Lubomír Mlčoch „Family as an economic agent under the pressure of markets“ Conference „Central Europe in the EU and the EU in the Central Europe“ Faculty of the Social Sciences, Prague 5 Jinonice, U Kříže 8 a 10, September 19 21, 2007 1. Introduction: family in economics Family is surely one of oldiest institutions; G.Becker in his Nobel lecture argues refering to O.Soffer´s paleontology research that we can trace its origine to more than 40.000 years ago. The family is also arguably the most fundamental human institution /Becker,G./1993//. Nevertheless, in our times there is no clear definition „what the institution of family really means“. Family is „well defined“ within the ecclesiastical law of the catholic church ; but the concepts of family in the states laws /crf. „La famiglia in Europa“ /2006// differ substantially in fundamental elements of marriage, duration and solubility of marriage, rights of parents and children in social provisions etc.; esp. controversial are so called same sex partnership laws. Within societies with islamic minorities there are particular problems with completely different tradition of the family based on polygamy. As we can observe a process of weakening the legal instituion of family and matrimonial law, the role of less formal institutions /conventions, rules, samples of behavior/ appears to be more important; even in a sense „what institution is“ in the principle /see Hodgson 2006/. The growing rate of divorces and esp. the phenomenon of repeated divorces and marriages open the door for questions of the „family´s integrity“ /and legal problems with matrimonial names and names of children/. Nontraditional households of our times are represented by single parents and homosexual partners. Finally, there are statistical problems how to define a family; „ill structured“ family concepts lead to a kind of resignation on the family as the „statistical unit“ / as a consequence fertility is measured „per woman“ not „per family“ as before/. Nevertheless, to analyse the family as economic agent and to evaluate family driven policies /see Zamagni 2005a/, it is necessary to have some research consensus about the concept of family. In spite of our doubts „what the family means and represents“, and how to understand the old instituion of family in our post modern age, the economic theory has in its disposal even sophisticated theories of marriage, family and fertility: the substantial part of „essence of Gary S.Becker“celebrating this Nobel Prize winner /see Febrero,R. Schwartz,P.S. /eds./ is dedicated to this branch of „imperial economics“. My topic in this paper is „our experience with the market“ /R.Lane/ and its cultural consequences. I will argue that Becker´s „family economics“ and his economic looking at the family behavior is not able to find a solution of the family crisis, rather just this reductionism is a part of the problem. A culture of market with a spirit of consumerism is more and more eroding the institution of family, and within our Western civilization even the future of life. The progress in modern reproductive medicine, pregenetic diagnosis, new methods of contraception or abortions etc., all this represent just capacities, capabilitis, potentials of today humankind; actual individual choices are deeply influenced by social structures of men and women. My point is, that the spirit of consumer society is –step by step desintegrating the hoseholds as economic agents, and destroying families as elementary cells of every society. I refer in this context to my regional report presented at the XII Plenary Session of the Pontifical Academy of Social Sciences /see Mlčoch 2006/ and other interventions at this conference entitled „Vanishing Youth? Solidarity with Children and Young People in an Age of Turbulence“/. The etymology of Old Greek´s „Oikos nomikos“ shows that terms „economic of family“ /Schultz,T. /ed./ /Chicago 1974/, Becker,G.: „Treatise on the Family“, Cambridge Mass.1991/., and even „institutional economics“ are de facto pleonasms. Oikosnomikos provided rules of sound governance of the household=family=firm. In our modern economics we do not understand it this way: „firm“ and „family“ are methodologically separated from each other, and „rules“ and „calculations“ met again only recently. For millenia, in the Old and New Testaments and Psalm´s tradition sound rules of family life coincided with rules of governance and household management. This applies also for a pre scientific period of economics. Only starting from Adam Smith´s Wealth of Nations onwards, we can trace a split between „family“ and „business“. Adam Smith /and William Petty before him/ were seeking the source of wealth „outside family“, in the division of labor and cooperation, at the market. It is symptomatic for our times, that – as a result of the evolution of thinking in the euro american civilisation – that in the famous book of one American conservative leader Michael Novak´s „Philosophy of Freedom“, the „family“ as a „key ward“ is completely missing. The freedom is understood as a freedom of businesman, and the „prevailing tendency is still to treat the family as a dependent variable“ /Zamagni,S., /2005 a, p.9/. Consequences of this way of thinking and „acting for the best“ in this sense are disturbing. We will return to this key point in a special subchapter about a „generalized equivalence“. The founder of „family economics“ is entitled to write in his paper about macro economic consequences of the family behavior /Becker,G.1988/: „Modern economists neglected the behavior of families until the 1950s.“ /i.e. in the 20 th century L.M/. Having a look at some textbooks of economics –even now, a half century later we are undertaking a futile effort to find the key word of „family“. The macro economics and national accounting know a sector of „households“: in a modern political economy of the industrial age „oikos nomikos“ is splitted in microeconomics into „theroy of the firm“ and „theory of the consumer“. Also in a hard core of micro economics in the „utility theory“ economics a household is dissolved into individual consumers. A growing individualism both in the methodology of science and in our practical market experience needs a particular point. Before that we have to precise links household family in „the economic way of looking behavior“ /Becker/. In the mainstraem microeconomics consumers are maximizing utility from consumption under a hard budget constraint. Household incomes in macroeconomics /wages, interests and rents/ are „rewards“ payed by firms for the supply of labour, capital or land . Demands for products resulting from maximizing behavior of families reveal „well ordered“ preferences of „sovereign consumers“. In the „family economics“ maximizing behavior not only persists but includes other choices fundamental for the family life: investment into „human capital“, impacts of the discrimination of women /versus „others“/, allocation of time during life cycles of families, and at the „last but not least“ decisions about „production of children“ /Becker/. Family as „an economic agent“ is a reductionist personification: „decision maker“ represents here a small sociological group or „family coalition“ of the economic unit with specific organization. In this sense I use it in this paper an „generalized household“ that in post modern world /or in a „late modernity“ prefered by sociologists as Ivo Možný/ had included even most private and most intimate decisions into its economic calculations. Family as an economic agent has de sacralized intrinsic values: rational calcul is far beyond natural moral limitation of market. In the sense of the concept „le monde financialisé“ /P.H.Dembinski/ we can caracterise the post modern family as „la famille financialisée“; in a sense of O.E.Williamson „institutional theory of the contract“ we can treat family as a nexus of contracts not only between husband and his wife, between parents and children, but also contracts with „external participants“ at the family life. Today family in the USA has several tens of consumption loans and credit contracts, leasing, insurance, pension contracts according to one