Family First has just released a report on the costs of the breakdown of the family unit. I might not have given it a second glance save that it is written by Dr Patrick Nolan, the more qualified sibling of our Dear Leader.
The thrust of the document, as you might expect, is that costs of having fewer intact marriages are very high. The report points to a bunch of private and social costs, such as increased risks of poverty, mental illness and infant mortality, and tries to put a dollar value on them. It ends up suggesting that the fiscal cost of the reduction in the number of marriages is about $1 billion per year.
I don’t have a sociology background or the knowledge to challenge any of the assertions made by the report, and I trust that Dr Nolan has calculated his costs in as objective a fashion as possible. However, it’s what the report doesn’t monetarise that is most concerning.
The report dwells on the monetary costs of marriage break-up, but leaves out much discussion of the benefits. Marriages tend to break up because of the emotional costs of remaining in them, as Dr Nolan notes. It is very hard to monetarise those costs and the resulting benefits of divorce. For the break-up of marriages to be socially inefficient it must be the case that people are not considering the full costs of the break-up when they make their decision to divorce.
One reason might be the presence of externalities. Perhaps people don’t fully internalise the effects of their break-up on others. They may not fully consider the effect on their children, or the social and emotional cost to those who are close to them. However, those close to them are also likely to suffer by having to deal with the consequences of their sustenance of an unhappy marriage. Whether the costs of that are greater than the costs of dealing with marital dissolution is a tricky question. However, since the report merely details the monetary costs of break-up, excluding the emotional costs and ignoring the counter-factual, it does not help in answering this question.
A second reason may be that people’s expectations of happiness post-divorce do not eventuate. If people tend to systematically underestimate the costs and overestimate the benefits of divorce then there may be a role for a third party. In this case, government and community organisations may be able to increase welfare by discouraging divorce.
So the report, while it may be accurate as far as it goes, does not shed much light on whether discouraging divorce is an appropriate role for government policy. It considers only monetary costs to divorce, which seem likely to be only a small part of the total welfare impact of marital break-up. It also focusses on the present costs rather than comparing these costs to the counter-factual costs of marriages remaining together.