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Welcome to the lse. Thank you all for coming. It's a real pleasure for me to present Professor Nancy Folber from the University of Massachusetts Amherst, where she also had received her PhD. Nancy is one of the leading voices of feminist economics, if not the leading one. Feminist economics, surely you know, is the study of economics while thinking about issues which are typically left outside the mainstream, such as care, work, occupational segregation, not only of women, but also of minorities, and paying particular attention to gender in both theoretical and empirical work. If you're not familiar with Professor Folber's work or with economics in general, a perfect starting point is her fantastic blog in the New York Times, which I really recommend reading. It's accessible to both economists and non economists. As we will see tonight, Nancy focuses in her work on the economics of care. Again, something that economists are not paying enough attention to. One of the unique traits of care is that people are intrinsically motivated to provide it. It is something, as we say, we care about care. A casual wisdom among economists is that if you're intrinsically motivated to do something that you shouldn't be paid or you shouldn't be paid much, or incentives that we provide to people that intrinsically care about something will just destroy their motivation to work and they wouldn't do it. That's a great excuse not to pay public service workers or to pay them very little. So this is obviously a hugely important issue. There is actually recent experimental work that challenges this view, which had followed from Professor Volber's contribution. Her most recent book, which I would also like to say a few words on greed, lust and gender, looks at norms of behavior in the workplace such as aggression and greed, which are considered favorable when exhibited by male and less favorable when exhibited by female, which has a lot of effect on damaging effect on both male and female. I would, I would think again, while mainstream economics is still far behind in considering culture and norms in places like the workplace, I have seen already within established economics theoretical and empirical work trying to assess the extent which this affects our workplace, such as issues such as how do male and female workers select into different jobs? And again, I truly think all this would not have been done without Nancy's influence. Professor Folber was president of the International association for Feminist Economics, editor of Feminist Economics, consulted to the United Nations Human Development Office to the American government, received numerous prizes and recognitions for this type of work. She's a fellow of the American Academy of Political and Social Science. And I'll cut it short. We're extremely happy to have you here tonight, presenting and speaking about the production of people by means of people. Let me just say that the lecture will be around 30, 40 minutes. We'll have then a 30 minutes Q&A session and not forget afterwards, a reception in The Gender Institute, 5th floor of Columbia House. So let me welcome again Professor Nancy Folberg. Please join me.
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Thank you so much for that lovely introduction. It's a great pleasure to be here. Working with, thinking about feminist economics for the last 25 years has been a very great adventure and it's one that I've enjoyed in the company of many of the people in this room. And I think I can safely say that we've made collectively an important contribution and also had a very good time. So I'm really looking forward to sharing some ideas about it with you today. This is a graphic that was produced by a London women's art collective sometime in the 1970s. I've never actually been able to track down the artist, but every single PowerPoint presentation I ever give is always inaugurated with this image because it just.
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For.
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Me represented a very powerful visual reminder of what I wanted to think about and study, which is the process of taking care of people, which is as much a part of the economic system as the factory that in this graphic is properly in the background. So the, the issue that I'm going to focus on today is an accounting system for thinking about the value of non market work, inter family transfers and net taxes. And I know it sounds terribly boring and economists in general have been rather dismissive of accountants. In fact, isn't there some joke about economists and accountants? Like somebody went in why did you go into economics? I didn't have enough personality to be an accountant, something like that. But I think actually the financial crisis, among other things, including questions of environmental sustainability, has really alerted us to the weaknesses of our current accounting system. And that phrase, off the books things being off the books is just a very telling phrase. And it's very applicable not just to financial instability, corporate corruption, global warming, but also to the work of caring for other people. So it's actually quite important to sort out the conceptual obstacles to developing a broader accounting system and also to fleshing it out empirically. And you know, I've done little bits and pieces of empirical work that I'll tell you a little bit about. But first I want to set the stage by really thinking about the big picture. So a little bit of background in intellectual history, which I think is interesting in and of itself, but also kind of sets the stage and also maybe helps explain the resistance to this intellectual project and why this resistance is sort of deeply embedded in our Anglo American tradition of political economy. Then I'm going to describe an equation. There's just one equation, and it's a very simple equation, and I'm going to stick with it and just look at the terms in, in this equation successively. So please treat this equation kindly and don't act fearful of it. This equation will taste good eventually once you chew it a little bit and really get the flavor of it. Okay. And then a little bit about data sources and examples of empirical research. But I think maybe I'll leave much of that discussion for the much of that for the informal discussion. Okay, so a little intellectual history. This is the COVID of a book that I wrote about the history of economic ideas that has this painting by William Blake that I'm very fond of. Why am I fond of it? Because Eve looks so brazen, so unrepentant. She actually kind of looks liberated. And the serpent, rather than being an evil serpent in the Garden of Eden, looks like a. Like it's behind her and ready to defend her and help her advance, whereas Adam is kind of in the background taking a nap. So, you know, in general economic theory, for a long time, it's actually reforming itself recently and I think changing in very positive directions. But for much of its history, political economy has treated the family as a kind of realm of altruism, in contrast to the market, which is the realm of self interest. So what that meant, for a long time the family itself was treated as kind of a black box in economic theory. That's less true today because we have kind of a new school of home economics looking at the household from a microeconomic perspective. But we still haven't really thought about the macroeconomic implications of family, worker family care. And that spills over to our treatment of the welfare state and government transfers. So one of the interesting things about national income accounting is not just that it leaves out unpaid family work and intra family transfers, but also that it treats government spending as a kind of unproductive form of consumption, rather than