Let’s begin with posited Rule No.1: “Limit Their Options.” Here Fremling basically says that her kids do not get anything beyond basic needs without having to work for it. No TV, restriction of video games and probably much else. Now it is unclear why this rule is implied. This seems like an imposition of parenting preferences on the preferences of children; something that is usually considered pretty anti-economic and free choice. But as we progress through the rules, you will see that this is essential for the running of a market-based household. The Fremling household creates scarcity and with that creates demand from their children, in terms of what they are willing to work for. Without that, it is hard to get the rest to follow. From this perspective, they start their market economy with a state-run monopoly.
Which gets to Rule No.2: “Economic Incentives — Offer Plenty of Jobs.” The Fremling household is the land of opportunity. Everything is an employment opportunity for which a child can receive a set amount of pay. That sounds like a pretty neat economy but so much can go wrong with pay. I pretty much wrote a book on the basis of the difficulties of applying this to young children. But a recent tweet by former Whitehouse Council of Economic Advisors head, Austan Goolsbee, recounted the time he paid his young son a fee for each cricket he disposed of in his Washington DC home. The arrangement ended when he found his son opening the back door to let more crickets in. But even with unintended consequences, how do you know what price to set? $1 for a dishwasher load? That seems high to me. I can’t imagine having to work this out for every chore and task in the house. So much better to have a broad deal like we have, do the tasks you are supposed to, or else? There’s an incentive. It is a little vague but it does save on transaction costs.
Tonight, I found myself being presented with my own contract terms. I had, over dinner, promised to let my daughter stay up late over the Spring break if she went to bed early before it. An hour later I was asked to sit down and sign a contract to that effect, including the standard ‘no complaint’ clause. I happily signed and our signatures were witnessed and the contract was filed away.
I am a little worried that I have opened a can of worms here. Everything has suddenly gone from informal to highly legalistic. I guess our daughter has a few trust issues. But at the moment I have no complaints.
The Fremling household has its own “Mom’s Court” but it involves not only contract law but tort law. In their rigorous private property household, infringements occur.
When it comes down to it, punishing is hard. There is something hands-free about parenting with set fines and punishments. But it is rarely the case that an infringement does not uncover deeper issues of understanding and getting along. You just can’t avoid hands-on management even if it is long and boring. This is what was borne out in the Planet Money podcast featuring my daughter. Economists like to think that they can offer simple, market solutions to all manner of problems. But within the household as in the real world, things are never so simple and you cannot avoid management by enforcing an economy. The Fremling household has chosen to put their efforts in establishing an economy. I tried that to once but time and again, it is has taught me more about how hard that is and why it is mistaken to think that there are economic rules that can be applied carte blanche to good effect.