Country singer Brad Paisley (my teenage celebrity crush), has a song I’ve always liked that says “If love was a plane, nobody’d get on.” The song laments the challenges of trying to find lasting love in today’s world. “What in the world could go wrong…I mean after all we’re in love…,” Brad pokes a little bit of fun at the sometimes irrational optimism of people in love.
There’s no doubt that it is tough to find the kind of love many of us hope to experience in our lives. Unfortunately, I still often hear people talk positively about the times when divorce rates were so much lower because supposedly people back in the “good old days” knew how to make love last, and we just lost it somewhere along the way, because nowadays we don’t understand what commitment means or we don’t know how to really love. I don’t buy that explanation. My justification? Economics.
Although people don’t usually associate love and relationships with economics, the fact is that economics is social science. Some people call it the dismal science, but I like to think of economics as the science of happiness. Economics looks at the behavior of individuals trying to maximize their utility (which may also be measured as happiness) within the context of society. That might include purchasing goods and services, as in traditional supply and demand models, but it also includes many interactions that are not traditionally considered economic.
Forget love for a moment and imagine some of your regular purchases of goods and services. Most of the things you buy are purchased in a competitive market. Unless you live way out of town, you can probably buy a tank of gas at a different station than you bought it last week, no problem. However, things can get more complicated when there are specific investments, which are investments made in a particular transaction that are not as valuable in other transactions.
The labor market is an example of how specific investments change the dynamics of a market. When you leave an employer, although you might have many transferrable skills, some of the investments you made in your last job are likely to be so specific that they will not be valuable to your future employer, such as knowledge of the particular company’s policies and procedures, software, and even your co-workers. Likewise, your employer has made investments in training you and getting to know your way of doing things. If the employment relationship is terminated by either party, both will incur the transactions costs of having to learn those new things that are not transferrable.
What does all of this have to do with the problem Brad Paisley was singing about? There are a variety of economic explanations for the increase in divorce rates that occurred in the 20th century, but a major part of the explanation is transactions costs. There are a variety of relationship specific investments which increase the transactions costs of ending any relationship “contract.” These investments can include specific knowledge of a partner, emotional investments, mutual children, and physical investments, such as mutually owned houses and cars. This is why it is likely to be much easier to end a relationship with a hook-up buddy, than to end a 10 year marriage.
A variety of changes in society, including labor-saving technology in the home, industries that shift production of many services outside the home, and changes in divorce laws have reduced the transactions costs of ending a marriage. Partners no longer directly rely on each other for many of life’s necessities, which means if they aren’t happy with the relationship, it is easier for them to increase their utility by ending it.
This might not make the divorce rates more encouraging, but maybe we aren’t just worse at love than our ancestors. It’s more likely that love has always been and always will be as elusive as it is wonderful, it’s just the economics that changes over time.