emphasizing the important components of investment in government spending and public programs. So, okay, that's just my illustration of the black box. It's from a funky economics textbook from the 1940s, and I like it because it looks like an old fashioned hydraulic plumbing system and you can see resources going into households and coming out, but not very much interesting going on inside. So going back to the very beginning of kind of liberal political theory, surely this is a Point that many of you are familiar with or have heard before. But John Locke, in articulating his kind of critique of Robert Filmer's Patriarcha and inaugurating a kind of liberal tradition of thinking about individual rights, articulated two very important principles. And these principles kind of shape the whole political and constitutional evolution of much of the world that we live in. So here are the two principles. Every man should have. Every man. Every man. Man should have control over the products of his own labor. And every man should enjoy self ownership or autonomy. What if men themselves are produced? Then these two principles come into conflict. Right. Because I produced you, I should have control over you. Oh, but you're a man, so you have self ownership or autonomy. So it's actually this, I think, really helps explain part of why there is so much resistance to bringing the family and family work and family care into the purview of economic theory is very disruptive of some basic principles of liberal individualism. And I think that's a point that resonates through the history of economic ideas in a way that I tried to illustrate in Greed, Lust and Gender. So some of you may have been wondering why I titled this talk the Production of People by Means of People. And it's actually, I confess it's kind of a little in joke. Economists in joke. But actually a lot of economists don't even get it. So it wouldn't be surprising if you didn't get it. But there's a long tradition in Marxian political economy of struggling with the labor theory of value, which is kind of descended from John Locke, that people should have, men should have control over the products of their labor. But one of the conundrums of the labor theory of value is the difficulty of actually mathematically specifying a theory of relative prices in which labor could be treated as a numerator, so that you could actually examine the relationship between market prices and the relative amounts of direct and indirect labor embodied in commodities. And Piero Schraffer wrote kind of a brilliant, devised a brilliant mathematical solution to this problem in 1960. And the article, the small essay that he wrote about that was entitled the Production of Commodities by Means of Commodities. And that's exactly what it was because he treated, in the tradition of political economy that I'm discussing, he treated labor as a non produced commodity. So everything out there has labor in it except for labor. Right. And that's why it works so well as a kind of numeraire for looking at the relative amounts of resources in very different commodities. So in some Ways the Marxian tradition exemplifies this kind of conceptual double standard that I'm critiquing. But there are some other ways in which the Marxian tradition actually tells us some things about it. And to illustrate that, I want to tell you a little story about workers and robots. Actually, I also include this little story in almost every presentation I give because I like it so much, because I really like robots, and I think robots are the happening thing and androids. So, you know, information technology. So just imagine this is actually kind of a momentous tale. Imagine corporations don't hire workers, but they just purchase robots, and the robots require new batteries every week. Okay, what would it cost you to buy a robot? Well, you'd have to pay at least the cost of producing the robot before you put it to work and started buying the batteries for it. But what if there were some people out there, you know, like weird techno geek people who just love making robots? They think robots are adorable and they find meaning, intrinsic satisfaction in producing robots. Well, that's really great because then you can get those robots for free. Or if not totally for free, you can get them for a very highly subsidized price. So then what's the cost of production? Well, you only have to pay for the batteries. Well, the batteries are pretty much analogous to a wage. And the wage covers the cost to the adult worker getting enough food, clothing, and shelter to reproduce his labor power on a daily basis and get to work. But not enough. And there's no reason why it should be enough to cover the cost of actually producing new workers. So there's something in the labor theory value that, despite its intellectual history, actually kind of helps us problematize. The issue.
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But.
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Oh, okay, one more thing about that. This has to do with thinking about intrinsic motivation. Economists are accustomed to thinking really about individual decision making from the point of view of individual motivation. And I think that's actually a useful tool. It's just that there are certain resources that we take advantage of where motivation is really not an issue. Like, if you think about Mother Nature or the environment, Mother Nature is not maximizing her utility. Mother Nature is not making rational decisions about how to supply us with this or that. Mother Nature is, in fact, not even intrinsically motivated. She's not motivated at all. It's just some kind of system. It exists out there, we make use of it, but we can't really analyze its behavior in microeconomic terms. And yet the physical reproduction of Mother Nature is really crucial to our economic system. So in some ways, there's a similarity between Mother Nature and what mothers do or what caregivers do. That is, even if they're not motivated by altruism or personal gain or regardless of what their motivations are, there's something about the consequences of what they do that really bears very directly on our economic system. So it's no accident that methods of valuing non market work are very similar to the methods that environmental economists, ecological economists use to value ecosystem services. And I think, you know, this is a point about not so much that optimization is wrong or that utility maximization is irrelevant, but that their application is limited because it's not always relevant to the production of some very important, very important subset of economic resources. But I want to add here that you can also approach this question from a very relatively neoclassical perspective. And there is also in neoclassical economic discourse some room for conceptualizing the problems that are at stake. And I would summarize this line of reasoning by this phrase, the paradox of human capitalism. So we know, and there's a tremendous amount of very important economic research showing that human capital is very valuable. Human capabilities developed through, through education and experience plays a crucial role in economic development, growth, innovation, and it wins a very high rate of return in a competitive capitalist economy. So that's one of the reasons educators get some public resources to try and develop the human capital of the country. But on the other hand, a lot of the effort that's devoted to the production and maintenance of human capital, especially before it gets to school, is very poorly rewarded by the market. And so that creates a kind of coordination problem. And you could conceptualize it, you could treat it in neoclassical economic terms as an externality like you treat environmental resources, something that's external to the market but nonetheless has consequences for it. You