empirical research 49 „financial products“ on average. In the „nation of shareholders“ more than half of families owns securities of mutuals, building societies, bonds, etc. Family life even in the rich countries of the „Europe´s social reality“ is tied with numerous „contracts“ that though being promising greater sovereignity impose a growing burden of „hedonic treadmill“ on families. /“There is evidence that most of us find the ´hedonic treadmill´ultimately unsatisfying ...and a source of stress, accentuating problems of self esteem and feelings of personal failure“ – see Liddle,R. Lerais, F. /2006, p.13/. The family in our time of „mass affluence“ differs very substantionally from the concept of „household“ from the times of industrial society in another very imortant aspect. After the World War II, the „budget constraint“ is subjected to a process of furtive „softening“. In making “consumer choices“ today family is less than before restricted by the „hard budget constraint“ known from textbooks of micro economics. What is symptomatic that these pressures on softening of households budgets came from the market itself; as a consequence of the fact that „consumtion is so important to people that they are prepared to incure large consumer debts in order to sustain it“. The debt in 12 of the EU 15 ..“as a percentage of annual household disposal income.. stands over 90%“. /Liddle,R. Lerais,F.,2006, p.13/. In the Czech Republic the household idebtedness is relatively low –comparatively to the „West“ nevertheless the speedy of our „catching up“ in this „post modern aspect“ is leading to a disquietude /esp. for low income categories of households/ even for analysts from the Central Bank /see „Zpráva o finanční stabilitě“ 2006, ČNB/. A sovereign consumer with well ordered preferences and revealing these preferences by his choices based on the ´induction of consumption´ is not adequate in the era of hyper consumerism. The soveregnity of consumer became illusory: a manipulation of consumption in some market sectors is such important think that advertising costs /a price of manipulation/ represent substantional part of total costs. The sovereign consumer has been an actor of the industrial age; in affluent society the consumer is addicted to consumption. Sure, even now the consumer reveals his preferences at the market, but just this ´revealation´ discloses dis order in his preferences and shows that the consumer is a sovereign only in appearances. The micro economics can continue in stemming on the seeming sovereignity even analysing a behavior of drug´s addiction; nevertheless a more realistic attempt would reflect a value shift and weakening of the soveregnity of consumers. This way of thinking leads us to some doubts about the ´rationality gardiens´role of economics as a science in the era of consumerism – is spite of the fact that we use to use the name ´knowledge society´ for today civilization. 2. Occidental rationality :a critical frame of mind destroying the moral authority of family In order to reveal millestones of the western thinking „path dependency“, allow me, please, to present here a sketch from the history of economics and sociology. According to Max Weber it was just occidental rationality and protestant ethics that provided an explanation for the fascinating social and economic dynamism of the market system. But, only few decades after Weber /1942/ Joseph Schumpeter wrote about capitalism´s tendency do decay. Apart from a crisis of corporate governance /in today language/ or perplexities in the operationalization of property rights he found another, even more important intrinsic force of this decay, i.e. desintegration of the family. The main desintegration force for Schumpeter is just this Weber´s occidental rationality, individualistic economic calculation of costs in private family life. The spouses cannot omit the personal burden of family´s ties in general, and of parenthood in particular, from the equation. The willingness to accept child is in conflict with the omnipresent spirit of utilitarism and the temptations of more and more diversified and attractive pleasures that the market offers. Morever, children do not present economic assets any more. Rather there are investment whose repayment period is too long. Schumpeter was aware that this „balance sheet“ of costs and profits/ joys of children is surely incomplete and perhaps even principally wrong, but this awareness could not change his conclusion that „capitalism creates a critical frame of mind which, after having destroyed the moral authority of so many other institutions, in the end turns against its own“. This is, in short, a substance of Schumpeter´s argumentation. Another few decades after Schumpeter, Tibor Scitovsky came with his diagnosis of joyless economy and with an analysis of human desires „on the frontiers of economics“. At the same time Gary Becker provided a perfect economic analysis of the family in his „Treatise“, explaining what Scitovsky had described. In turn, Robert Esterlin pointed to a paradox that western families were richer but not happier on average. Joseph Schumpeter´s prophecy about the decay of the institution of family was presented as a description of American reality by Scitovsky and as a positive science by Becker, and even in the form of foolish rationality of economic man /Amartya Sen/. Ten years ago, professor of M.I.T. Lester C.Thurow, wrote in his „Future of Capitalism“: „Competitive individualism is growing at the expense of family´s solidarity. The „I“ consumption culture drives out the „We“ investment culture. ...Changes within capitalism are making the family and the market less and less compatible“ /Thurow, 1996, chapter „Economic viability of the family“ /pp.31 34/. Finally, Robert E.Lane /2000/ included family crisis into his list of „negative components“ of happiness in market democracies; sub chapter „The Triumph of the Market over the Family“ /p.113 ff:/. */ */ The word „Triumph“ appears in sub titles of books: a triumph of American materialism /James Twitchell, 1999/, a Triumph of capitalism in the West /de Soto, 2001/. But what triumph and at what price? The title of Twitchell´s book /“Lead us Into Temptation“/ is simply a blasphemy and an idolatry of consumption /“you are what you buy“!?/. Ulrich Beck sees our age of turbulence as the risk society; on the other hand the ideology of consumerism is diffusing an illusion of riskless society with permanent growth of material consumption. Nevertheless the roots of these ideologies are not new: obsession with money is nihil novi sub sole, as follows from this almost two thousand years old quotation: „People who want to get rich fall into temptation and a trap, and into many foolish and harmful desires that plunge men into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs“ /St.Paul, 1 Timothy 6, 9 10/. What is really new in our times is the expansion of this line of thinking into nearly all spheres of life, family life included. Table 1: Social change of the family in a historical retrospect Family in traditional society Family in industrial society Family in late modernity Rules: Oikos nomikos Equivalence- Solidarity Generalized equivalence WE Rationality ME Rationality+ altruism ME hyper- rationality House-household-family Household Firm Firm Family economics farm or cfaftsmen shop Family=externality production of children economic autarky hard budget constraint soft budget constraint occasional market economic dependency on market family indebtedness habits in consumption soveregnity of consumer consumer´s manipulation God governs the time time is money in production deficient time to consume market=externality market versus family market triumphans 3. The competition family market: Theory of the vertical desintegration of family Robert Lane´s „triumph of the market over the family“ is a journalist licence, but it has close parallel in institutional economics. Ronald Cose /well known for his „Nature of the Firm“, 1937/ has explained that a „frontier“ between an „organization“ and the „market“ results from a competition as well; returns to scale and transaction costs, tied with the specificity