The Nature of Economics (6)


The Nature of Economics (6)
The household is an equally important part of the economy as the firm. But neoclassical economics has similarly avoided serious economic analyses of this economic unit by assuming that the utility function is exogenously given. This has caused many serious problems.
The household is important in the economy because it determines labor supply and labor quality. It also determines consumer demand. Indeed, a typical individual in the real world feels much of happiness in the household rather than in the firm or market. Nevertheless, neoclassical analyses of this problem is insufficient, biased, and harmful.
G. Becker has done some detailed analyses of the household but we do not know how they are incorporated into general equilibrium theory or if such incorporation generates efficient equilibrium. The whole system of economics needs to be considered.
As in the case of the firm, neoclassical economics lacks a theory of efficient human relations within the household. This causes it to lead people to believe that each family member is free to pursue his or her own self-interest as in the market. This theoretical defect has promoted disruption of the family in the real economy by accelerating trends towards the nuclear family, divorce, and child abuse. The market principle has invaded the family.
I guess that the high rates of divorce and child abuse are to a large extent results of increased competition in the workplace. People have thought that they are free to use or sacrifice the household in order to achieve occupational success and to relieve the stress experienced in the workplace. They have lost intension to keep harmonious human relations within the family as well as the will to develop competent children.
In this way the market logic has controlled whole society and people have sacrificed the efficiency within the household as well as within the firm. They have become too self-assertive and less cooperative in the household and firm. This is a result generated by neoclassical economics and neoliberalism.

Comments and questions are welcome.
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