Story time. The following is an excerpt I found particularly interesting today from Abhijit Banerjee and Esther Duflo’s book, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Chapter 5). Yes, it’s a book about economics and data, but what it does very well is tell very human stories about how we behave, in different places around the world under different circumstances. I highly recommend it. In addition, Banerjee and Duflo have created a rich accompanying website full of additional data, photos, graphics and stories, studies, teachings and resources.
For the sake of their models, economists often ignore the inconvenient fact that the family is not the same as just one person. We treat the family as one “unit,” assuming that the family makes decisions as if it were just one individual. The paterfamilias, the head of the dynasty, decides on behalf of his spouse and his children what the family consumes, who gets educated and for how long, who gets what kind of bequest, and so on. He may be altruistic, but he is clearly omnipotent. But as anybody who has been part of a family knows, this isn’t quite how families work. This simplification is misleading, and there are important policy consequences from ignoring the complicated dynamics within the family. We already saw, for example, that giving women access to a formal property title is important for fertility choices [how many children to have], not because it changes her view on how many children she wants but because it makes her views count more.