of assets, matter in the evaluation of these alternatives. Coase´s ingenious idea forms the basis of the modern theory of „vertical integration“ represented for example by O.E.Williamson. The winners in this competition on global markets are transnational corporations. Asymetry of information and the principal-agent problem explain the erosion of corporate governance, which results into a tendency to mega mergers. However I would like to point to a different aspect of the same logic. My own contribution in neoinstitutional economics refers to a theory of vertical the desintegration of family as a parallel to the „Nature of Firm“. A competition between family as economic agent /S.Zamagni/ and „the market“ has completely opposite consequences: while corporations tend to mergers or takeovers, the competition between „family“ and the „market“ – according to the same principle of Ronald Coase – makes a household economy smaller and smaller. Markets have been, step by step, „cutting slices“ of informal economic activities of the family from the begining of the industrial society. The household – an economic agent or unit – and the market compete and the market is winner and family a loser of this contest. Returns to scale in the textile, clothing and shoes industries eliminated „home made“ wear and shoes. Home made bread and pastries , food, beveridges of our mother and grandmothers belong to the lost world being replaced by ready made meals and semiproducts. Growing economic activities of women „out of the family“ led to a need, and, later, to the necessity of buying child caring services at the market, namely nurseries from the early age. The latest evolutionary period of eroded family has brought even a market „production of children“ /Becker/: global labour markets provide the western „economically triumphant „ civilization with labour force which is lacking , via migration from other parts of the globe. The vertical desintegration of family is especially „efficient“ for people with highly specific human capital assets. Considering the „opportunity costs“, children are too expensive, official „marriage contract“ too risky, hence childless and cohabitating couples are „more efficient“. The latest stage of the vertical desintegration of family is society of „singles“: family has become an „empty set“. This very triumph of the market over the family could mean the end of family. Table 2:Stages of vertical desintegration cutting slices from the family informal economy A: from the 19. century : accumulation of the capital, industrialization, urbanization - a/ textil industry b/ clothing c/ shoes d/ bred and other meals e/ milk and other beveridges B: the 20.century from the end of World War II a/ ready made meals: frozen, tins, ...cakes b/ services: laundering, dry cleaning, doing a room c/ legal or illegal imigration: labor force „imported“ from civilisations out of the West d/ care for children bought at the market e/ care for elderly people bought at the market /´a revange´ of children to parents for d// f/ contraception pills and/or induced abortions legally bought at the market or „organized“ by the state C: the 21.century a/ semen from men /sperm/ and/or eggs for assisted reproductive technologies /ARTs practices/ legaly bought at the unregulted /U.S.A./ or regulated /UK/ markets b/ illegal market for children c/ pressures for legalization of „euthanasia“ /a kind of ageing population´s „solution“?/ d/ prolongation of the professional career by „young eggs“ freezing and preserving for the future ARTs /“allocation of time“ between fertilization and bearing a child/ e/ pre implantation genetic diagnosis to „select out“ uwanted children for sex, disease risk /a kind od „destructive test procedures“ applied to the „production of children“?/ f/ pressures for scientific research of cells from human embrya for the future therapeutic purposes /a perverse „intergenerational solidarity“?/ D: 22.century „omnipotent economic man“ or „the end of history“? 4. A generalized calculation: „sovereign consumer“ seeking an optimal family size The concept of „economic man“ is well known, also as a subject of controversions, adorations from one side, or a strong criticism from other one. Nevertheless this principal actor of economic paradigm seems to be well defined and capable to solve well structured problems. For the task of my paper, for an economic analysis of the postmodern family, I decided to dedicate the principal role in a „generalized utility theory“ to an explicit couple of „economic man and woman“. The reason is not just to include a gendre into economics. */ */ Post modern consumer society succumbing into temptations is governed by the woman´ spirit – arguments for this proposition came from the socio biology, social psychology and even from the theology refering to the famous story about Adam and Eve from first pages of the Bible. But it is not a business of me, a process of creating common preferences of the husband and his wife is a ´black box´ for my institutional analysis. Making decisions in the „fertility theory“ or within an economic space of „production of children“ – as key problems of the family economics this is –without any doubt a domain of women. Sure: not only, but first of all. It is so even in the argumentation of the fundamental feminists and we men have to accept it. Market has an inner tendency to impose instrumental, utilitarian attitudes to relations among people even within the family: between wifes and husbands, grandparents and children...This is not a criticism of market in general from my side; what I would like to stress is that it becomes a problem when market relations expand far beyond the moral limits of market. Utilitarism has to have its unsourmountable limits, otherwise it leads to a desacralization of values: there are moral imperatives /within religion tradition since the Old Testament, there are Commandments Divine rules of coonduct/. Without these moral limits, self-interest is profondly destructive. This too is nihil novi sub sole. Young Karl Marx discovered it in his very emotionally writtten Economic-Philosophical Manuscripts. It was just this animal greed that led young Marx to argue against capitalism as an advocatus diaboli and become a false prophet of a new Paradise of Communisme. Our country and myself personally, we have our unfortunate historical experience with social experiments based on marxism. Nevertheless, after collapse of communism, contemporary promises of Paradise on Earth /“Paradise now!“/ are based in radical liberal economic thinking, rather than in the discredited philosophy of socialism and communism. I am not a philosopher, but it seems to me, that both radical liberalism and neo marxism have to have common philosophical /and likely also theological/ roots. These roots return us back in the history of Western thinking. Profession of economist leads me to a duty to contribute to an explanation of dangers „from the right“, from imperial economics. The „economic man“ and „economic woman“ in the „economics of family“ subjected the questions of fatherhood and motherhood to the rational calculation with parameters of the „efficiency of contraception“and a„price for abortion“. A lesser willingness to house and take care of parents and elderly relatives /or pay for it/ could lead to a similar „rationality“ in the controversial question interpreted as a „right to euthanasia“. The former communist Czechoslovakia, with its 15 millions inhabitants, had about 100.000 induced abortions a year before its fall. The Czechoslovak ratio of 1:1 approximately between born children and children killed in the wombs of their mothers was not any extreme: in the communist Romania and the republics of the former USSR the relative frequency of this induced abortions was even 3 4 times greater. The communist state, on the one hand, provided social provisions for children, payed the „maternal holiday“ to mothers, subsidised clothing, shoes and food for children; on the other hand, the same state permited, organized and payed abortions. This was conduct of a free man, who had taken his fate into his own hands in the marxist terminology. */ */ The „Pro Life Movement Czech Republic“ remebers 50 years from the legalization of abortions in our country: 3 190 589 children killed in the wombs of their mothers /see „Hnutí pro život ČR“ 3/2007/. This is a hard statistical datum, in spite of the fact that it was not registered by the „science“ but only by one of many NGO´s. According to Professor Helen M. Alvare from Washington /Alvare,H.M.2006/, in today USA in spite of the more restrictive abortion law than we have with us still there is about 1 million of induced abortions a year. 5.Demographic implosion: a price for the lost perspective of eternity in a joyless economy Nevertheless, in the completely different institutional setting based on different ideology we are facing similar evolution in the West. Professor Manfred Spieker discovered /1994/ the deepest reason for the crisis of the welfare state in a lost faith in the eternal life in western societies. /I add: the same reason can be a cause for the lost happiness in the family life and for the demographic implosion in our civilization/. Tibor Scitovsky argued that economic growth in the West after the Second World War had been based not only on the accumulation of capital, but also on the growing economic activity of women. The same was true for the East Europe and the ideology of equality of women was even more „successfull“ there. Socialist Czechoslovakia proudly displayed the highest rate of women employment in the world! „Desire for economic independence..., greater sexual freedom..., new, cheaper, safer and more convenient mothods of contraception“ were for Scitovsky /1984/ main „driving forces“ in the USA; all this we were able to match in Eastern Europe – seemingly in completely different political, social and economic system. „Declining fertiliity has been pretty universal throughout the EU...fertility rates have fallen by 45% since 1960s. In 1960 the EU 15 fertility rate was 2.69. By 1980 it had fallen to 1.82. In 2000 it was 1.53“ /Liddle,R. Lerais,F. 2006, p.14/. Ramón Febrero and Pedro S.Schwartz appreciating a „value added“ by Gary Becker argue that he endogenizing marriage and divorce decision, and included „production of children“ into economic analysis. From this moment „we assume children are normal goods“....“optimal family size can be expressed as the outcome of an utility maximization program where parents choose between children and all other goods. As in standard economic theory, we can explain the demand for babies in terms of the price of children relative to other goods and the size of the parents´ budget“. /Febrero,R. Schwartz,P.S., 1994, p.XXVIII/. We could discuss if this economic approach to family decisions has a form of the so called „self fulfiling hypothesis“ or not. If we accept this endogenization of the former „externality“ for economics, it has serious consequences. Children understood just as „normal goods“ or „products“ or „consumer durables“ „similar to cars or washing machines“ /Febrero Schwartz, o.c.,p.XXVII/ allow in this moment a definition of the marginal rate of substitution between them and „other products“. As soon as you have a „production of children“, a quality control of this „production“ becomes inevitable, also „normal“. As a consequence, you have to accept a selection of products with unwanted parameters /sex/ or inconsistent with technical norms...Inner cynism in this economic calculation couldn´t be fully apparent in 80s. when G.Becker published his pioneers works about family economics and perhaps almost hidden in 60s when he came with his fertility theory. Refering to my table 2 /C: at the beginning 21.century /see points ad a/ ad f// cultural consequences of this endogenization of economic calculations are striking, even shocking. Nevertheless the ´generalized equivalence´ and a deepening of the economic calculation in „family economics“ has not only these apparent cynical features; there are other „trade offs“ in maximizing ´a portfolio of consumer goods and children´, more hidden and almost invisible. S.Zamagni /2005 a// pointed a sociological fact that parents are more avare of the need to spend more time with their families and children „but they have less time to do it“. This is a fantastic paradox of the western civilization: in spite of the enormous growth of the productivity in the sphere of production, the men in the late modernity are working more hours a week, a month, a year than before. In the 7th RFG Family Report we find: „There has been a very considerable expansion in the number of working hours in the transition from the male sole earner...“ /to a ´dual earner´ family model note by me L.M./. „For instance, a man still worked for 48 hours per weak at the beginning of the sixties, whilst today on average men and women together spend more than 70 hours at work“. /o.c. p.15/. The same is finding from the sociological research in the USA: in the richest country people is working more hours a year than twenty years before. As a consequence, parents have less time for their children. So, in family economics, we have to define not only the MRS between child and other „normal products“ but also a MRS between time of parents spent with their children and a ´substitut´ for this defficient time in a form of gifts for children. And even more: just a money for children as a substitut for the time spent with children. The sociology of the family, research of crime and the study of addictions to drug confirm that just this kind of marginal rate of substitution between „time for children“ and „money and gifts for children“ is a way to the hell: material affluence together with emotional starvation of children leads – not inevitably but likely to a ´pursuit of false happiness´in a chemical paradise... An imperial economists is tempted to refuse „futile moralizing“ of this kind. Nevertheless even if we could accept this pure economic approach to family behavior, two serious problems remain unsolved: a/ „vitiosus circle“ of this logic leading to a „loss of subjective happiness“, b/ macro demographic consequences /demographic implosion/ resulting from this micro efficiency /i.e. discrepancy between private and social efficiencies; due to this inconsistency the common good is not feasible. I will shortly argue in both ways ad a/ G.Becker explains the existence of negative relation between fertility and per capita income: in the falling fertility the substitution effect dominates the income effect due to the rise in cost of rearing children in rich countries. So, nor an imperial economist could call children /in his cynical language/ as „inferior goods“, nevertheless children and richness /and affluence/ become less and less compatible. There is a chaine of micro economic decisions /„circulus vitiosus“ – a „vicious circle“ or a „feedback“/ with serious macro consequences as follows: Flow chart 1: Reinforcing feedback loop of market pressures and the family crisis a/ MICRO LEVEL choices
growth of family family choice income Eaterlin’s paradox stagnation of subjective production of happiness falling fertility children manipulating demand for advertising hedonic additional family leading us treadmill income into temptation b/ MACRO CONSEQUENCES of the pursuite of happiness in affluence