could also treated as kind of an incomplete contracting problem. Gary Becker actually alludes to this. You know, he says, you know, the problem, the problem with the world today is children don't get to choose their parents. True. Actually, it's, you know, it is a pretty serious problem. And his fellow Chicago economist James Heckman has written quite a lot about the importance of early childhood education on precisely those grounds. And Heckman, who's actually had a very positive effect on political discourse in the US Uses this terminology, says this is a market failure. Children can't choose their parents. This is a market failure. So there has to be some intervention. So I'm actually kind of ecumenical about this issue, happy to approach it from a Marxian or a neoclassical perspective, but as you've already figured out, I have a little bit more affinity with the classical political economy tradition. So here's the conventional. Okay, now the accounting starts. Take a deep breath. It's really actually quite lovely. And I have some good pictures and nice colors. So here's the conventional circular flow. This is kind of introductory macroeconomics. There are households, there are businesses, there's government. Income goes one way, expenditures go another. And there's this one little arrow called transfers from the government to households that are not actually are just kind of redistributing resources and not really creating new resources. And so when you look at national income accounting or macroeconomics, income is equal to consumption, investment and government spending. And on we go. We can spend years studying and conceptualizing this. But here's a revised picture, and this is the picture that I think is a much more accurate picture. So there's still households and businesses in government, right? But they're in an ocean, an ocean of water and air and natural resources. And they're taking things, unpriced things out of that environment, and they're dumping unpriced shit into that environment. And we don't know exactly what the directionality or level of these flows are, but we have good reason to be concerned about the level of negative externalities being imposed on the environment and the resource depletion that is taking place outside of a market, kind of outside of a market logic or market economy. And then we also see within households inside that what was previously treated as a black box. There are a lot of transfers, not just transfers from the government to households, but there are transfers between men and women, there are transfers between parents and children, there are transfers back from children to parents. And those are all related to those government transfers in a significant way. They're not really. They're not market transactions. And I have intentionally drawn those red arrows. The market arrows in this picture as relatively small. And quantitatively compared to these other transfers, actually, they are relatively small. So the market is a very important part of our economic system, but it doesn't really dominate in terms of resource flows. So one of the instruments that we use now to look at non market work is time use data. Time use surveys. Time use surveys are based on asking a representative sample of the population to recall what they did the previous day. So when did you wake up? What did you do? How much time did you spend time traveling to work, did you spend time preparing meals, did you spend time caring for children, so forth and so on. And you can construct pretty good measures. There's now roughly 100 times as much time use data today as there was 10 years ago. Rapid proliferation. Very, very good data, not flawless. I have some serious quarrels with some of it. But in general it's a very rich resource for looking at unpaid work. And I just wanted to share with you this is a particularly compelling way of thinking about time use data. And what it's showing you is the percent of people who are engaging in a certain activity at a particular time of day. So blue is sleepy time. So 4am Almost 100% of the population is asleep. And then everybody all over the world gradually wakes up, right? And they go to work. And that red section of the graph shows people going to work and the average number of people who are engaging at work at that time of day. But they also do household work, which is that green area. And as you can see, the green area is roughly comparable in magnitude to that red area. And this is consistent with time use data from many, many different countries. The relative similarity in terms of total hours between market work and non market work.
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And.
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Then actually this is data from France, a country where people take a lot of time to eat meals. And you can see the little window into the quality of French life. That white area, around lunchtime a lot of people are eating something very salade, you know, something really special. And then some people continue to snack recklessly throughout the afternoon and then at dinner they're eating more. So it's called a tempogram. And it's just a nice kind of way of thinking about the metabolism of time and what we can do with it and why it's important. So that's why I wanted to share it with you. So in my experience there's often a fair amount of resistance to measuring or valuing time devoted to non market work. And I get a lot of objections. So I like to inoculate against the objections beforehand, very briefly. So it's not because I think non market work is wonderful or that anybody should necessarily feel like they should do more of it. It's not because I am succumbing to commodity fetishism and I think we should have think of everything in money terms. That's not it either. It's not an act of economic imperialism. I am not trying to intrude on sociology or anthropology. In a way it's just an accounting problem. It's an accounting problem. We want to understand the way in which we produce and distribute resources and non market work. Inter family transfers and government transfers are very large relative to market income. So we should be thinking about them in a more systematic way. So here comes the equation, okay, so Y is almost always income and Y is on the left hand side of that equation. And the first term is the money that you earn from the market. So it's the wage rate, your individual I so wi is your wage rate. Or we could sum that over a group of individuals times the number of hours that you work in the market in. Okay, so you're earning £5 an hour, you're working 10 hours a day. You multiply that, that's your market income for the day. Okay. That's actually the figure that most economists focus on. We could add in government transfers or add in income from capital, but we're going to just leave them out for the time being because it's kind of an unnecessary complication. This is just a simple model. Economists actually really like simple models with straightforward assumptions. So we're just going to keep it as simple as possible. But now what we're going to do is we're going to add in three terms and then we're going to talk about each of those three terms in sequence. So the first term is the implicit wage for household work. And right now I don't really care how you value it. There's a lot of different ways, a lot of interesting controversy over how you should value it, how you should determine whi very, very interesting question. But let's set that aside for now and let's just say we're going to measure it by the same way that we measure market income, the number of hours times the implicit wage rate. So if you wanted to, you could think of it as what it would cost you to hire somebody at prevailing market wages to do the unpaid work that you're doing. Okay, so that's using data from the time