The Altruistic Family

Gary Becker was quick to recognize that a coherent theory of human capital required a theory of family, rather than individual decision-making. But families, like societies are aggregations of individuals; a family welfare function suffers from the same conundrum as a social welfare function— how can one person's desires be weighed against those of others? The easiest solution was to treat the family as though it were an individual, the larger self in the pursuit of self-interest.

James Mill had adopted this strategy in the early nineteenth century when he explained that women were politically represented by their fathers, hus­bands, and brothers and therefore did not require the right to vote. Paul Samuelson reiterated the argument in 1956, suggesting that family members act as a unit because they are bound together by altruism and mutual affec- tion.³⁹ Becker refined the theory further, invoking evolutionary biology to explain why altruism should prevail in the family, self-interest in the market.⁴⁰

Families seek to maximize their collective happiness. Who defines this happiness? Altruistic household heads love not only their children, but their children’s children, encompassing the utility of future generations in a dynastic utility function. One wonders how they factor in the prefer­ences of the unborn, and also how they could know which dynasties will be linked with their own through future marriages. The boundary between family and non-family is hardly fixed.⁴¹ One also wonders what it means when families are essentially discontinued as the result of abandonment, separation or divorce—presumably their altruistic prefer­ences have atrophied.

Becker’s confidence in the altruism of the household head sounds unshakeable. Some individuals within the family, so-called rotten kids, may be tempted to act in selfish ways.

The assumption that families make decisions that are in the best interests of all their members implies that the distribution of resources within families is always efficient. Economists have found many possible applications for such reasoning, arguing, for example, that poor families in India may allocate less food and health care to female than to male children because they depend so heavily on the future income that male children can more effectively provide.⁴⁵ The higher mortality of female than male children, however unfortunate, presumably leaves the family unit better off (it is never clear what preferences the dead girls might have had).

Families that successfully maximize their collective welfare respond in predictable ways to changes imposed from outside their boundaries. Any unanticipated increase in the resources available to one family member should lead the family to shift some of their own resources away from that member, neutralizing the change much the same way as government spend­ing can crowd out private investment (the more typical macroeconomic usage of the term). For instance, public provision of school lunches should reduce the amount of food parents feed the child at breakfast, and public provision of higher education should displace the resources that parents would otherwise have spent.

Selfish dynasties that have perfect economic foresight can counteract government fiscal policies. When parents see an increase in government spending that leads to higher national debt, they anticipate that their children will be required to pay higher taxes in the future to finance that debt. In response, they increase the amount of money they save in order to transfer more to their children at a later date, offsetting the impact of increased government spending.⁴⁶ Human capital models provide the microeconomic foundation for a distinctly anti-Keynesian approach to macroeconomic analysis.⁴⁷ In this conceptual world, selfish families are not only predominant; they are, in a sense, hegemonic. Not even the modern state can neutralize their decisions.