pursuit of happiness max GDP per capita lost happiness in demographic implosion market democracies Note: Scientific concept of the reinforcing feedback loop can be expressed in our context in a more poetical form as a ´vicious circle´ defined as „an unbroken sequence of reciprocal cause and effect /action and reaction/ that intensify each other“ /The Concise Oxford Dictionary/. ad b/ G.Becker´s analysis is perfect in explanation why family is in a crisis, and for what fertility is falling down in rich countries. If „economic men and women“ make decisions for marriage, divorce, conception/abortion of their child there are „rational sovereign consumers“, and they behave in an „optimal way“ from the point of their private interest even though that this calculation is „incomplete“ and perhaps even „principally wrong“ /Schumpeter/. Nevertheless their „rational choices“ have macro economic impacts on demographic situation of the country / labor force in productive age in relation to retired people first of all/. In its ´Green book´the European Comission /KOM, 2005, 94, Brussels, March 16, 2005/ has faced the population decline. By 2050 the predicted deficit of ´vanishing children, teenagers and young adults /0 14, 15 24, 25 39/ will exceed 50 million persons /i.e. the population is expected to decrease by this number/. For the new Member States bank analysts from KBC deal with a demographic uncertainty, ageing populations and smaller working age population. „Morever, migration within the EU 27 does not offer a solution, as all Member States have to battle with the same problem“ /see Deruder,B. Van Gompel,J. , April 2007/. As a consequence of millions and millions family private decisions made by these „economic agents“ in their „optimal way“ the common good of the EU suffers and endangers the future of the welfare state. This inner contradiction is aparent and striking even in a recent „consultation paper of EU advisers“: on the same page we read that „In 2003, the EU 25 fertility rate was an average of 1,48, far below the 2,1 figure estimated to be necessary to sustain the present level of population /disregarding migration/“ and only few phrases later that „effective contraception has enabled parents to make responsible choices over whether and when to have children! /Liddle,R. Lerais,F., 2006, p.15, underline by myself –L.M./. And a factual confession of ´ill ordered preferences´ of ´economic women´in the ´family economics´ is inherent in the proposition that follows: „there is some evidence that because of economic pressures, women are not having as many children as they would ideally prefer“ /o.c., p.c./. In fact, really, we euro american citizens, we are in the same boat. In spite of a different historical development in the USA and Europe /and in the West and East of Europe/, and, conseequently, different systems of accepted values, policies and social provisions, the main generational issues are very similar: „..in many countries it becomes apparent that children and younger generations appear as victims of adults and older generations under many social, economic and cultural aspects“ /quotation of one conclusion from the deep sociological analysis of Professor Pierpaolo Donati / see „Intergenerational Solidarity“, Malinvaud,E./ed./ 2002/. No matter that the purchasing power of consumers in the 12 new EU member countries is substantially lower the demografic implosion is almost omnipresent. The majority of former communist countries in the Central and East Europe shows even a worse total fertility rates than the rich EU 15. Total fertility rates /children born per woman at the start of 3 rd Millenium/ Central and East Europe compared to the EU 15 demonstrate this sombre state of things: 1,5 child a woman for the „West lung“ and 1,21 child a woman for the „East lung“ of Europe. Only Albania is an exception from this demographic implosion in Europe. /More details see in Mlčoch /2006//. Any argumentation about the lost sense for eternity in the EU society could be eventually put aside as inappropriate in economics. Nevertheless, even in the economics we know models with an infinite time horizon. Also Gary Becker is giving in his fertility analysis a touch of an species aeternitatis considering „with a heroic amount of additional imagination“ contracts between „parents and potential children“. In such – a hypotetical case „a potential child could commit to compensating his parents eventually if he is born“ /Becker Murphy, o.c., p.394/. Becker and Murphy continue: „This contract would be Pareto improving...if child would still prefer to be born“, and they concludes: „Since such contracts are impossible, some children may not get born even when both parents and children could be better off“. The economic man in the /new/ institutional economics is conceptualised as an „contractual man“. Contracts between parents and unborn potential children are impossible in principle; but they would be also „illegal“ because human embryos in the late modernity have admitted nor legal nor even moral status /as they had it before the World War II/, and it was the state who had authorized abortions. Before that, unborn children had their „barristers“ in God´s Law: induced abortion had been not allowed. In this connection I will risk telling my personal story, unusual in the scientific paper. Nevertheless I believe that my story has its value in my argumentation. I was born in a Moravian village in 1944 to the father 41 and the mother 38; my parents had 6 chidren already /from 10 to 18/. Two years later after me another sister came, hence we were eight. For my parents the decision to accept a conceived child was not a result of ´rational calculation´. My parents /fortunately/ knew nothing about the diminishing marginal utility of numbers of children. In a completely opposite way, my father was convinced that he was rich just by having eight children! Our parents had no doubts about a necessity to ´invest´ in our education without sophisticated calculations in terms of „human capital“ theory. They didn´t expect any compensation from us – they loved us unconditionally, and their love didn´subject to diminsihing reurns from our number. To conclude: the deontology in behavior of my parents resulted in Pareto optimal family size, we both parents and children had been better off; no contracts with us as potential children were needed to reach such optimum. And as to me, I „still prefer to be born“. 6. The State protection as a ´countervailing power´ to the market pressures? Having in mind market pressures and analyzing market impacts eroding the institution of family we cannot omit „heavy state involvement in the family...and surprising number of state interventions“ /Becker,G. Murphy,K.M.´s „The Family and the State“ /1988//. There is relatively long tradition of state intervention in provision of education and state subsidies to public elementary schools, also in our Central Europe region. Social security and other old age support and social provisions from the state to elderly people are also nothing new. Nevertheless a special ´family driven policies´ are closely tied with the „welfare state“ after World War II and before that with „totalitarian states“. In both –culturally and historically different cases based on very different ideologies a growing state involvement in the family had evolved in the connection with a growing economic activity of women „out of family“ at the market and as a consequence of the more and more complicated coexistence of the employment and care for children; later as a direct consequence of the falling fertility /parental leave, parental allowances/. Now, the EU countries provide a very colourful picture of different family driven policies with different impact of family and demographic behavior. A consultation paper from the Bureau of European Policy Advisers brings a lot of good examples and less succesful cases throughout the EU /see Liddle,R. Larais,F. /2006/. Seventh Family Report from the FRG /April 2006/ is concerned on a „sustainable family policy“ for the next future 15 years; to reach this difficult target the analysis of our neighbours is based on a more comprehensive comparative analysis of different European „infrastructures for families“. In our Czech milieu I refer to papers of Šalamounová, P. /2/2004/, Chaloupková J. /2/ 2005/ , Soukupová E. /August 2006/, and to a series of international conferences organized by „Národní centrum pro rodinu“ /National Centre for the family/ together with the Czech Parliament Senate. This „surprising state envolvement“ in the field of family creates several paradoxes: a/ The process of weakening of the legal institution of family described and analysed above is accompanied with a growing dependency of families on the state social provisions. The state responsible for the matrimonial law enforcement is less and less respected by citizens; the same citizens have growing claims and argue for more comprehensive parental and children rights. b/ This evolution leads to a criticism: system of social provisions is abused, too generous