Marriage: An Economic Institution

Becker also discusses the family unit, and its importance as an economic institution. Before individuals marry, they analyze the benefits and costs to the union, according to Becker. "The point of departure of my work on the family is the assumption that when men and women decide to marry or have children or divorce, they attempt to maximize their utility by comparing benefits and costs. So they marry when they expect to be better off than if they remained single, and they divorce if that is expected to increase their welfare." Becker is stating that individuals perform a cost-benefit analysis of their union with another individual, before undergoing the union. Marriage is viewed as a joining of two people within society, it is an act of love. However, Becker believes that within this act of love is an analysis of what can be gained from the union. Individuals are viewing this union from an economic perspective, and in the end they continue with the union because they believe they are going to gain success, wealth, and power from the union. It is an investment on their behalf, done entirely in self-interest. However, just like with a bad investment, if the marriage goes poorly, you divorce, and look for other ways to increase your personal welfare, including other marriages. So my question is this, how much longer will marriage survive as an institution? Marriage itself is a costly ceremony, and it has added costs throughout life. However, two individuals simply living together, without being legally married, could become a more beneficial union. We already see it today with couples remaining together for years at a time without every marrying. So my question remains, how much longer will marriage survive as institution before it loses its value, or be replace by a non-binding union? How much longer will individuals see more benefits to marriage than costs? It is unlikely that marriage will ever disappear, but is it on a decline, and if so what effects will this decline have on the economy?

Will social behavior lead to an "savage" economic state?

In this course we have seen the development and changes in different societies. We have discussed the factors of the theory of value, impartial spectator, cost and labor, etc. In this post I mainly am going to focus on Heilbroner’s chapter of “The Savage State of Thorstein Veblen.” The behavior of society is dictated by our human dignity; this is largely influenced by the views that others have. In his description of the leisure class, he refers to the different values of goods; he states the more expensive goods are better. From this I concluded that our human dignity is based off society’s perspective of accumulation of wealth; meaning the more material wealth people have, then the “better” they will feel about themselves because that is society’s view. This relates to my topic of the development and change of societies throughout time because some societies take pride in the work that they have accomplished, not the wealth that they attain.

For example, American Indians performed hands-on work to try to out-perform one another; they would base this off their labor. Their pride came from work, whereas in society today the pride comes from how much wealth one person has or the ability to buy expensive goods. If someone in their society did not perform as expected, then they would not receive the level of respect that could be obtained.

Society today has completely changed; people heavily rely on technology and machinery rather than their own sweat and labor. Veblen would consider this to be disgraceful due to the fact that nowadays people are less willing to perform hard-working, hands-on tasks then before. This reliance on machinery disables the working class to grow due to the fact that people are more interested accumulation of wealth than taking pride in the work that they have done. If more people were interested in out-performing one another with their work, then it would lead to a high-performance, full working class which would ultimately lead to a more efficient economy.

            The major issue in society today is that people base their dignity and standing among peers by the amount of luxury goods that they have. The main contributing factor is technology; technology leads to mass production. Society is becoming more of a “savage” state because they are more interested in making themselves look better with their luxury goods and are too concerned about what other people think. People today are not so focused on the quality of work the produce due to the fact the technology enables them to produce in large quantities at a similar quality.

My question is this; do you think that people today are too focused on what other people think about their jobs, wealth, and material goods and less focused on their productivity and efficiency with work? With the view that society holds on importance of flaunting the luxury and wealth, do you think that this will lead to a savage economic state in which people care more about wealth than they do their work?

Self-Interest

There has been the discussion in the class on the principle of ‘self-interest;’ primarily dealing with the different views that Mandeville and Hutcheson held. Mandeville had the view point that people are naturally self-interest and do not consider other peoples interest. On the other hand, Hutcheson thought that people to be more “altruistic and driven by looking after oneself, feelings for others, and the desire to better ones condition.” Both had valid points in their argument. Later, Adam Smith adopted both of those viewpoints to come up with his idea that people are naturally self-interested but from their self-interest they contribute to others well-being. I tend to agree with Smith. I believe that, yes, people are naturally self-interested but they ultimately benefit society as a whole through their work. In today’s society, I think that every single person is motivated by self-interest; modern society is very selfish. In my eyes, the work force is seen as a “dog eat dog” environment. Everyone is driven by the idea that they want to prove them and be better than every competitor. This type of competition provides the incentive for economies to grow. My question is this, what do you think are the factors in society today that motivate people to become successful or to better the economy? Do you think that people are naturally self-interested?

Freedom Within a Market System?