you survey or as in the tempogram, and it's adding that in to your measure of income. Now you're going to look, this is again inside the black box. Think about this income in individual terms. So you as a parent are probably transferring some of that money income to your children or you might be getting some transfer from your parents. And these inter family transfers are invisible to, are largely invisible to our national income accounting system, but it's actually quite relevant to how much money you have to spend on yourself, whether you're supporting a bunch of dependents or, or whether you are yourself a dependent being supported by others. Right. And then we're going to add in transfers from government gi there, but we're going to define those transfers in a little bit different way than they are defined in a conventional model. Because we're going to insist on looking at this model over the life cycle, not at just one point in time. So if you think about it, in this equation, what are the differences for a child, for a working age adult and for a retired person? Okay, well, in the society we live in, children don't normally work for a wage and they don't typically do a lot of housework, although they may, as they become teenagers, they might start doing a little bit. But mostly what children are getting is some FI from their parents or from other family members. And they might also be getting some GI because they might be going to school or getting public assistance in some form or another. Right? And children themselves are not paying taxes. So that gi, by the way, is a net term. It's the difference between benefits received and taxes paid. Okay? So what happens when you're a working age adult is you get a job. So there your WIMI grows, your market income grows and you do some non market work and you may live with somebody who does some non market work and you may live with somebody who transfers money to you or somebody that performs unpaid labor on your behalf. So that FI inter family transfer is going to include transfers of direct services of household work as well as cash income. And if you're a working age adult, you're probably paying more in taxes that you're getting in benefits. So that G term might be negative. But if you're an elderly person, you wouldn't have much market income. You might or might not enjoy some household services from another family member and you're likely to get a fairly large amount of GI in the form of public pension or private pension payment and also provision of services like healthcare or something like that. So it's a very, very simple model. And you think, look at that. God, that's so obvious. That's really not a big deal to add those in. How could anybody possibly disagree with that? Yeah, how could you possibly disagree with that? Well, let's just look at some policy issues that are really confounded by the failure to look at those other terms. So now what I want to do is convince you that this is actually fairly momentous redefinition of income in terms of the way you think about public policy. Almost every form of public assistance that we provide in the UK and the US is targeted or affected by the level of family income. And family income is typically defined largely in terms of earnings, the earnings that are available. Okay? So just imagine two families that are otherwise identical, both families, two adults and two children. Both families have an income of $30,000 a year, or £30,000 doesn't matter. So we treat those families exactly the same in most public policy programs. Okay, I'm simplifying a little bit. There's some complicated tax and transfer issues that might be a little bit different, but in general, I'm pretty willing to stand by that claim that they're treated as pretty similar. But imagine that in one of those families, both adults are working full time and they're each earning $15,000. And in the other family, one adult is specializing in market work and one adult is specializing in non market work. Which family do you think has the higher living standard? Well, the family that has a stay at home homemaker doesn't have to pay for childcare, probably produces more of its own meals, has fewer expenses in terms of commuting to work or work related expenses. So that red term up there is almost certainly greater for a family with a stay at home homemaker. Even if, as in this numerical example, the dual earner family is actually working more hours overall to try to spend time with their children and take care of their house in addition to doing market income, it's very unlikely that they're able to compensate fully for the fact that they're both working full time in wage employment to achieve the same standard of living. So when we target families based on their market income, we're not really measuring their standard of living very effectively. Well, why does that matter? Well, I think it helps explain a lot of the resistance and resentment that you see among working class families to income targeted or means tested benefits. And it fits very naturally into the debate over providing universal benefits versus means tested benefits. Because it suggests that one of the bad things about means tested benefits is that they're unfair because they're not really measuring accurately the standard of living of the family's that are involved. And there are other reasons to be critical of means tested benefits. They impose a pretty high marginal tax rate on market income. But I think this point really speaks to a lot of the political distributional conflict that we see in the middle between the middle and the bottom of the income distribution. Not that it's easy to solve that or make that go away by simply adopting a new accounting system. But just to point out that we're not really measuring living standards as accurately as we claim to be. Okay, here's another issue. Trends in income inequality. A lot of evidence that inequality in both the US and the UK has increased over time. And some people have done a little exercise to try and determine, well, what's the impact of women's entrance into wage employment over the last 40 years on income inequality? Has debt made income inequality better or has it made it worse? It turns out that this is actually kind of a complicated question because it depends on what women earn relative to men and it also depends on which women marry which men. And so there's kind of a debate about whether you know, what the effect is. And of course it fits into a kind of discourse about feminism. You know, oh, feminism is, is a kind of, has benefited upper class women and it's really, you know, had some very negative distributional effects. I'm not really interested in that debate. Well, I'm interested in it actually. I think it is really interesting and important. But the debate itself is very misleading because in all of these statistical measures, the contribution that women make, married women make to household income is basically treated as zero if they're not working for a wage. So the whole statistical analysis and disaggregation is looking at adding in women's market income and not thinking about the work that a stay at home homemaker might be doing. Well, that's kind of crazy because that term, the value of household work wi h I, that's a lot more equally distributed than market income is. Of course it depends partly on how you measure it. But in general there's less variation in the value of non market work than there is in the value of market work. So the difference in the productivity of a college educated mother and a non college educated mother might be significant, but she's not 10 times as productive, but she probably earns about 10 times as much on the market. So I mean, in a way, I mean think. So what this means is that if you add in some kind of valuation.
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Term.