welfare state created new dependences on and even „addictions“ to the affluency. Nevertheles, our vertical family desintegration´ analysis and vicious circle´s feedback of the affluent society show that the „original sin“ came from market temptations and from the inner logic of the functionning of the market: it was the market with its „learning by doing“ that created a manipulated „consumer“ and „family agent“ with omnipresent spirit of equivalence and one sided economic calculation. c/ Let us accept a common responsilility of „market“ and the „state“ for the „education“ of families to irresponsibility and consumer´s addictions. Perhaps the first step to a recognition of shared responsilibilty is done by prominent ´imperial economists´ who were able and willing to write this final proposition from their analysis of the state involvement in the family: „It is remarkable how many state interventions in family decisions appear to contribute to the efficiency of family arrangements“. /Becker,G. Murphy,K.M., o.c./. d/ In spite of different cultural, religional, and ideological traditions „declining fertility has been pretty universal thgroughout the EU“ as „the impact of mass affluence“ /Liddle Lerais, 2006,pp.13 14/, or –as „the drive to get rich quick“ esp. in the postsocialist countries /Suchocka,H.2006,p.235/. A spirit of aggressive market and consumerism is overriding other factors, different family driven policies of states included. e/ Public expenditures on families as a percentage of GDP in OECD countries varies substantionally /from almost 4% in Denmark or Norway to about 0,5% in the USA, Japan and Spain/ /See Seventh Family Report from Germany /2006/, comparative statistics table on p.9/. It is not so easy to evaluate the efficiency of this public expenditures: in the „Scandiavian model“ and for example in France, the high level of public support for families is correlated with /relatively/ high fertility; in neighbour Austria it is not. f/ Family friendly framework organized and financed by the state exerts only limited influence esp. among female academics with higher educational level for who´s childlessnes increases; it is so even in Northern Europe /Liddle Lerais, p.10 12/. The same is so in Ireland: this „Celtic tigger“ adored by /imperial/ economists is almost an exemplary case, but in a negative connotation in my view. In Ireland fertility rate fell to 1.9 in 2000 during two decades /from 3,2 at the end of 80s./. The growth of GDP per capita was fascinating; but it has been payed by enourmous price in terms of the consumed human and social capital. Also in Ireland this evolution resulted in a worsening of the quality of population due to the fact that for educated women children are „too expensive“. Nor the involvement of the /very liberal in general/ Irish governement that pays relatively high public investments in families /about 2% of GDP/ is able to face this negative tendency. g/ There is a lot of attempts to define different „clusters“ within the EU as to family institutions, regulations and policies; they are based on the „social geography“, religious and historical traditions, state ideologies etc. It is quite natural that family legislations and policies remain in the hands of national states; what is surprising, that – in spite of the general trend to the harmonisation of legal framework within the EU in the sphere of family involvement the evolution is rather reverse: there is a trend to growing divergence among „clusters“. h/ This is only seemingly a paradox; in fact, this is a consequence of the fostering market pressures within the EU /and others from global markets/. These market pressures have different impacts on the family life in different countries, and as a response of „state protectionism“ we recognize different national family legislations and different family driven policies. So, this trend is fully consistent with the Professor E.J.Hobsbawm vision of „The Future of the State“ /Develoment and Change, 27, 1996/: social provisions persist as one of atributes of the post modern, ´post sovereign´ state. i/ The effort to study, understand and learn from the experiences of our neighbours in the EU /and outside/ in the solving such serious problems as conflicts „having job“ and „having children“ is needed; nevertheless this is an illusion to seek an „optimal model“ for family driven policies and legislation. In the context of above argumentation, the OECD „modelling“ of potential impacts of selected interventions /taken from different countries/ to the fertility in the EU has a small chance to resolve „ciruculus vitiosus“ of the below replacement fertility. In some contrast with my line of thinking and argumentation, the group of the EU policy advisers concludes refering to the „Atlas of European Values“ „voting for“ the future European convergence in the field of our interest: „Europeans do not have to look over ocean, but to the North to see their future“ /Liddle Lerais,o.c.,p.17/. This „Northern model“ means „dual earner households“ with newly defined roles taken on by the genders and high level of economic activity of women, and with a child raising allowance provided by the state – practically fully compensating the most recent parental income. This model –relatively succesful in Denmark or Finland till now is a way to an „etatization of the family“. Parental /maternal/ leave is no more a „private matter“ but a „training period“ in building future human and social capital; care for children is a „job“ and the state is employer /See Seventh Family Report, FRG 2006,p 5 13/. Gary Becker´s „production of children“ is „nationalized“ in this model. The question is, if just this solution we could include into mentionned Becker Murphy´s optimistic evaluation of the state interventions in family decisions /that/ „appear to contribute to the efficiency of family arrangements“. We, in the Czech Republic, we have experienced that a „nationalization“ is not a salvation in general. Only the post socialist restoration of capitalism has revealed a depth of the erosion of family ´past dependent´ on former arrangements. That rapid social and economic change of our times has its negative impact on population conduct, different from the past, but perhaps even more intensive. Induced abortions are a typical example. New abortion legislation is liberal /and former regulations of the old regime ceased/, but public awareness of the dangers is better than before. Hence, the rates of induced abortions are falling down in the Central and East Europe. On the other hand, some new methods of contraception are mini-abortions de facto , though they are not recorded as such. What is sure is that fertility declines / with an temporary exception of a time lag ´baby boom´of Husák´s children/ last year /2006/ recorded ratio child per woman for the Czech Republic was 1,33. The critical analysis of the culture of consumerism is at our disposal in the social doctrine of the church at least from the „Centesimus Annus“ /1991 see Compendium /2004//. A warning in this respect seems to be futile till now: the church has lost its influence on the formation of culture not only in the Czech Republic but in our civilization... The practical materialism is deeply piercing to the practice of politics, labor union and culture, the church itself is no exception. This is an „idolatry of consum“, and this spirit is perhaps the main obstacle to the sound family conduct... What we really owe to our children and grandchildren is a clear message that „whilst money might buy a little happiness, it does not buy very much“ /Andrew J.Oswald/. Wealth itself does not lead to happiness, wealth can even become an obstacle for our very family happiness. A dichotomy itself between market pressures and state protection is not enough in order to cure the family crisis. More see in my paper on links „economics“ „happiness“ /Mlčoch /2007//. A state protectionism of families had evolved as a quite natural ´response´ to eroding forces and pressures of the market. Nevertheless a part of these policies and social provisions is curing rather consequences than causes. Some of them have even counter