Biological Basics and the Economics of the Family

M any economic models of the family are based on a generic “person one/person two” household or “parent–child” family, rather than their anatomically correct counterparts: sons and daughters, fathers and mothers, and grandfathers and grandmothers. These economic models can offer powerful insights into family behavior, but also can leave certain patterns unexplained and neglect potentially important crosscurrents. Melding biological insights with family economics can cast new light on existing knowledge and open up novel paths for research. For example, study after study has found that putting family income in the hands of mothers, rather than fathers, tends to increase the consumption of children, as noted in this journal in Lundberg and Pollak (1996). Yet the way such results are usually described might strike a noneconomist as exceedingly circumspect. Economists point out that these findings reject the “common preference” model of household decision making in favor of one with “independent decisionmaking spouses”—but usually make little mention of motherhood or fatherhood per se. Or consider the dramatic expansion of South African government pension programs in the early 1990s, which put lots of extra money in the hands of grandparents, many of whom lived with their grandchildren. In a compelling and oft-cited study, Duflo (2003) found evidence of pension spillovers to grandchildren. But the most intriguing patterns were demographic: pensions to maternal grandmothers redounded to the benefit of granddaughters. Economic analysis uncovers the income effects but turns out to be of little help for explaining why these particular gender effects predominated.