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For non market work to household income, that has an equalizing effect because you're adding in kind of roughly the same amount to a lot of family income. And so actually a lot of people shake their finger at me about this. Oh, if you value non market work, you're going to make things look more equal than they are. Well, well, why should we care about that? What we want is an accurate picture of trends in living standards over time. And the interesting thing about this exercise is that yes, valuing non market work makes standards of living look more egalitarian today than just market income alone, but it makes the trends look a lot worse. Right, because back in 1950 when almost all households had a stay at home homemaker, you're equalizing the distribution of income, because you're taking every man who has different wage income and you're adding to that man's income the value of some household work that's approximately the same. So if you perform this exercise, and I actually have struggled with some empirical estimates, although not, you know, not it's harder than you. It's harder than it should be to do this. But I think there's pretty strong a priori reasons to see that, to believe that it really has a very disequalizing effect. So that really alters our perception of a macroeconomic trend that's gotten a lot of attention. Okay, policy relevant example number three. Look at the way the United nations tries to assess the position of women in countries and arrive at cross sectional measures of women's empowerment. I mean, what they tend to use are measures of kind of participation in the market economy or in the public economy, like women's relative earnings, their participation in professional managerial occupations, their representation in government. And you see with capitalist development in general, an increase very uneven in some ways, not as predictable as you might think, but kind of a general pattern over time of women's empowerment. Well, what's left out of this picture? F. F is left out of the picture that in modern capitalist societies you see many more women raising children on their own and taking responsibilities, financial as well as temporal responsibility for the care of dependents on their own. So if you look inside the family and you ask how much of that income are they spending on dependents? It's a very large number and it's very relevant to assessing the relative well being of men and women simply because women in general devote a larger share of their market income and their non market work to the care of children and the elderly. So you really need to look at those intra family transfers of income and time to get an accurate assessment. Okay, one last example that is looking at G. And here is where I'm going to show you that thinking about government transfers over the life cycle makes a really big difference in most measures of what you spend in taxes and what you spend and what you get in benefits are done in the cross section. Even in the cross section, it's pretty hard to figure out like, okay, you may know what you paid in taxes this year. Probably you don't know exactly, but you'd probably sort of know, right? But you don't really know what you've gotten in benefits, right? Because a lot of the benefits you get are indirect, like social insurance. You may or may not have utilized the national health Services. This Year, I don't know, roads. How do you figure out what you're getting from your taxes in terms of public service? Actually pretty hard to figure out in the cross section, which is, I think, one of the reasons that people get very cranky about paying taxes. It's not really clear to them what they get for it. But over the life cycle, that calculation becomes way, way, way more difficult. And the way you think about it, over the life cycle is really momentous. So in the US we have a group called the Tax foundation that publicizes something called Tax Freedom Day. Do you have Tax Freedom Day in the uk? Has anybody ever heard the term Tax Freedom Day? Okay, well, Tax Freedom Day is. Imagine that starting January 1st, you sent all of your earnings to the government to pay off what the government requires you to pay as a slave of a runaway government that's infringing on your personal rights. So how long do you have to keep handing over everything that you earn, which should be yours by right? Remember John Locke to the government? Okay, what day in the year will you be free, liberated from this expropriation of the products of your labor? Well, in the US the aggregate tax rate this is looking at federal, state and local taxes is, is about 30% of market income. So you can do this math 30% of the way through the year, Tax Freedom Day comes. So it kind of comes in early April about when income taxes are due. So it gets a lot of publicity. Tax Freedom Day came later this year. Yet another sign of runaway government spending. Okay, think about this instead as tax. Think about a different concept, tax payback year. Tax payback year is, let's just imagine that you calculate everything that was spent on you from age 0 until you completed your education. And that when you start paying taxes, what you're doing is you're paying down the debt that you have accumulated from the transfers made to you by government. How long to do you have to keep on paying taxes to pay your fellow citizens back for what has been spent on you? And of course, economists among you will immediately recognize that a lot depends on the interest rate that you calculate for this loan. But let's say you take a pretty reasonable real interest rate of 3% and make this calculation. And I can refer you to some of the technical things, foundations of the assumption. But in general, it takes about 17 years for a college educated adult earning average wages, paying average taxes in the US to pay back what has been spent on them. But that's a very different concept of a tax. Right? It's a repayment of an obligation over which people had exercised no individual choice. It's not consistent with that liberal individualist idea of human agency and optimization because again, Gary Becker, you didn't choose your parents and you also didn't choose your government. Right. So I think that actually has pretty big implications for the discourse about public spending and government spending. Okay, well there's some more slides in here, I think surely don't you think for policy relevant examples is enough. Maybe we should. Let's just take a breather there. And if you want to come back to thinking about Social Security is another one. Basically the point there is if you cut public spending on the elderly, probably private spending on the elderly will go up. So that is going to complicate your calculations in an important way. And a related theme is that which I mentioned at the beginning is that you want to think about investment as well as consumption. Okay. And I think I've already mentioned some examples of empirical methods. A lot of them rest on time use and valuation of non market work, but they also are related to different kinds of government budgets and reconceptualizing, redesigning the way that we think about public spending and being more attentive to intra family transfers. So it sounds very, you know, accounting can sound rather dull, but it's really at the heart of what our economic system relies on. And I hope I've persuaded you to take to look at it in a more creative light. Thank you.
