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Home Economics

by Elaine Schwartz    •    May 29, 2012    •    688 Views

What if we think of a household as a production unit that does child care, gardening, cooking and cleaning? And, if the work in the home is “outsourced” when people hire a nanny, a housekeeper, a gardener or do take-out for dinner, then the GDP reflects the goods and services that the household makes.

But what if no one is hired and the members of the household do all the work?

Household production has been a dilemma for government statisticians since the 1930s when a group of economists led by Simon Kuznets wanted to quantify the nation’s economic contraction. They felt that if they knew the value of current output, they could figure out potential output, and then connect the two. The results of their research was national income accounting and the groundwork for calculating the GDP. But what to count? Finally, they said, include only legal goods and services that people bought and sold. Household work that had no price, because it had no price, would be excluded.

But, what if we did include non-market household production?

A recent Bureau of Economic (BEA) Analysis paper has some answers. For 1965, if we had included household production, the GDP would have been 39% higher. For 2010, GDP would have been 26% higher. Why the decline? One reason is that more women are in the labor force. Consequently, they do less unpaid work in the home. According to the BEA paper, we even might be able to correlate the recent recession and more household production in states with higher unemployment.

Where does this leave us?

Yes, quarterly GDP stats compare apples to apples by consistently recording government, consumer and business spending and exports minus imports. But there is so much more to ponder. As is true for every statistic, what we learn depends on what we ask.

To see more about the value and implications of household production between 1965 and 2010, the BEA article is here and here is a wonderful discussion of it from University of Massachusetts economist Nancy Folbre. Also, you might enjoy reading more about Simon Kuznets and his Nobel Prize.

This entry was edited after it was posted.


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