Heterogeneous human capital, uncertainty,
and the structure of plans: A market process
approach to marriage and divorce
Steven Horwitz
&
Peter Lewin
Published online: 13 November 2007
#
Springer Science + Business Media, LLC 2007
Abstract The family has not been exempt from the multiple and rapidly occurring changes
in the world today, particularly in market economies. The number of marriages has
declined, age at first marriage has risen, the number of divorces has risen sharply, the
fertility rate has declined, and the division of labor within families has changed, not always
in ways that might be expected. This paper subjects these developments to a market process
analysis, drawing on the voluminous work occurring in family economics. The Austrian
theory of capital, with its emphasis on capital heterogeneity, is relevant. We place particular
emphasis on the importance of the structure of human capital within marriage and how
investments in such human capital have been affected by the uncertainty that these changes
have produced. We also examine investments in marriage-specific human capital and in
general human capital (particularly as they relate to childcare). This is then related to the
incidence of divorce and the causes and spoils from divorce. The advent of no-fault divorce
seems to have been seminal in this regard. We end with a brief glance at the future.
Keywords Capital heterogeneity
.
No-fault divorce
.
Marriage
.
Marriage-specific human capital
.
Market process
.
Plan disequilibrium
.
Covenant marriage
JEL codes D10
.
D13
.
D80
.
J22
.
J24
.
K19
1 Introduction
A salient feature of the postrevival work in Austrian economics is the attempt to incorporate
and account for endogenous change. The best work in the last 30 years has emphasized the
Rev Austrian Econ (2008) 21:1–21
DOI 10.1007/s11138-007-0029-x
S. Horwitz (*)
Department of Economics, St. Lawrence University, Canton, NY 13617, USA
e-mail: sghorwitz@stlawu.edu
P. Lewin
School of Management, University of Texas at Dallas School of Management,
P.O. Box 830688, SM 31, Richardson, TX 75083-0688, USA
e-mail: plewin@utdallas.edu