- [44:23]
A
Thank you. This has been really illuminating and again, the power of one equation is amazing. So we're open for questions now. There should be a microphone around, but I think it's pretty small auditorium so we can try and even speak without it. So any questions? Can I start perhaps by, you know, perhaps the mainstream of economics and not all of economics is mentioning, I think intra family transfers, but economists would take into consideration that investment in children, for example, would pay off as they would pay, you know, they would get higher wages in the future. Okay. So this is something that our models would take into consideration. And as you said, governments do take into consideration investment in early childhood. Perhaps not for the right reasons, but it is taken into consideration. And we are provided with child benefits, free MenuSeries in the UK for from the age of 3 or 4, free schools, schools that essentially we don't pay for. So perhaps it's not for the right reasons, but it is something that does happen in practice.
- [45:47]
B
No, absolutely.
- [45:49]
A
Semantic importance.
- [45:49]
B
Yeah, I hear what you're saying and I don't think it's necessarily for the wrong reasons, but it's often portrayed as we are doing this for social reasons or for moral reasons. And I think it's not conceptualized so much as part of the economic system, kind of the circular flow of the economy per se. And I've actually been very heartened by a lot more attention among neoclassical economists to the family and to individual resource allocation in the family. But I think it's often couched in terms of a theory of individual optimization that is kind of based on assumptions of perfect knowledge and perfect foresight that are just not really realistic over the lifetime of an individual. So I guess I would say in my view, transfers to children are not really governed by the maximization of a dynastic utility function where you're trying to weigh the happiness of your great, great, great, great, great grandchildren against your consumption decisions today. I think there's something particularly implausible and improbable about the notion of a dynastic utility. It's hard enough to optimize like what you're going to eat for lunch. And I think optimization is relevant, but I don't think it need. You know, I think it's just not plausible to me that you can describe individual decisions to invest in children as a, a form of either utility or maximization or otherwise.
- [47:27]
A
Wendy, thank you.
- [47:32]
D
I think my question is probably going to reveal why I was such a lousy economist. Because every time I look at an equation I see the value of it, but then I immediately want to complicate it. And one of the things that struck me is you're talking a lot about parents and children, which is really interesting. And a lot of neoclassical and new home economics people tend to see the family as an area of altruism and the market as an area of selfishness.
- [47:54]
B
But actually when you look at your.
- [47:56]
D
Family, they also, when they get into the family, they treat parents and children very differently from partners.
- [48:04]
B
So when you look at parents and.
- [48:05]
D
Children, they have perfect foresight. But if you take a lifecycle model to interactions between spouses, your wage depends on how much you've worked before. So original allocations of market and homework have implications over the life cycle which then affect bargaining power. And you're taking the individual transfers, the fi is given, which actually are a power relation and a much more sort of.
- [48:31]
B
Okay, just. It's not. Just don't think of this as a causal. It's not a causal. It's just an accounting model. No, I realize that if you specialize, if you're a housewife and you specialize in non market work and you spend 15 years out of the labor market raising two children and your husband divorces you, that changes your fi.
- [48:54]
D
Absolutely.
- [48:55]
B
Okay, so there are a lot of implications. Marital decision making and marital stability are going to affect your individual fi.
- [49:02]
D
Absolutely. And I kept reminding myself that this was an accounting equipment. But as soon as you take it to the policy realm, it's more than an accounting equation. Because when you're talking about how you should reward people who have two incomes relative to one, and a lot of the issues attached to it have a lot more complicated stories underneath many of the areas.
- [49:21]
B
Yeah, absolutely. Because there are a lot of causal linkages that you absolutely care about. So there's no prescription in here for how you. It's just a point that, that it's really a point about transparency. Whatever you think are investments, however you think public assistance should be targeted, whatever you think is the appropriate level of government spending, surely greater transparency about the overall effects of living standards would be a good thing. Or maybe not. I mean, that's kind of a modernist rationalist, modernist economist argument for trans. But basically, basically this is an argument for a different. For more transparency.
- [50:02]
D
Yeah. And that point's very well taken, Very clear.
- [50:06]
B
Yeah.
- [50:07]
A
Question here.
- [50:10]
B
Do you hear me? Yes, I can hear you. Yes, thank you very much.
- [50:16]
E
I really enjoyed this. I think I have two quite quick questions. One is it gets down to a problem accounting. How would you calculate the wage for housework and would this effectively then change? Because if you link it to issues of productivity, of course that will, you know, change class terms. That would be one question. And the second would be how would this be placed in the context of all the things that families have discussed like the wages for household campaign and also the problems that were related to that in terms of the threats of locking women into the home Again. Yes, yes, thanks.
