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The answers we get are dictated by the questions we ask, but there was one question which always grated on my wife’s nerves, no matter who frequently she was asked. That was the question, “Do you work?” As she had five small children and a husband (or, as some would reckon it, six children), she did quite a bit of work. But what the questioner really meant was, “Do you work for a wage?” Being a “housewife” (a term which seems to designate someone wedded to a house) carried no status at all; only work in exchange for wages could have any value, precisely the value of the wage. Work that has no wage has no value.

But we cannot blame the average person for asking this question when the economists have no better understanding of the family and no better questions to ask. Modern economics is a theory about how individuals exchange goods and services, but it has no explanation of how these goods come into being in the first place; that is, it has no coherent production function. Exchange theories deal merely with the change of ownership of already existing goods among freely contracting individuals; it can never explain the appearance of new goods. In these theories, everything is treated as a commodity (even the human person gets commodified as “labor”) but the actual existence of these commodities cannot be explained. But of all the “commodities” whose existence economics cannot explain, the first is the existence of the individual. And without such a explanation, how can economics understand the growth of the economy?

John Mueller of the Ethics and Public Policy Center, has characterized these shortcomings  as “The Economic Stork Theory” (EST). Mueller explains this theory in Redeeming Economics: Rediscovering the Missing Element, which will be published this Spring by ISI Books. In the Economic Stork Theory, workers arrive in the economy fully grown, fully trained, and fully socialized. These stork-borne workers are a “given”; that is, there is no way to explain the growth in workers or their level of training and socialization, and hence little reason to support them with political or fiscal policies. Mueller describes the theory as follows:

I call this the Stork Assumption, since it literally means that adult workers spring from nowhere, as if brought by a large Economic Stork. Under the Stork Assumption, the accumulation of workers’ tools—buildings and machines—is the only possible source of economic growth that can be affected by policymakers. Moreover, under these assumptions the total tax burden not only should, but inevitably must, fall entirely upon the incomes of workers (who by assumption cannot avoid such taxes by having fewer or less-educated children, though property owners are assumed able to avoid taxes on property income by investing less in property). The Stork Assumption, not economic theory, underlies the perennial proposals to abolish taxes on property income, which are advocated by a cottage industry of (mostly my fellow Republican) economists centered in Washington, D.C.

As a corollary to the Economic Stork Theory, the only “useful” work done in the economy is work done for wages or other economic rewards, and hence there are only two kinds of human activity, work and leisure. Hence, there are only two kinds of Individuals in this theory: Partially Useful Individuals (PUIs) and Totally Useless Individuals (TUIs). The PUIs are partially useful because they spend a part of their time at “work” producing things in the money economy. The TUIs, however, don’t “work” at all because they earn no wage. Rather, some of the TUIs, otherwise known as “mothers,” spend their time in such leisure activities as taking care of the household pets; some of these pets are called “cats” or “dogs,” and others are called “children,” another form of TUIs.

Since the standard of living in the EST is the result of a positive capital-to-labor ratio, increasing the number of PUIs does not increase the standard of living unless the amount of capital is increased by at least an equal amount. In other words, you can increase the standard of living by decreasing the number of people, or at least slowing the growth of the population.  Therefore the crucial element in growth is capital, and people are problematic. The policy implications are that capital should not be taxed, only people, in the form of labor or consumption taxes. This will help to discourage the formation of new PUI/TUIs, while raising the capital-to-labor ratio.

Mueller points out that the EST’s most glaring error is the failure to recognize that the family is the basic economic unit. And within the family, the choice is not so much between work and leisure as it is between production for exchange and production for use. Of course, economic theory simply has no way to account for production for use, even though it is actually the whole point of production for exchange; we work to provide money to buy meat and potatoes which we then use to produce dinner. Production for use does not show up in the GDP, but in fact the GDP presupposes such production; indeed, it is the whole point of the exchange economy.

