All Commentary
Wednesday, June 21, 2017

You Can’t Mandate Family Life

The best people to make these decisions are the parents who have the local knowledge.

Economists think about how markets work, and why they work better than the alternative ways we might figure out what to produce and how to produce it. We often focus on the way in which prices and profit and loss signals enable us to utilize the knowledge of countless other people that we don’t know but with whom we must interact.

Knowledge is dispersed and often hard to articulate.

The insight that we each know different things, and that we each face different contexts in which we might deploy our knowledge, is a fact of human existence. Knowledge is dispersed and often hard to articulate. The challenge of social coordination and cooperation is how to get us to make that knowledge available to others in a form that they can use to inform their own purposes and plans.

That, according to Mises, Hayek and other Austrian school economists, is exactly what the unhampered market process does through prices and profits. That is also, they argue, why we should leave people to buy and sell as they please. Not only do markets coordinate people’s behavior, but any attempt to direct resources from the top down will not be able to marshal the knowledge necessary to know how best to use those resources.

The importance of relying on local knowledge is not limited to the market only. In other social situations, we rely on other kinds of processes to coordinate behavior, we use our local knowledge to solve local problems. One might point to the role played by things like homeowners associations or even municipal governments, but I’m thinking of the ways in which family members work out arrangements related to work and family, free from overarching mandates that pretend to know the right solution for everyone.

Family Life as a Knowledge Problem

Consider two kinds of examples.

First, think about the ways in which married couples with children have to work out childcare arrangements. It might be tempting to pass laws mandating that employers provide childcare or that stay-at-home parents get some sort of subsidy, for example. Proposals like these make assumptions about what are the best sorts of arrangements and ignore the fine details that go into sorting out these issues.

The best people to make these decisions are the parents who have the local knowledge. Some couples are lucky enough to have family members nearby who are willing to care for their kids during the day or after school. Perhaps they can do so every day, perhaps not. Perhaps the couple is perfectly fine with three days of care from a relative, even if that means one of them has to work part-time, rather than five days with a stranger. Perhaps one or both, or neither, has the option of part-time work available. The answer to that question will change things.

Perhaps one or the other is simply better with kids or has the option to work from home for part of the week. And perhaps one is willing to give up labor market income altogether to care for the kids. Once we begin to consider the options, especially as the labor market continues to get more flexible with respect to not having to be physically present in a common office, the idea that there is one right solution seems bizarre.

When we throw in the ways in which kids differ in what they need for care and who provides it best for them, it becomes clear that the people best positioned to make these decisions are the parents who have the local, and often inarticulate, knowledge about the situation.

When we try to mandate solutions, we cause people, and not just the parents, to adjust on other margins. The most obvious case of this is mandating employer-provided childcare or parental leave after the birth of a child. Mandatory provision of either one will surely encourage people to take advantage of it, even if they would not have seen that as the best solution in its absence.

Mandating one right way to address the complex problem will produce undesirable, unintended consequences. More important, it changes employer behavior. If employers think a potential employee will be more likely to use these benefits than another applicant for the job, it might reduce the employer’s willingness to hire that person. To the extent that, in our culture, it is still predominantly women who take time off to care for newborns, or who would want their child cared for in their place of work, mandating employer-provided childcare will make these women more expensive to hire, harming their job prospects.

Attempting to mandate one right way to address the complex and idiosyncratic problem of juggling work and childcare will produce a whole variety of undesirable unintended consequences, only some of which we can predict with confidence. Instead, why not just let couples work these issues out themselves based on the contextual and nuanced factors that they know about best?

Mandating Divorce Terms

The same argument applies to divorce settlements.

A new bill in Michigan wants to mandate that neither parent can spend more than 200 nights of physical custody with their children after a divorce (in the absence of evidence of domestic violence). This sounds like a reasonable form of fairness to all parties. However, it overlooks just the same sorts of issues raised above.

For example, what if one parent lives in a much better school district than the other? Isn’t there reason, out of concern for the kids, to ensure that the parent in question has both the 180 nights in a school year plus some weekend and vacation time? Do we really want the other parent having to transport kids long distances to school in the name of equity? And what if one parent is simply more responsible about making sure school work gets done, etc.?

If we mandate divorce solutions, people will just adjust in ways that will make people worse off than what they could have negotiated voluntarily.What if we throw in the complexities of work schedules? Is it easier for one parent to be home for dinner and evenings than for the other? What if one parent has a job that involves heavy travel? Is it wrong to consider their travel and work income as an equal contribution to the physical custody that the other parent might provide for more than 200 nights per year?

Again, the point is that one-size-fits-all solutions by their nature do not take into account the different situations divorced parents find themselves in and remove their ability to negotiate their way to more subtle and better fitting solutions.

Much like the employment issues, if we mandate divorce solutions, people will just adjust in ways that will make people worse off than what they could have negotiated voluntarily. The Michigan bill does appear to let parents negotiate around the mandate, but the power of that baseline will still carry much weight.

Getting People to Negotiate

Of course, not all divorces are cooperative. If one party refuses to negotiate or be reasonable, there are ways that judges and mediators can guide them toward an agreement without having a statutory mandate. These agreements need to be strictly enforced so that both support and custody time are maintained. Yes, this might give judges a fair deal of discretion, but that also provides incentives for the divorcing couple to work things out, especially if they are sufficiently confident the agreement will be enforced.

More expansively, we might re-think elements of divorce law to provide more incentive to bargain. For example, our current system is both “no-fault” and “unilateral,” with the latter meaning that divorce requires only the desire of one party to leave the marriage for it to happen. What if we eliminated that and required that both parties consent to the divorce (leaving intact the “no-fault” idea that it can be for any reason)?

Local and inarticulate knowledge matters.

The party wanting out would have to negotiate to placate the one who did not wish to split. This might lead to better deals for men who are worried about their wives divorcing them and taking the kids. It might lead to better deals for women who are worried about husbands leaving them in poor financial shape. It might also have some undesirable consequences as well, but it would return more of the negotiation to the parties involved. It is a proposal worth considering.

We know that running an economy based on one-size-fits-all mandates from the top does not work. That same argument applies to trying to solve coordination problems within families from the top down. Local and inarticulate knowledge matters, and empowering the people who have it to solve their own problems cooperatively is a better way to ensure peaceful cooperation and serve the best interests of parents and children alike.

  • Steven Horwitz was the Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he was also Director of the Institute for the Study of Political Economy. He is the author of Austrian Economics: An Introduction.