If a market economy, with prices and profits, is such an efficient system, why isn't it employed within the household? Are we closet communists? Shouldn't I, as an allegedly free-market economist, practice what I preach?
After all, some of the policies I follow in my home would be considered communistic if they were implemented in the broader society. Most rooms in the house are open to everyone. Those with the ability to produce bring in the food; everyone eats according to his hunger. Then there is a central authority (me) developing the equivalent of Five-Year Plans (on bad days, they're Five-Minute Plans) and directing the flow of goods and services.
Clearly, communism is deadly. Common-property arrangements killed many early settlers in the American colonies, as Gary North has pointed out in his book Puritan Economic Experiments. The starvation ended when the common storehouse system was abolished. And twentieth-century communism is responsible for upwards of a hundred million deaths and countless heinous crimes worldwide (see the recent Black Book of Communism). Why do we use a common-property system in the home to such an extent?
It is not inconsistent with free-market economics to say that common-property arrangements might function well in certain settings. The existence of some common property in a household, or in a business, does not contradict the virtues of private property in the larger society. In small-scale settings like households, using prices and contracts would be a cumbersome way of deciding who gets what.
Because of the costs of running a market, we do not resort to the price system unless there is no other way to obtain the information we need to make good decisions. Markets are best where the situation is complicated. Where there are more than a few people involved, prices are usually the best way to discover (a) who places the highest value on a good and (b) who can produce the good at the lowest cost. A complex society cannot function without markets. The late economist Paul Heyne in a 1993 article in Stewardship Journal explained the problem with comparing households to the larger society:
[W]e live in a complex, decentralized, highly specialized society that no one controls or can control. What we call our "economy" is not at all analogous to a household or anything else that could possibly be "managed"… A modern industrial society, characterized as it is by extensive and minute division of labor, is a social system far too complex to be managed by any oikonomos [steward] not endowed with godlike powers.
When civil governments assert "godlike powers" and try to replace information-laden market prices with centralized planning, they create inefficiencies and trample on basic liberties. Only in a few cases, such as the requirement to administer justice, may the Biblical state exclude a market from operating.
In a simple household, with just a handful of individuals, it becomes easier to make "educated guesses" as to what the best use of resources might be. The "education" for those guesses comes from observing how other households do things and by observing the market prices paid on the goods brought into the household. These provide essential clues to good household management (œkonomics). Besides, each person typically has a greater interest in the well-being of others in the household than would typically be the case in the general population.
Children and Property
Common-property arrangements can serve a good purpose in a household. For example, having children share rooms can be useful because it will train children for other situations in life where living space will be shared — dorm rooms, marriage, etc. As with the disputes between Abraham's and Lot's shepherds, conflicts will inevitably arise with common-property arrangements. While strife would certainly not be our goal, having shared rooms allows children to develop their own abilities to settle arguments and make peace.
It is also important for parents to teach about individual property — about ownership and its responsibilities. With young children, this might mean that the parents decide on an owner for each book or toy the children use, and guard the property rights of each child. This replaces the innate property rights understanding of each child — "physical possession equals ownership." In practice, this property rights system can be difficult to enact comprehensively. With hundreds of books, stuffed animals, toy cars, crayons, and blocks strewn around a playroom, who can keep track? Who can remember which old toys had been transferred to a younger child (inspiring, of course, renewed interest in the toys from the older child)? What of the toy that is given to two or more children by a well-meaning family member? However, at the very least, establishing property rights on the high-demand toys is helpful.
Defending a child's property rights means that parents should refrain from forcing a child to share toys in many cases. This is contrary to the common practice in most households because it is usually thought that forcing sharing will teach generosity. A forced wealth transfer, however, does not inspire generosity but encourages bitterness and resentment. It is no more useful in teaching generosity than requiring an unrepentant child to say "I'm sorry" teaches remorse. Of course, children may be told all the virtues of sharing, just as they may be encouraged to repent and ask forgiveness when they have wronged someone.
In my home, my children are not permitted to use their possessions as tools for wicked behavior. For example, a child who is using a toy to taunt another must give it up. Displaying anger by mistreating or throwing toys or books is not allowed. But where the ownership of an item is clear, coerced sharing produces numerous problems.
When a child is given ownership of something, along with that ownership goes the ability to give away or exchange it. There are limits on this freedom, of course. But as long as the gift or the exchange does not break God's law in some way, parents should acknowledge that freedom — even if the child is likely to show some regret later. Some allowance for age is appropriate, of course. A two-year-old has a very short time horizon and may not be able to comprehend the idea of a permanent gift. But respect for promises, or contracts, is something that should be inculcated in children from an early age. As Gary North wrote in An Introduction to Christian Economics,
The parent is understandably upset when he discovers that his son, age five, has just traded his [$45] tricycle for the next door neighbor's goldfish. The parent is tempted to force the child to give back the tricycle. The parent who does this is making a serious mistake. A child must learn very early that a bargain is a bargain, that once a man shakes hands, figuratively speaking, on a deal, that deal is closed. A contract, in short, is a contract. Besides, the child may well prefer a goldfish to a trike. If he changes his mind later, the permanence of his contract will manifest itself. He may try to trade back with his friend. If he can do it, fine. But a parent who forces the kids to trade back, or a parent who allows his neighbor to force a trade, is a moral weakling … A forfeited trike is a cheap way to teach a child to respect contracts, property, and the authority of law.
A parent who regularly intervenes to redistribute property in the name of "fairness" is setting the child up to disregard the rights of others later in life. In essence, he is setting the child up to be a socialist. Though market prices are not often used within the household, the foundation of any market is respect for private property and contracts. Children who are not trained well in the ethics of property rights by their parents will not understand or respect markets when they reach adulthood. Eventually, a failing here, in the ethics of property rights, will infect the ethics of the broader culture.
- Timothy D. Terrell
Timothy Terrell is associate professor of economics at Wofford College in Spartanburg, South Carolina. He is assistant editor of the Quarterly Journal of Austrian Economics and is an Associated Scholar with the Mises Institute.