productive impacts or bring only temporary effects; in the ´long run´perspective can lead just to the further weakening of the insitution of family. This is the case of „Northern model“ in wise saying advisers´ recommendations to the EU, as an example of ´family modernisation´. That´s truth, that fertility rate in Denmark, Netherland, Finland, Sweden,....is higher than otherwise /still below reproduction level/. Nevertheless at the same time, a weakening of the family here is even more apparent than in the rest of Europe: family is eroding fast, divorce rate is striking, marriage is no longer a good indicator of realtionship stability and lone parent families are almost omnipresent. These ´exemplary´ countries are typical by un married cohabitation, couples living together and apart together, by numbers of children born outside marriage. An article of Šalamounová /2004/ compares extra marriage fertility in Europe. The ratio of children born extra marriage /born to unmarried mother/ in Nothern Europe is higher than in the „rest of Europe“ and higher than the same ratio of children born to married mothers: in Denmark about 45%, Norway 50%, Sweden 55%, Estonia 56%, in Island even 65% children. Also in ´etatic´ and ´modernized family´ in France /with generous social provisions/ this process of de familism is fast, the ratio of children born extra marriage excceds 40% /for a comaparison: in the Czech Republic the ratio is less than 25%/. The Northern Europe is typical also by „singles“ one person households. This final stadium of family erosion is –without any doubts also a consequence of these policies based on a ´de familism´ /Zamagni, o.c./. Just completing my paper I had been confirmed in my research point by daily newspaper titles: even for media was an attractive new that we Czechs are living more and more as ´singles´: number of single households is almost twice time higher than 30 years before. So, a way of ´modernization´ of the Czech family and a ´catching up´ our Northern examples – from the perspective of the EU advisers is in the course! We are facing a ´puzzle´ in the existence /and functioning/ of two magic circles based on seemingly different forces but leading to silimar consequences resulting in the family and demographic crisis: family eroded by market pressures from one side, and becaming more and more dependent on the state from the other side. I argue that it is not any puzzle but just a consequence of the same logic defined by Zamagni as a ´dichotomic social order´. Till now, a cold and /intentionally/ rational calculation govern in the behavior of all three counter actors: „Chicago man“ at the market, „Chicago parents“ within the family and a „Chicago officer“ at the /abstract/ Ministery for Family understand family /and children/ in a ´common sens´ as a burden: for employers and tax payers, for mother and father, and at the end for public spending. We ought to overcome this dichotomy, this is the only way out from our crisis. To be sure, the problem is very complex by nature. To conclude this part I provide a parallel to a market ´vicious circle´, a ´vicious cercle´ of state social provisions that results in de familism. Flow chart 2: Reinforcing feedback loop of the addiction to the state help welfare state responsible for GDP growth and public finance
infrastructure for women growing burden for public employment spending growing economic activity growing addiction to the of women state help
falling fertility process of de familism dismantling families ´positive discrimination´ of divorced and unmarried in social provisions Note: Reinforcing feedback loop of the „welfare state“ in this ´vicious circle´ is meant not only in a sense of the EU ´state of Providence´, but also in more general sense, including ´liberal market democracies´ like the U.S.A.: since 50s /of the XX.century/ even here the government is politically responsible for GDP growth and employment, and for „social transfers“ 7. Looking for ways out: business, community and culture family friendly. As a starting point to some recommendations „what to do“ and how to cut both vitious circles I choose a qotation from the last essay of K.Arrow /2006/: „..the evidence seem to be that our perception of obligations /to children/ is failing a significant fraction of the children. Increasing role of the state may be called for in some cases, but we all know the problems there. The conflict shows up in every case of a child killed or gravely damaged by parents; there is a balancing of the state´s rather crude and limited capabilities against the value of even an underperforming family.../Arrow /2006/, p.53/. We in the post sociaalist countries, we have experienced a special way of limited capabilities of the state in the core problem of family crisis, i.e. in a state regulation of induced abortions. In the past, women had to apply ´for abortion´ and special ´abortion commissions´evaluated social, economic and personal conditions of families. ´Society´ had its idea of the ´optimal number of children´, and families were forced – by the authority of law to keep conceived but unwanted children. One team of Czech psychologists /famous professor Zdeněk Matějček among them/ undertook a unique longitudinal research of the menthal health of adults born of unwanted pregnancies /see Kubička and others /2002/ , David and others /2003//. The research cocluded that unwanted pregnancy increased the risk of poor menthal health in adulthood. Research findings were /sometimes/ misused to ´justify´induced abortions. Nevertheless, even if it was not so, what is sure, that law enforcement of the state is not enough if this enforcement is going ´against the tide´of prevailing social values. Professor Robert Lane from Yale /Lane 1991/ evaluating American experience with the market economy writes about „the costs of rationality“ or consequences of ´hyperrationalism´: post modern society based on an onesided utilitarism is paying a high ´price´in terms of self attribution and self esteem. Professor Stefano Zamagni /Bologne University/ finds the individualism of our civilization as the main obstacle to happiness, and to ´family happiness´first of all. I incline to an Italian economic school of the „economy of communion“ represented by professors Benedetto Gui, Luigino Bruni, Stefano Zamagni and few others. „Spirituality“ of this new school is based on the Focolare Movement, and practical social experiments ´economia di communione´inspired by Chiara Lubich are at the very beginning – founded some 10 15 years ago. Nevertheless they lead even to the old franciscan ideas of an economy as place for the mutual assistence, reciprocity, solidarity and help. Within this ideal there is also a room for a respect to human life and flourishing family happiness. Nevertheless, angaged enthusiasts from Focolare Movement count about 800 „communities“ of the ´economia de communione´ at five continents: this is just a marginal minority in today business. Today´s dichotomic social order /Zamagni/ is in the deep crisis. Nor ´ imperial economy´ nor ´ state solidarity´ provide a way out from this crisis. The hemisphere of liberty /Michael Novak/ urgently needs more virtues, and virtues are „produced“ within families. Our western world suffers by an overproduction of ´goods´ and ´ positional goods´ and by a shortage of ´relational goods´ and ´relations of unity ´. A new vision of family is closely tied to the extension of a „broader family“ to business. The economy of communion is a good example of the spiritual initiative, this is an attempt to return to the original union family household and firm enterprise. Market competition, market cooperation and market solidarity have to be reconcilled. Amitai Etzioni in his famous book „The Moral Dimension“ /Etzioni 1990/ states a perspective of a „new economics“. The neoclassical utilitarism is completed by a new moral dimension. A „general“ and „fundamental“ solution of this task is up of my potential esp. within this paper. Nevertheless this new perspective itself is providing a hope that ´vitiosus circle´in the ´family economic´can be cut. Etzioni´s solution is „two dimensional“: „utility“ is balanced