The Economics of the Family and Family Policy

The Economics of the Family and Family Policy

Francisco Cabrillo

This comprehensive and authoritative book offers a global approach to the modern economics of the family, family law and family policy. Beginning with the division of labour in the family, this book deals with the economics of marriage, the demand for children, inter-generational relationships, and the economics of inheritance. The family is analysed using the theory of utility maximisation assuming that individuals wish to achieve the greatest possible satisfaction with limited resources and imperfect knowledge. The family is examined from both long and short term perspectives, and it is assumed that the family is cooperative with incentives for altruistic behaviour greater than in any other social group.

Chapter 9: The Economic Foundations and Effects of a Policy for the Family

Francisco Cabrillo

Subjects: development studies, family and gender policy, politics and public policy, public policy, social policy and sociology, family and gender policy

Extract

Page 146 9.  The economic foundations and effects of a policy for the family 1  PARENTS AS PRODUCERS OF EXTERNALITIES One of the basic theorems of economic analysis is that equilibrium in a market with perfect competition amounts to a situation of social optimum.1 However there are  many cases in which this situation is not reached because one of the basic premises of market functioning fails. The clearest case is obvious, that of pure public goods.  When providing such goods—for which the most representative example is the national defence—the market is not the most efficient institution because they do not  meet the requirement of the existence of different levels of demand and it is not possible to prevent them from being utilized by those people who are not prepared to  contribute to financing them. But there are also other cases which are very common in today’s world and in which, although not governed by the same conditions as  pure public goods, activities take place which affect the public sphere. In them, the economic agents either cannot appropriate all the profits their action has generated  or they do not have to pay all the costs they have caused. These are the so­called external economies and diseconomies. A classic example of the latter can be found in companies that contaminate the environment and which force many people who do not benefit at all from the activity of  these companies to pay costs in the form of contaminated water or...

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