- [51:02]
B
Yeah, those are really good questions. There have been, there is now actually a pretty substantial literature trying to integrate the value of unpaid work into national income accounts. The Eurostat has supported those efforts. OECD has supported those efforts. U.S. bureau of Economic Analysis has constructed satellite accounts for the US of unpaid household work. And in general, the preferred methodology for national income accounting is a quality adjusted replacement cost. So what would it cost to hire somebody to do work of comparable quality to the work that you're performing? And the best you can do with that is a very crude approximation. But the more sophisticated analyses take look at different activities. Like you might look at household management, cooking, childcare, and you would apply to those a different wage rate to every activity. So you have a vector of wage rates and a vector of activities. So you can arrive at a pretty precise measure of the quality adjusted replacement cost and treat that as a plausible lower bound estimate of the value. It's probably a lower bound, and I think you need to emphasize that. But this is happening now. This is, you know, this is basically a process that is well underway in many countries around the world. The development of this satellite accounting system for other purposes, let's say not national income accounting, but for thinking about your own lifetime decisions, the value that you might place on that labor might be very different. You might want to think about the opportunity cost over your lifetime of specializing in that work. And that opportunity cost could be much higher than a replacement cost estimate. And so you might use a different methodology depending on the question that you are asking. And whatever question you ask about the valuation, the question of who should pay for it is really kind of a separate issue, and it's not one that the model really gets at. So the traditional Marxist wages for housework argument was that employers should pay it because employers are getting the little robot, the cute little biological robots to hire, so they should be paying the cost. But I think that there is a, a much broader case to be made for seeing those benefits, seeing those costs of raising children in particular as kind of social costs that represent a kind of intergenerational contract. So the older generation is helping support the younger generation and educate them in return for a claim on the earnings of adult taxpayers that will help fund the health care and pensions of the older generation. That's the kind of language in which a lot of discussions of welfare state and public spending are couched. And if you think about it, I mean, this is really a really important reason why children are not just consumption goods. So the standard neoclassical treatment of children is that they're consumption goods. Like some people have kids, some people buy sports cars, some people have kids, some people have golden retrievers. I don't have children myself and I have pets. I love pets. So to say that children are pets, you know, okay, there are similarities between children and pets. I get there are similarities, but. But this actually came up in discussions of the Affordable Care act in the U.S. greg Mankiw, who's a famous economist who teaches at Harvard, said, why is the Affordable Care act providing health care for pregnant women and mothers? This is an individual choice. If people decide to have children, it must be because they get utility from it. They get utility from it, they should pay for it.
- [55:10]
F
Right.
- [55:11]
B
And. But as the equation shows, you as A citizen of a country actually have through government a claim on the future earnings of everybody else's children. They are going to grow up and be taxed to help support you in your old age. So there is already a transfer. Those costs already are socialized to some extent. That is what the welfare state does. The problem as the welfare state doesn't do it very well and it doesn't do it in a very transparent way. And it's difficult to have a meaningful debate, especially with people that you disagree with politically. It's hard because you don't know you don't have an equation. Not that the equation solves the problem, but it could help. Yes, yes. Sorry.
- [56:02]
A
Mansi, Soda.
- [56:03]
B
Oh, sorry.
- [56:03]
A
Over here.
- [56:09]
G
Okay, so I'm interested in this from a development perspective. And you mentioned that this equation minus the fi, if I remember correctly, was being used for the unhdr. And I can see it as an interesting unit of measurement, possibly kind of in juxtaposition to a gdp. I don't know if it can be used like that. So that's my first question. And then the second is, has this FI been used at any point in any developing countries? And how has it worked? How do you measure it?
- [56:39]
B
Yeah, that's a great question. Not fi, but I think in this. I actually wrote an article about a gender empowerment measure that you might use to supplement the traditional measure. And the measure that I proposed was asking how the cost of care, caring for dependence, was divided between men and women. So how could you calculate that? Well, you could make the very generous assumption that in married couple households the costs of caring for children are equally shared, which is a very generous assumption. There's a lot of research that suggests that women work much longer hours in order to care for children after contributing to family incomes. But you could make that assumption and then you could look at the number of children living in households maintained by women alone and you could take into account the child support payments that some, a very small number of them get from non custodial fathers.
- [57:38]
A
Right.
- [57:39]
B
And you could use those numbers to calculate what percentage of the private costs of raising children or born by women or men. I think that would be a really interesting exercise and it's not a far fetched empirical task. You can also do that for the elderly, by the way, which is increasingly, increasingly relevant. And one of the gendered dimensions of that is that many men marry women who are younger than they and who have a longer life expectancy. So a lot of men in their older years enjoy a lot of care services from their wives, but their wives outlive them and become, you know, are the recipients of much lower intra family care transfers as a result of that difference in longevity. So that introduces a kind of gender wedge in the old aged care dimension.
- [58:37]
F
I had a question which I was trying to, to transfer this whole exercise to a low income country. Now the tax benefit system is very different. Obviously there's no benefits of the kind you're talking about. But one of the things that struck me about that example of two income earners going out and then a smaller amount of housework and therefore being less well off than the full time carer is that one of the things that the two income earners might do with their money is buy labor saving technology. So if you've got a woman who, if she stayed at home would be, you know, traveling a long way to get water and fuel, etc. So it wouldn't work quite as easily.
- [59:30]
B
Oh no, yeah, you would want to. I mean, I left capital income. And also really what you need is a household production function. You don't really want to treat the value of household product as just hours times wages. You want a household production function. But I think it's very telling. There's a lot of evidence that technological innovation reduces time in housework. And we see that in developing countries. But it's also very clear that care activities, caring for children and caring for the elderly become a much larger component of that equation with development. And I think there are genuine limits to technical substitution there. That's what is so interesting about care work in general, that the kind of face to face, hands on dimension of it leads to less substitutability. And I think, in fact that's what's exerting a lot of the pressure on contemporary living standards in the affluent countries. It's not the demands of housework per se, it's the demands of this very labor intensive activity of care.
- [60:44]
C
Yes, I also got two questions. Just briefly. I'm just stimulated by your equation thinking how one would apply the insights from this analysis to the issue of migrant labor. Because if you go beyond the closed economy and you take, as you say, a life cycle approach, the government transfer, intergovernment transfers are not necessarily the same governments that, I mean, it's just different. And so.
- [61:17]
B
Okay, I think, I'm sorry, let me answer that and then you can ask your second question.
- [61:24]
C
Okay.