with „deontology“. In ´family economics´especially there are ´decisions´and ´solutions´that have to be burdened by a ´prohibitive price´. K.Arrow seems to incline to this „way out“: „I now have come to believe there is a category of ´obligations´, which cannot easily be reduced to either utilities or rights“ /Arrow, o.c. p.52/. Professor Dasgupta /Cambridge/ / argues that there is an „implicit contract with previous generations of receiving the capital .../be in cultural or moral, manufactured or natural/ in return... to assume parenthood deep and abiding“ /Dasgupta /2006/, underlined by me L.M./. Our above analyses is dedicated to the explanation of the very speedy erosion of the old institution of family, from economic reasons. The decay is apparent esp. during a last half century; in the relation to a 40.000 lasting history of family this period of ´late modernity´represents something about 1 per mille on the time axis. Etzioni formulated at the very end of his „propositional inventory“ the most general conlusion from his book: „The more people accept the neoclassical paradigm as a guide for their behavior, the more their ability to sustain a market economy is undermined“ /Etzioni 1990, p.257/. This is no more true than in the ´family economics´. Family – a victim of market pressures is just an institutional precondition for survival of the market economy: a precondition sine qua non. I share a certain scepticism as to the efficacy of some state pro natalist policies with Marek Loužek /Loužek /2003/. State mesures that are trying to cure consequences of a social illness really „can result in a short term increase in fertility, it does not necessarily halt the long term trend of decreasing fertility /Loužek, o.c., p.121/. I also believe with him that „economics can significantly enrich demographic and sociologic understanding of population issues /Loužek, o.c., l.c./. Nevertheless my perspective is different as to the role of economics in this better understanding of population issues. Marek Loužek – as many others takes the evolution of population in the West as a ´objective social law´ discovered by Becker in his family economics. I am convinced that every economy is culturally conditioned and deeply rooted in formal and informal institutions. So, „the pills“ to cure the illnes of population implosion and a decay of families is hidden rather in the institutional economics. The economics, as a part of our culture and the part more and more influencial in our times is co responsible for this trend. I beleieve that we economists are able to offer something more than a fatalism as to population crisis within „market democracies“. To conclude, I am going to offer some hopeful examples and ways out from „vitious circles“ analysed above. This just an inventory also trace my future research intentions: A/ Family friendly employers : firm as a broader family „Alliance for the family“ /since 2003/ and „Local Alliances for family“ /since 2004/ in FRG include now about 1.200 enterprisses, more than half the chambers of industry and commerce, and personalities from the business community, trade unions, NGO´s and science. B/ Family friendly taxation reflecting the fact that prevailng family as an economic unit is „dual earner household“ /in some countries about 75% of all couple households/ and promoting this newly defined and percepted roles of genders /new forms of „cooperating complementary specific human assets“/ by the common income taxation of married couple. This kind of taxation suppoorts the institution of family – by means compatible with market and fiscal instruments and it is welcome also in families when mother /father/ is taking care for children, and even by couples with female „academics“ and women with higher educational level. The common income taxation of husband and his wife seems to be compatible also with the old concept of the catholic social teaching known as a „family wage“ /Quadragesimo anno written in 1931, during Great Depression /see Compendium /2004/, p.147/. This family friendly taxation has not only pure fiscal dimension but also a great symbolic value fostering complete family with both parents as a model still appreciated by the evolutionary psychology as the best one. In the Czech Republic, till recently, the tax system was not too family friendly. According to microcensus from 2001 the families with children had been „penalized“ due to the burden from the TVA. Now, the actual government tax reform based on the ideology of ´flat income taxation´ / and cancellation of the common income taxation of married couple as incompatible with the flat tax/ and on the transfer of the part of tax burden from direct taxes to indirect ones would mean a return to a family unfriendly economic policy of the Czech state. C/ Infrastructure for a´sustainable family´ The adjective ´sustainable´ means that family is not a ´dependent variable´ as till now but an independent variable. The ´infrastructure´of both formal and informal institutions, policies, measures, social values has to be subjected to the top goal: sustainability of the family. As a consequence, the economics has to be understood as a powerful but ´dependent´ device in the service of families. D/ Family friendly cities and communities The family crisis and population decline have also their ´space dimension´ in the ´social geography´. As a consequence of urbanization we have ´childless districts´, ´childless cities´ and even whole regions in deep population crisis. A ´communitarism´ in sociology gives a lot of inspirations for building bridges to the institutional economy and family driven local policies. In our Czech context I refer to the exceptional initiative from Olomouc /see „Obec pozorná k rodině“/. E/ Family friendly culture and family friendly economic theory I am an optimist: I believe that the future history of economic analysis will appreciate Gary Becker as an great economists at the end of one of few blind alleys in economic thinking. Becker with his utilitarist approach to family behavior is the man of the past. We have to seek men with new visions for the future, for non materialistic style of life. As to me, I believe that the deep argumentation of ´social economists´ such as Amitai Etzioni, and Stefano Zamagni is a sign post . The demographic implosion and erosion of family have more subjective and cultural than objective, economic causes: „Most EU citizens in middle life would count as affluent by the standards of their parents and grandparents“ /Liddle,R. Lerais,F. /2006/, p.13/. It is a profound change of our preferences what we need, not obssesion with the growth of GDP. Since growth cannot increase subjective happiness in rich countries, we still have a chance to find happiness as an by-product of our care for our neighbours /S.Zamagni/ and for our children and grandchildren. Even in the most atheistic post socialist country in Europe – there is a minority of families, which are ready to accept more babies and offer hope – in spite of the population decline. /See“Vision of the Development of the Czech Republic to 2015“, Potůček,M./ed./, Charles University 2001/. Abstract: The author discusses methodological problems of links between concepts of consumer, household and family in micro and macro economics; his institutional evolutionism is in a critical opposition to the utilitarist approch in Gary Becker´s family economics. Hyperrationalism and ´generalized equivalence´ in family choices including „production of children“ leads to a destruction of the moral authority of family. The paper applies the O.E.Williamson´s theory of vertical integration to a competition between family and the market: a desintegration of the family is the author´s finding in this respect. Market pressures and temptations for family choices are formulated in a form of reinforcing feedback loop explaining the falling fertility in rich market democracies. This primary ´vicious circle´ is even more completed by another, secondary reinforcing feedback loop of the family driven state policies based on a ´positive discrimination´ of dismantling families. 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