chapter 3 of logic of life: many could have been mrs. rojas, but there is only one mrs. rojas
This review is cross posted at the Marginal Revolution blog, which is having a book forum on Tim Harford’s The Logic of Life.
In chapter three, “Divorce is Underrated,” Tim Harford explores the economics of love, marriage, and divorce. It’s the kind of topic that makes people hate economists. Of all the subjects studied by economists, can’t love be spared the rational choice treatment? Of course not! If you spend a few moments thinking about how men and women scheme in the dating world, you’ll quickly see that a rational choice theory of relationships isn’t such a crazy idea after all.
Harford hits the major points you’d expect. People make substitutions, and they respond to supply and demand in dating and sex. One interesting section talks about the “optimal” divorce rate and how in the post-1970s era, we’re probably switching from a situation of many marriages with many divorces, to less frequent marriages and less frequent divorce. Harford quotes MR regular Justin Wolfers in saying that there is social learning and that we should appreciate that the optimal divorce rate is not zero, lest we believe in perfect marriages.
The average person probably hates this econo-talk because it seems to devalue love. Here’s where it helps to be a sociologist. Yes, from the bird’s eye view, there is a “love market” and you are just a love widget. But let’s take the symbolic interactionist perspective. Relationships are highly customizable. Once you bond with a person, you can make the relationship highly unique and hard to substitute. Even if two people are similar, they can form very different relationships with different histories. If you’ve done that, then you’ve created a fairly unique thing that’s hard to replace. By yourself you might be generic, but in a relationship you can be very special.
Translating back into econo-talk, people in loving relationships differentiate their “love product.” A person in a couple with a special history knows that there will never be another person who has lived the same life with them. That knowledge makes them stick it out. If you can do that in a way that improves both parties, then you won’t contribute to the optimal divorce rate.
orgtheory.net 
marriage is a great example of how plain old neo-classical price theory fails us and you need to consider institutions.
in particular, as fabio is saying, marriage is an embedded relationship in which the partners make investments with high asset specificity. this is only possible when there are high barriers to exit as otherwise there is a strong incentive to make investments with low asset specificity as a hedge against dissolution of the tie. in plain english, this means that when divorce is expensive, spouses will invest in each other (often through a breadwinner/homemaker division of labor) whereas when divorce is cheap spouses will invest in themselves (often as DINKs). you can see this most clearly in that cohabiting couples (who break up at the drop of a hat) exhibit almost no complementarity whatsoever. harford seems to get all this.
however what he seems to miss is that this creates problems for people who would prefer to credibly commit to a high investment marriage. since marriage is both culturally and legally cheaper than it used to be, credible commitment is impossible and post-1970s marriage takes on the structure of a prisoners dilemma with a positive feedback loop between low investment and high dissolution.
as Schelling taught us, in many cases fewer choices are better as they allow credible commitments.
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gabrielrossman
February 2, 2008 at 4:37 pm
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