What the TUIs known as “mothers” are doing is crucial not just to the continuation of the economic system, but to the continuation of civilization itself. There is no economic growth without mothers and the job they do. Moreover, the social shifts of the last 50 years have moved us away from production for use to more production for exchange. Now, one may debate as long as one likes the soundness of this move into the workplace in terms of, say, women’s liberation. But as the feminists point out (quite rightly), if mothers were paid a salary for everything they do, they would earn a hefty salary indeed. But the attempt to monetize the work of mothers, to convert it from production for use to production for exchange, is futile and leads to endless debates that have no possible resolution. There simply isn’t enough money on the planet to replace what mothers do everyday. The transfer of work from use to exchange does indeed show up as an “increase” in the GDP, but not as an increase in any actual output of goods and services, and likely involves an actual decrease in such services and in their quality. When mom cooks you a dinner, the GDP does not record the fact; but when she takes the family to MacDonald’s, the GDP rises. But do fast-food stands really substitute for family meals? Do day care centers really provide the same level of “care” as does a family?

The Economic Stork Theory isn’t even compatible with the commodification of labor. After all, economic theory recognizes that the price of any commodity must cover all of its costs, not only its production costs, but its maintenance and depreciation costs as well. But labor also has a “production cost” (the family, the school, etc.) maintenance costs (subsistence and health care) and depreciation costs (old age). If the price of labor does not cover these costs, then the economic system does not meet its own basic requirements. An economic system that doesn’t understand the basic economics of the family will gradually erode the family, which is precisely what has been happening in the last 30 or 40 years. As John Wilson reminds us, “It’s the Family, Stupid,” and an economic system that doesn’t consciously support the family and judge itself by that standard is stupid indeed.

23 COMMENTS

  1. “Economics is people arbitrarily, or as a matter of taste, assigning numerical values to non-numerical things. And then pretending that they haven’t just made the numbers up, which they have. Economics is like astrology in that sense, except that economics serves to justify the current power structure, and so it has a lot of fervent believers among the powerful.” – Kim Stanley Robinson

    There is no such thing as an economic science. It’s an art at best and downright hoodoo at worst. Most of the time it isn’t any better than reading entrails or casting runes. For a society so skeptical of omens, ours is hilariously superstitious when it comes to this particular brand of witchdoctor.

    You’ve blogged about this before. The Emperor has no clothes, but too many careers, academic and political, have been predicated upon this nonsense for things to be otherwise.

  2. Two English men, C. H. Douglas and A. R. Orage, attempted to square this circle early on in the last century through their collaboration to make Social Credit part of Guild Socialism so that everybody got paid a dividend out of a nation’s productivity irrespective of whether they were waged or not. Milton Friedman proposed a variation of this through the Negative Income Tax credit and the Labour Party in the UK recently implemented it as a one-off through the Child Trust Fund where each new born child is given a starter nest-egg the size of which is relative to the wealth of the parents. However, in their paper “Reciprocity, Self-interest, and the Welfare State.” the Americans Fong, Bowles and Gintis suggest that when it comes to hand-outs human beings have a deep sense of fairness with regard to generosity. Self-indulgence,laziness and free-riding is frowned upon as being unfair to those who make an effort to lead disciplined and cooperative lives. It is perceived as violating reciprocity norms. Handing out dividends from a national pot without regard to circumstances or life-style is contentious and attempting to police it is expensive. I was recently told by a very wealthy individual who lives near Detroit that the city is a write-off and too dangerous to visit because of the high level of High School drop-outs with consequent high levels of illiteracy resulting in extensive crime and all caused by unmarried mothers on welfare more interested in sex and lounging around than child-rearing and home-making! As Fong, Bowles and Gintis argue in the conclusion to their paper if there are low levels of return to virtuous behavior, for example, in the form of low wages, poor schooling, lack of gun control, unsafe environments, poor policing, intervention on domestic abuse, etc., then the effort made to be a virtuous citizen will be low. It is against this unhelpful stereo-typing background that a campaign for a Social Credit scheme has to contend. At the opposite end of the spectrum, of course, becoming a Vampire Squid and engaging in unvirtuous behavior for the high levels of return doesn’t seem to attract quite the same levels of disapproval! Money not virtue rules!

