Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Job- Family Balance: Trade Offs, Double Income and Single Income Families



Many believe that job-family balance is strictly a time management issue. With many women and men reporting difficulties in constantly adjusting to the demands of the double duties of employment and family in an atmosphere of economic insecurity, demanding jobs, and unsupported workplaces, tradeoffs become essential.   Yet inspite of these perceived difficulties, we do find existence of both single income and double income families. Let us explore this phenomenon through a lens of an economist.
Economics posits the presence of trade-offs. Studies indicate the existence of both employment trade-offs and family trade-offs.  The former refer to sacrifices that people make in their jobs because of their family responsibilities and the latter refers to the other way round.  As individuals offer themselves in the labour market, the benefits accrue through increased income, increased knowledge and consequent associated higher living standards. This however results in decreased time spent towards nourishment and guidance of children. As responsibilities increase, the time allocated to work increases. This increases results in increasing sacrifice of time towards the family responsibilities. Both the time spent on work as also on undertaking family responsibilities yield utility. As we know an individual allocates the resources towards the basket of goods in a manner that utility from the last currency unit spent on the good is equal across all the goods in the basket. In the initial period, leisure is abundant relative to income from work and hence substitution occurs from time spent on leisure towards increased time on work.  Higher job responsibilities necessitate the sacrifice of family lives. The leisure becomes relatively scarce and the substitution stops when the utility gained on the last cost unit spent on leisure is equal to last cost unit spent on gaining extra income.   Further tradeoffs can be unequal. The costs differ from family to family. People may be more willing to miss out on a family occasion or unable to do some of their chores at home rather than be unable to nurse a sick child.
If incomes are lower, then both family members may opt to work to yield the desired standard of living. If the cost of both members working in terms of family sacrifices is higher relative to a single member working, then we possibly see the emergence of single income family. In a single income family, who should sacrifice the work?. It is the one with the lowest opportunity cost. Typically, the wife may be the one who has the lowest opportunity cost to shift to family care from work place and thus we may find men work while wives stay at home.
In short the family balance in terms of the staying together, child care, economic insecurity and the career goals determine the decision to go in for single income or double income families. A trade off results.

Source: Sue Falter Mennio et al (Tulane University), “Job-Family trade offs”, Work and Occupation, May 2002 ; Blogs on Double income families

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