Monday, January 27, 2014

Monday's Child is Full of Alchian and Allen

If you're a reader here at EE, the probability that you also read Kids Prefer Cheese approaches 1 in the limit. So it's almost guaranteed that you've borne witness to this week's Monday's Child. However, if you're like me, you may not necessarily click on each of Mike's links. I know, I know: it's breaking kayfabe of me to admit that, but time is scarce etc. etc. I think it's fair to say though that this little fellow here should be a good one to exercise the ol' EWOT.

ICY didn't RTWT, Colorado is mulling a state-mandated pre-wedding education course. Regret, I imagine is the EE condition engaged here. Divorce rates seem to be evidence of ex post regret, res ipsa loquitor. How can marriage be euvoluntary if people get a few years in and then huck it all?

The economics are pretty straightforward: ceteris paribus, adding a fixed cost to something raises the relative price of the low-quality good. Alchian and Allen made the case for apples and lobsters, saying that orchards and Maine lobstermen would be more prone to shipping the good stuff out given shipping costs. Of course, if you've had a pint of cider fresh from the press or a bowl of l-bisque fresh from the bay, you might recognize the empirical flaw (that A&A themselves readily admitted in their textbook) in the theory. Still, the incentives here are pretty plain: raise the relative price of marriage, and you can expect to see some substitution on one or more margins: more cohabitation, more out-of-state ceremonies (inter alia, naturally). More single parenthood?

Of course, with single parenthood, ceteris is not  parebus since the relative private cost of oral contraceptives is taking a big honkin' nose dive under the ACA. Or at least it is for folks with coverage. Which is pretty much the part of the population that's already underserved by the insurance industry already, right? Young poor people are signing up in droves on the exchanges, right?

Step 1: make it more expensive to get married
Step 2: make it cheaper to have kids out of wedlock
Step 3: imprison fathers like it's going out of style
Step 4: ???
Step 5: forward the empire

Consequences aren't everything, people. But they are a thing and they need to be taken seriously.


  1. Well, my thinking on this was that, by adding a fixed cost to marriages, you increase the average quality of marriages and lower the divorce rate. IF you assume that a relationship that people are least willing to endure 10 hours of counseling for are also more likely to end in divorce (i.e., people who are most indifferent about marriage are most likely to divorce), then by creating this cost you'll reduce the divorce rate.

    Of course, reducing the divorce rate is not the same thing as improving people's lives. As you mentioned, increasing costs also encourages people to substitute for less valuable alternatives (which isn't A&A, since they don't have to pay the 10 hours to consume those alternatives).

    1. Agreed. There are two pernicious problems here: governing by statistical moments, and picking an endogenous dependent variable. The Lucas Critique applies to microeconomics as well as to anything else.


Do you have suggestions on where we could find more examples of this phenomenon?