  3. Douglas was certainly right that the markets cannot be cleared in the current system, but his “social credit” scheme is really just a variant of Keynesianism, which is likely why Keynes had such a sympathetic view when everybody else marginalized SC. Among its other problems, any form of Keynesianism will have the problems you mention. Both Keynes and Douglas properly identify the problem, but put the solution in the wrong place, in politics rather than economics, in re-distribution after production rather than in just distributions at the point of production (i.e., the just wage.)

  4. I believe I understand what you mean by “when mom cooks you a dinner, the GDP does not record the fact; but when she takes the family to MacDonald’s, the GDP rises”, but surely mom uses products whose purchase was recorded in GDP. I suppose the point of your comment is that her work (the labor added to the capital) isn’t considered in GDP. But if that dinner contributes to the well-being of her children, one of whom may be the next successful entrepreneur, and they become productive, wouldn’t her contribution be captured in their “output”? What I’m thinking of is something like an inter-generational recognition of a mom’s “economic value” through the production of her children.

  5. It seems “production for use” economy as part of the black market is normative for the EST.

    Therefore the crucial element in growth is capital, and people are problematic. The policy implications are that capital should not be taxed, only people, in the form of labor or consumption taxes.

    Hmm. Capital taxes are also paid by people, though, no? Wouldn’t then the effect be of making more high capital (holding) people rather than high laboring people or high consuming people, rather than capital vs. people per se, which is not that bad of an idea? Well, maybe the taxes on labor should go…

    Thanks for the thought-provoking article.

  6. Just to throw a monkey wrench out there, and hopefully continue the conversation… I think there may be something not entirely inappropriate about not counting the work of housewives, etc. as part of GDP.

    Why? Because work that they do is not work that they paid someone else to do. I know a missionary family who lived in Eritria. Their kids were all grown, and they planned to be more economical about their budget by having the wife take care of the house. It took them a little while to figure out why they were so resented by the locals. In essence, the work that the wife was doing for the family herself represented two or three people’s jobs. In that sense, the economy wasn’t growing, because the household was spending less money.

    I think there are analogous situations in our economy, though we’ve largely either 1) completely forgotten about them, or 2) pretended they aren’t true. Historically upper-income people supported large numbers of menial laborers to do things like cook their food, clean their homes, maintain their lands, and even things as intimate as helping them dress or cleaning their bodies. Most Americans do close to 100% of these tasks themselves, even the ones who given their relative wealth would have relied upon servants to do those things even as recently as a century ago. This means that there has been a huge drop in demand for unskilled labor in the form of domestic servants.

    Part of the reason this continues to be the case is that we’ve effectively made it impossible to hire domestics through our employment laws, which are really designed to deal with factory workers more than anyone else. Workers’ compensation? Shift restrictions? Minimum wages? All of these are conceived with a line worker in mind, not a nanny or maid.

    But that aside, the housewife who does everything for herself, including raising the children–who among us remembers anyone having a governess?–is not spending money on other people. So yes, it’s certainly true that the “production” of functional human beings is completely unaccounted for by all contemporary economic models, the fact that said models do not include retained domestic labor is not entirely inappropriate.

  7. Ryan, It depends, does it not, on whether you consider “economic activity” to occur when money changes hands or when work is done. But the whole point of the exchange economy is use, not mere exchange. Further, it confuses the whole idea of wealth. Wealth comes only from use values, not exchange values. The more use you get out of an item, say a car, the more wealth it produces.

    As for servants, I think it is the responsibility of the rich to spend rather than horde. The rich should be extravagant, as this is a way of recycling the excess funds. And I agree that hiring is difficult for the small employer, since so many tasks are placed on the employer, tasks that have nothing to do with employment, like health care.

    Albert, I think the informal and illegal economies are not the same as the use economy. A purchase of drugs may be illegal, but it is still an exchange of money for goods (or bads).

