Household economics 101: human capital

If other social institutions had to perform the tasks of the home, society would immediately collapse.

Many valuable goods are produced in the home, but because they do not involve payment they are largely invisible to what we normally think of as “the economy” and the work of producing them is not recognized as a profession. At a recent conference in London -- Sustainable Living: Professional Approaches to Housework -- Dr Michael-Burkhard Piorkowsky, Professor for Household and Consumption Economics at the University of Bonn, presented a paper on what household economics tells us about this profession. His paper, “The Competences of Housework”, can be found at the website of the Home Renaissance Foundation, sponsor of the conference. Here, in an email interview, he answers some questions from MercatorNet.


MercatorNet: Some people might be surprised to learn that a university professor has anything to say about housework. From which academic perspective to you approach this subject?

Michael-Burkhard Piorkowsky: I am an economist and my arguments are grounded on a special branch of economic science called household economics. It has a tradition in early home economics and in advanced modern micro economics. Gary Stanley Becker has elaborated the Human Capital Theory and the New Home Economics, stressing the economic dimension of “productive consumption”. He was honored with the Nobel Prize for Economics in 1992. Some new influences in this field came from the New Institutional Economics, insisting that institutions matter, because the “consumer” is embedded in the household and family context.

You have described running a household as “a genuine management task”. What sorts of things do you include in this task?

Household management includes all tasks directed to the development of the household, i.e. the household group and assets. It starts with the initial formation of one’s own household and the dynamic, ongoing creation of a lifestyle pattern, setting goals and allocating resources to these goals.

Deciding to leave the parents’ home, living alone or in partnership, renting or buying a flat or a house, organizing the interior, deciding to have or not to have children, feeding them and bringing them up, looking for healthy food, caring for the elderly, being informed about private pension plans, taking care of the environment -- these are all examples of managerial tasks that contribute to sustainable living in the home.

It further includes a system of planning and control for monetary transactions, i.e. household bookkeeping. Household management in family households requires a mode of governance, i.e. division of labor, to organize every-day living, e.g. addressing responsibilities and sharing tasks. Last, but not least, it includes modes of motivating household members to contribute to a successful and responsible way of living.

Gary Becker has described the household as “truly a small factory”. Is that a good way to look at the economics of family life? What distinguishes household “production” from that of a company?

Household production has its end in itself: maintaining vital functions, building human capital, and generating life satisfaction. For example, it makes a difference to eat a cake baked by the mother rather than a cake from the bakery. And organizing the interior can turn an anonymous apartment into a cosy home. This production of human welfare contributes to a well functioning society with equal opportunities for all members.

The production of firms is – from this perspective – a means to diverse ends, including monetary return on investment, self fulfillment in paid work and the generation of power and influence on the middle and upper levels of the economy and society.

K.E. Boulding, you say, has characterised the household as “the Achilles Heel of society” and stated that if the other social institutions had to perform the functions of households, society would immediately collapse. Could you elaborate on this for us?

Private households are the basic socio-economic units of the economy and society: Firstly, the private household is the most successful institution for providing personal goods which are strongly related to individual needs and small group life, at least cost and in the most satisfying way. The alternative -- that is, total provision by institutional households such as like boarding schools, boarding houses, and old people’s homes -- is not what people generally want.

Second, the most important function of family households is to bring up children and maintain the latent pattern of society, which includes informal rules, like how to behave in relationships or at the table. In this way the family household produces human capital, starting from very basic and necessary knowledge and competencies. Capital is, after all, only human knowledge impressed upon the material world. The problem of transmission and expansion of knowledge is the crucial problem of any society.

Third, caring for the elderly is mostly done within enlarged family households or in close proximity with support by adult children. Institutional old people’s homes are very cost intensive and not desired by most of the elderly.

In some countries, notably some of the Nordic countries, the state has effectively outsourced the care of young children so that their mothers as well as fathers can be in paid work. Does this make real economic sense?

The question cannot be answered only with respect to economic arguments. Such a measurement is not available. And the answer lies beyond the realm of economic reasoning. My opinion is as follows. Although good care early in life is essential to the good development of children, it is not only the time spent on child care but the quality of caring that matters. Nor is it a question of gender.

There is no question that the mother has a unique relationship with her child. But if double income earning couples have a good work-life work balance and both give the child high quality care -- that is, strong emotional and responsive care, supported by sufficient complementary daycare -- this could meet the needs of all family members. As we know, paid work is not only for monetary returns but also for personal well-being and life satisfaction in a special dimension.

On the other hand, does it make economic sense to pay mothers an allowance to encourage them to look after their young children at home?

Yes, if good caring is provided it makes sense to pay mothers an allowance to encourage them to look after their young children at home. Child care is unpaid work, and mothers face opportunity costs by not entering the labour market. Beside this, professional daycare in institutional settings is cost intensive.

Do you think there is a link between the breakdown of the family in Western societies and the financial crisis? If so, why don’t economists draw more attention to this issue?

I have no explanation for this possible link. But in fact, standard economic theory neglects the household and the family as the basic economic actors. And this is contrary to their relevance for building stable and successful economies and societies in modern times. It has something to do with pure theory building, with the smallness of the units, with measurement problems, and with the traditional female dominance -- not to say monopoly -- in the performance of household tasks.

If men were forced to do a lot more housework, or even if they would do it voluntarily, households and families would be on top of the agenda of economic science.

Dr Michael-Burkhard Piorkowsky is Professor for Household and Consumption Economics at the University of Bonn.


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