 husbands.  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%”.  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.  Mother virtually doubles 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” — 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% of its field, all because it leaves out the gift of love in its most basic form: married family life.

Pat Fagan

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