Love is in the air! I recently married the love of my life. Marriage is not only a great tradition, it is economically effective! Well, in theory. We can now bask in the cost savings of consuming goods together such as a home, car, kids, Netflix accounts, groceries, and so much more!
In practice, though, we must agree on which goods to share and how. And, FYI, the new covenant with my favorite lady did not magically solve all our disagreements. (Say it ain’t so!) Alas, it’s true. We still disagree on a bunch of stuff.
What if we decided to designate one person to make all the decisions? One person who would have all the decision-making power. Wouldn’t that help solve our problems?
Well, it would certainly reduce the costs of making a decision. But if one person makes all the decisions, without considering the other person, then the other gets the short end of the stick. This is not a desirable outcome for the other, non-decision maker. And, my friends, decisions that increase happiness for both leads to a happy marriage.
… like groceries
For example, if I was in charge of our groceries every week, we would only eat rice, beans, and fried eggs. I would be content. It’s cheap, nutritious, and pretty delicious (if you haven’t tried it). My wife would hate this menu. She enjoys a bit more variety in her weekly dining experience. As a result, if I forced my food down her throat (excuse the punnyness) without considering what she wanted, our total happiness levels would be less than if she had some say in the selection process. Isn’t the point of getting married to increase both of our happiness levels?
Knut Wicksell, a Swedish economist, saw the same problem emerge when governments provide goods to its citizens, like education, healthcare, parks, etc. It would only make sense to provide these goods if it actually increased the social utility, or the sum of all the individual happinesses, of the citizenry. But, how could we tell that the government was providing goods that made everyone happy? Well, we couldn’t. Unless the decisions were made unanimously like in a (happy) marriage.
Only when decisions are made unanimously, do we find the “mutual gains” economics is always harping on about. Similarly, by voting unanimously on government activity can the government ensure that the decision will increase the happiness of everyone involved.
But let’s be real: achieving Wicksellian unanimity would be a nightmare. The government would provide nothing, having made very few decisions unanimously. So, Wicksell would rather us vote on the institutional arrangements–the process and the rules of decision-making–unanimously, and try to aim for unanimity on the other stuff. This way we can get close to increasing happiness for the group.
Wicksell’s Inspiration on Buchanan: Interdependent Costs
Wicksell was a big influence on Nobel Prize winner, James Buchanan, who helped found a school of economics that looks at the economics of politics. Buchanan’s economic model was based on Wicksellian unanimity in that on one side, the cost of making a decision increases as you get closer to unanimity. On the other side, the “external costs” imposed on others increases the farther you get from unanimity. So, the “optimal” decision happens when both costs–known as the interdependence costs– are at their lowest point.
Seeing as there are only two people involved, we can imagine unanimous decisions being easier to reach in a marriage. But, we quickly find out that this is not necessarily the case. So, the same kind of model can be used. We each make decisions at the point where the interdependent costs are at their lowest point.
Moral of the Story: The key to a happy marriage is making decisions at low interdependence costs. In other words, if you can’t ensure happiness, try to be unanimous.
Who would’ve thought we could apply public choice insights to marriage?
Oh, right! Probably anyone who knows me. Especially, my wife.
Awesome Photo Credit to Tori Michelle Photography