Friday, October 22, 2010

Why should marriages be eternal contracts?

Risk sharing contracts are good contracts, and they can have an important welfare benefit. However, it is not quite clear that these contracts should be valid for a life-time. Indeed, this is what marriage is. Aside from the fact that these contracts are restricted to be signed between people of opposite gender, one can also question why not more people could be included in them. That would be good risk diversification. The problem is that a marriage contract is not just about risk sharing (and for that we have a market for insurance contracts nowadays), it is also about limiting sex choices and commitments to supporting children. But all this could be achieved without marriage.

Anyway, Stefania Marcassa and Grégory Ponthière ask whether marriage contracts should be eternal and find that in most cases they should not. Their argument has nothing to do with risk and uncertainty, rather with declining match quality and unequal bargaining power. Indeed, when one potential partner has little bargaining power, marriage gives an important veto power. But when bargaining powers are rather equal, like they are nowadays, long-term contracts become more interesting because no one has an incentive to veto a marriage due to unequal power.


Vilfredo said...

There was a time where women had very little say. The only power they had was to refuse marriage and thus gain more bargaining power. But the Church took that way by forcing marriage onto people.

Now that the bargaining power is more even and the influence of the Church has vanished, marriage makes even less sense.

Anonymous said...

Two people who truly trust each other should not need to conclude an explicit contract, and hence should not need to marry.

We only got married because immigration authorities make it really difficult for you if you are not married.