- [61:27]
B
You know, from a macroeconomic perspective, the optimal international migration strategy is to admit only healthy college educated workers who have contractually agreed never to marry and to Go home at age 55. That would be, I mean then you wouldn't have to spend any money on schools. Your health care costs would be reduced, your government pension costs would be. You could just, and then you could, in return for allowing them into your high wage regime, you could just tax them. You could basically support your entire G by taxing immigrants and actually some Middle Eastern countries. You think this is a, a far fetched science fiction strategy. But you know, look at the migration regimes and some of the oil rich nations of the Middle east and it's actually quite, they've kind of figured it out. I hope I'm not, I hope I'm not giving them any ideas. Further ideas.
- [62:31]
C
No, I mean, I agree the generational and the daily reproduction of labor take place under very different production regimes. But I mean, I think that's kind of politically quite an important argument. But the other issue that is befuddling my brain is that in a sense, you know, a lot of feminist economists energies have been put into disaggregating the household.
- [62:58]
B
Yes.
- [62:58]
C
And yet in a sense what you're coming up with is an accounting model in which, which is for the whole household and doesn't take into account. No, it's I, I is the intra household transfer.
- [63:14]
B
That's what FI is about. So FI is you know, where you know, what you pay, what you transferred to other members of the family minus what they transferred to you. So women would be getting less FI than men. Like in the example of old age care, you know, the men are getting elderly men are getting this big FI in terms of time. Some elderly women might be getting a big FI in terms of money, but both times and money are included in fi. So it's actually quite shockingly individualistic in its orientation.
- [63:52]
A
There's one question here at the back and then please the gentleman. You know, looking at your equation here.
- [64:06]
B
I mean, I guess I'm focusing on the relationship between the G and the other three factors.
- [64:11]
A
And that ratio seems to vary by country to country.
- [64:14]
B
It's completely exogenous to your model.
- [64:17]
A
As that ratio falls. Do I need to care about these calculations anymore?
- [64:21]
B
Well, that's a great question. I think the big argument over G is by increasing G do you reduce F? So does government spending crowd out inter family transfers? I think there's a lot of historical evidence that it works the other way as well. I'm pretty sure there is some crowding out. But I also think it's a decline in intra family transfers that motivates the development of G. I also think that it's actually more efficient from a macroeconomic perspective to. Because G is basically social. You're kind of socializing the risks of caring for dependence through G. So you could ask some interesting questions like what is the optimal level of G relative to F? And I think that's probably changing over time and it's something we need to collectively negotiate. So I don't know exactly what the right answer to that is, but I think that it's a good way to. I guess I'm trying to do is frame that question in a more assertive way.
- [65:22]
H
I just wanted to say that this is very interesting and it has a lot of relevance in lower income countries, particularly where government resources are being spent in terms of water, electricity, all these health and so on, because it's not accounted so. Particularly for poorer people. It's not being included because it's not seen as actually an investment because it's not accounted so that's the first thing. The other thing is that in your talk you keep referring to older people as being a cost. And in fact, I think even in Britain and Western countries that is less the case because as the demographics work towards getting older in terms of having your child in school, longer working later, et cetera, in fact old older people are contributing immensely to the family transfers. They're not just receiving.
- [66:15]
B
Yes, I take your point. I think that's very true. And that grandparents, ideally you should be able to look at the contribution that grandparents are making to childcare through that kind of fi. And you're absolutely right that life expectancy is increasing, but amount of time in the labor force and age at retirement are going up and those are to some extent countervailing trends. But it is also true that long term care expenses in all of the advanced countries are really very, very high. And that has to do with the very labor intensive requirements of care for the extreme elderly, especially given the increased incidence of health problems like Alzheimer's disease and dementia. So when I speak of the elderly, I'm really speaking the really crucial category is kind of the 85 and older category. And I think they are, they are an increasing cost and burden. Whether that's being counterbalanced by increased Productivity of the 65 to 85 population is a really important question. Question?
- [67:29]
D
Yes.
- [67:30]
A
One last question.
- [67:36]
B
Yes.
- [67:37]
I
Thank you very much for your talk. And in answering all these questions you seem to have persuaded everyone about your arguments. I don't think we've had any particularly critical questions. They've all largely been ones of detail and elaboration. So what I'm wondering is, where are you going to take this analysis? And I'm thinking just because you have this particular slide up, I'm thinking about, you know, the Human Development Index. And that has had some sort of impact in terms of thinking about different ways of measuring welfare. Are you able to take this analysis anywhere to beyond academic audiences into the policy world where you know that potentially you've been persuasive here? Do you think you'll be persuasive there?
- [68:26]
B
Actually, the paper on which this presentation is based was commissioned for and written for UN women as part of the report they're working on to be published in the spring. But I don't really know yet exactly where it's going, but I guess I would say most of my empirical research has focused on that whi hi. And I've done quite a lot of number crunching about it, and I think it's an interesting part of the story. But I've sort of come to the realization that the project of moving the county framework forward will require a lot more participation in the effort. So I'm kind of engaged in a global recruiting effort, which is why I'm here, really, really just to try to persuade researchers who are doing work that's related to these themes to think about how they could combine and coordinate their efforts in a little bit more sustainable, systematic way. So I guess whether that works or not remains to be seen. Ask me back in another 20 years.
- [69:46]
A
Thank you.
- [69:47]
B
I'll be over 85, but hopefully still around.
- [69:54]
A
So this is a good way to bring this to a close. Thank you very much for coming. We should do now what the French seems to be doing all day. So going and at least drinking. So in the reception again, let me remind you in Columbia House in the fifth floor, Columbia House is just. If you exit this building, just walk to the right. And please join me again in thanking Professor Nancy Folger for this.
- [70:20]
B
Thank you all very much.