On this post I wanted to focus more on a lesser known economist, John R. Commons. He had some radical views on some topics of economics. One topic that he focused on was the idea that economic activity depends on the underlying legal and institutional relationships and how they develop over time. He analyzed these legal and institutional foundations of capitalism by looking at transactions as the basic unit of analysis. He saw these transactions as involving the transfer of property rights, but the transactions did not have to take place through the market. Bargaining transactions take place through the markets while managerial and rationing transactions do not. Bargaining transactions take place between legal equals and there is a double transfer of ownership. Each side can decide whether or not to participate and each side gives something to the other. This essentially led to his view that collective action was necessary to maintain order within a society. Without other parties involved in a transaction, individuals would not respect the institutions that society relied on.
This leads me to my question on this topic. Does the freedom of individuals have to be controlled in order to keep order in a society? Collective action can prevent people from interfering with the freedom of others and also gives a framework where people can act as well. For example, there can only be freedom within a market system if it is possible to make contracts that will be honored, which does limit the freedom of individuals based on the contract. I do believe that individuals have to be controlled in order to keep order in society because without having some sort of control over people, they will act in a selfish way in order to increase their personal gains.

Non-additivity in Consumers' Demand Theory

There can be many relationships drawn between individual demand curves and collective market demand curves, but Professor Oskar Morgenstern says that in some cases the market demand curve is not the lateral summation of the individual demand curves. This is because an individual's demand is so variable based on several different factors and effects: the bandwagon effect, snob effect, veblen effect, speculative demand, and irrational demand.
The bandwagon effect is when people are buying things because they see other people buying them. For example, with Johnny Manziel going to the Cleveland Browns in the NFL draft, people will buy Manziel jerseys just to jump on his bandwagon. The snob effect is when the demand for a consumers' good is decreased because others are also consuming that good. It represents the desire of people to be different. So, given the same Manziel scenario, people would buy someone else's jersey instead of Manziel's because of the snob effect. The veblen effect is when the desire for a good is increased because of the price of that good. A real Manziel jersey would be preferable to a fake Manziel jersey in this case. Speculative demand is when people invest in a commodity because they expect the price to rise. Irrational demand is when people buy things off of sudden urges and its neither planned or calculated.
My question in all of this is, which effect do you think effects consumers' demand the most? Also, which of these curves can be added together in order to produce a market demand curve and which ones aren't able to do that?

The Value of Human Capital

In his lecture, Becker discusses the value of human capital and how it can be changed, or augmented, through investments in training and education. Becker believes that individuals can raise the value of their labor power through these investments. These investments, in training and education, give individuals increased specific and general knowledge and it is this knowledge that gives them the skills they need to keep their jobs or current positions within their companies. However, the need for manual labor in modern society is not as great as it once was. Even with the improvements from the investments in training and education, machines are replacing many of the jobs that used to be performed by humans. With the continued advances in technology, and companies turning towards machines for production, there has been an overall decline in the value of human capital. The specific knowledge and training needed by individuals today is simply an understanding of how to operate, maintain, and repair the machines that have replaced the jobs they once performed. Companies do not mind that they no longer need many individuals for production, the use of machines is increasing production and decreasing costs which in turn greatly raises profits. My question is this, will there ever come a time when human capital no longer has any value? The rise of machines, for lack of a better term, is removing the need for human capital in the market place, and it is unlikely that human capital will make any sort of comeback. So the question remains, will the value of human capital disappear entirely, or will there remain a percentage of jobs for which manual labor remains necessary? Is there a solution or must we accept the elimination of human capital?

Becker and Posner Doping Athletes

Going along the lines of Gary Becker and Richard Posner, I would like to point out another blog opinion that both of these economists discussed. The issue is doping athletes in professional athletes. Why do athletes turn to performance enhancing drugs in their professions? One reason might the gains they will make if they are number one. In terms of competitiveness, professional sports are not lacking in any way so each team or athlete are equal roughly in terms of talent level (except for the super stars). One of the defining factors would be the monetary gains of doping. Consider the Yankees success in baseball, the Miami Heat and Los Angeles Lakers in basketball, or Lance Armstrong in Biking. What separates them from the rest of the pack? Mainly their monetary gains from winning. Consider the issue of Lance Armstrong winning seven Tour De France back to back to (you get the picture) and making sponsor deals and having millions of Americans wearing your yellow bracelets. Not only did Lance Armstrong make multiples times what the guy in second place made but also made him a household name. The same goes for A-Rod and Barry Bonds. So it pays to be first in terms of money and fame. No one remembers second place or likes to pay second place like the first place.
So what is legislation trying to accomplish. It is trying to reduce the side effects of the performance enhancing drugs on the quality of life of the athlete competing. PEDs might help that sprinter win the race by a slim margins but if the whole pack is taking the drugs the marginal benefit to taking the drugs will be reduced until the point it will have to be a necessary step in competition.
My question is why doping athletes such a huge problem in sports? Should it be such a big deal and how would legislation help stop this type of activity?