The consolations of economics

22nd July, 2006

Dear Economist,

I am being divorced. Since I will have less disposable income – due to higher living costs plus alimony – and since I want to stay married, must I conclude that I will be permanently worse off?

Gerard Nichols

Maastricht, Holland

Dear Gerard,

Commiserations, it certainly doesn’t look good. If it’s any consolation, I can think of five Nobel laureates in economics with helpful suggestions.

It is probably best to start by measuring your “permanent income”, the term Milton Friedman used to describe average income over your lifetime. Your future permanent income, in monetary terms, does seem to have fallen, although Friedman’s analysis argues that you should spread the misery over the rest of your life, rather than taking a big depressing hit all at once.

Gary Becker analyses the non-monetary returns to marriage. These are positive for you but clearly negative for your wife. Ronald Coase’s ideas suggest the opportunity for negotiation: it might be that you like the marriage more than your wife dislikes it. If so you could pay her to stay married to you.

Failing that, you should look on the bright side…

Continued on

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