  8. Being in my forties, unmarried and childless, I’m often accused of having no skin in the game when arguing with the family wingnuts at the Christmas table. They then lament the lack of grandchildren and the hesitation of the “right” people to have children. They have a blind spot when it comes to the uncertainty facing parents in today’s world. I have had three career changes and they were lateral moves as far as income goes. There was never a time where I would have been confident enough to start a family. How can you have children when you know you’re going have periods without healthcare unless you pay a ransom for Cobra?

    Out of the 12 couples I known for a long time, only two have more than two children, two couples have two, four have one child, and the others aren’t planning to have a child. Three of those children were unplanned. We’re all smart, curious IT professionals (geeks hang together in the long run) who insist on being in control of our fate. The way our society is evolving (promoting a high degree of economic churn “debt” to ensure the consolidation of wealth) the only people who will be parents are the wealthy, the stupid and the fanatically religious who are sure god will provide. Eventually there’ll be a small group of capital holders, a larger group of techs servicing the swells, and the rest of the population will be off the grid in some kind of Mad Max world. Excuse me if I don’t contribute cannon fodder to that future.

  9. Dear Pale Scot,

    All I can say is that one is never ‘ready’ for a child. One cannot, in good conscience, adequately ‘plan’ for a child. It is amazing how priorities and resources shift. Is it always easy? Absolutely not. Nevertheless, that bear hug from your 4 yr old goes a long way to making you feel as though it is worth all and more.

    I have nothing against those who choose not to have kids. They are honest and, at times, cannot honestly say I blame them. Only to say that you’ll be amazed at the possibilities.

    Peace and Grace,
    -jp

  10. How sad that a country can become so dis-eased that the idea of having children is perceived as a sin!

  11. @ Bruce and Grace: I hope you’re not responding to me;

    @JP

    JP: Of course one shouldn’t expect to have accrue the capital to have children before having them; as my best friend said, being a parent is something you learn as you do it. But our parents all had jobs they knew they could expect to keep as long as they did it well (mostly). Now the preferred model on Wall Street is to hire employees on short term contracts; roaming mercenaries like myself can do that but that’s not the way run a civilization in my opinion. My father got his accounting BS after two hitches in the Marines, his second company was where he landed and ended up as CFO after twenty three years. I’ve been reading the WSJ, Business Week and Fortune since the market was at 450, and watched as investing transformed from a method of keeping ahead of inflation to a ponzi scheme. The money I have at the end of my life will be bequeathed to three of my friend’s children. My point is that the modern economy requires much more capital to provide children a planned path than it should. My best friend’s daughter needed psychiatric treatment in her adolescence and it cleaned him out, he had “good” health insurance. If you don’t have parents with resources, you don’t endure something like that and stay solvent.

  12. Pale Scot. Be assured my comment was meant as a generalization that the divisions within society are creating an increased general pessimism for individuals with regard to the possible attainment of a “good life.” Those divisions according to traditional thinking are meant to be resolved through a democratic political process but politicians are now so often dependent on economic interest groups for their political survival that they increasingly no longer represent the society at large.

  13. Sorry to come late to the discussion. My original description of the “Stork Theory” occurred in Family Policy magazine, which was then ably edited by Bob Patterson (who now ably edits The Family in America). The article can be found at http://www.eppc.org/publications/pubID.2265/pub_detail.asp

    That article was an effort to make understandable to the average person some erroneous presuppositions often made by neoclassical economists. The “stork theory” limits “capital” to nonhuman capital. Thus ignoring the fact mentioned by Aristotle: that all of us humans are not only “rational” and “political” but also “conjugal” or “matrimonial” animals. That’s the gist of John Medaille’s article, as I understand it. John W. Kendrick, who died recently, did the calculations that Matthew Wade suggested, showing that the kind of income and capital that are excluded from GDP are necessary to explain actually observed economic growth.

    The forthcoming book that John Medaille kindly mentioned tries to integrate this understanding within an updated version of the scholastic economic theory, which prevailed for five centuries before Adam Smith. The main difference among (neo) scholastic, classical, and neoclassical economics is the presence or absence of the scholastic theory of distribution: at the personal level, gifts (and their opposite, crimes) and in all domestic and political economy, what Aristotle called distributive justice, which amounts to a kind of collective gift.

    Both classical and neoclassical economics attempt to reduce all economic transactions to some kind of consumption, production, or exchange. Most of the discussion above seems to revolve around the fact noted by Augustine, that there are two basic kinds of economic transaction: “sale or gift.”

    Parents give their children the three basic gifts enumerated by Aristotle: existence, rearing, and instruction. One chapter in the book includes a world model of fertility, which shows that the Pale Scot is quite right about one thing: the certainty that “god will provide” distinguishes those who have enough children to replace themselves from those who don’t. After taking other factors into account, regardless of denomination those who don’t worship weekly have an average of 1.2 children, while those who do have 3.4. Worshiping God, like having children, is a form of gift that requires sacrificing scarce resources we could otherwise devote to ourselves. So it is not at all surprising that the religiously observant (those who practice, not merely preach) raise a disproportionate share of the children.

    There are many good reasons why someone would choose not to have children. Many careers would be impossible, and the lives of most saints would be inexplicable, if there weren’t even higher callings. But whether or not we make the sacrifices necessary to have children ourselves, we all have one thing in common: we all began our lives as a gift received from someone else.

  14. Very interesting article and discussion thus far.

    One thing that has not been mentioned as of yet is the incredible shift in attitudes toward “domestic” labor that have occurred over the course of American history. The “mainstream” conservatism that maintains a slavish devotion to the alchemy of the marketplace seems to be completely ignorant of these traditions — which is why I do not subscribe to that line of thought. However, it is good to see a more honest conservatism, as represented on this site, which seems to recognize that non-paid labor has immense value in a society.

    I have done a good deal of historical inquiry into the white yeomanry of the antebellum South, and what has struck me most is the way in which they voluntarily distanced themselves from the market because it tended to undermine the system of household production that was so central to their “way of life”. It also helped to explain why so many people who did not own slaves themselves fought to defend that system — because it provided the buffer against market intrusion. To place one’s self and family at the mercy of market uncertainties was equivalent to giving up your freedom. If your freedom depended upon access to the means of production (i.e. land) and over-involvement in the marketplace opened you up to market vagaries that could result in the loss of control over those means of production, you generally tended to avoid the market when you could. Of course, none of this was good for a burgeoning industrial economy, which puts into perspective the way in which the old yeomanry was the group that saw their social and economic position decline perhaps more than any other in the years after the Civil War.

    The modern disparagement of household production combined with the deification of the all-knowing market serves a purpose in our cultural and social narrative. It encourages people to meet their needs more through the marketplace, simultaneously eroding their freedom and control over their own lives. For an economic and political system that tosses around words such as “freedom” and “liberty” so much, it seems that much of its machinations are meant to actually undermine the reality of those concepts among the majority of the population.

  15. Wendell Berry said back in the ’70s that “the most able are the most free”; the free marketeers reply, “the most able to pay are the most free.”

    It is of course hard these days to get away with saying anything in favor of southern agrarianism, but Mr. Harrison has it right.

  16. To John:

    I haven’t formally published anything on it. Rather, it was the focus of inquiry for a final paper I wrote for a graduate course in American history on the Civil War and Reconstruction. The final product was the result of a significant amount of research, but I’m afraid not anywhere near polished enough as a work in its own right to justify publication.

    Much of the paper was based upon secondary sources I found, both in the form of books and historical journal articles, that looked at the role of the market in undermining the Revolutionary ideals of localism and self-reliance — and the way in which the antebellum southern non-slaveholding yeoman farmer was, for the most part, the last remaining representative of those ideals.

    I would be happy to let you see the paper or provide you a list of sources if you would like.

  17. At root is the selfishness of those who choose not to permit others to associate and collectively choose what is choice-worthy. Relativism in choosing ideologies that provide little choice is really no choice at all, but selection of an ideology that encourages collective choice is.

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