The idea that economics is the study of markets is one of the greatest mistakes of our time. Properly understood, economics is the study of the production of goods and the provision of services. The market is only one realm in which goods production and service provision are found. The others are the family, the state, and civil society (the nonprofit or charity realm). The family is the oldest economic institution, as the very term “economics”—from the Greek word for household management—suggests.
Each of the four interlocking economies that make up the economy as a whole is based on a different set of principles. In the family economy, family relationships govern the pattern of both contributions and entitlements among family members. In the public economy, the state takes in taxes and provides goods or services to citizens according to some conception of the public interest. In the market, goods are produced and services are provided by firms or individuals in return for profits or wages. In the nonprofit or charity economy, people donate gifts of money or labor to organizations which help needy individuals or supply social goods (like higher education or museums or hospitals or symphony orchestras).
Family and Nonfamily Economics
Three of the four realms of the economy are relatively new historical developments. For about 97 percent of the three hundred thousand years or so since modern humans evolved, goods production and service provision—like care for the young, elderly, and sick—took place entirely within small or extended families of hunter-gatherers. The agrarian era, which began in the Middle East about ten thousand years ago, accounts for only about 3 percent of human history and prehistory. The industrial era of the last two centuries makes up only about 0.06 percent of the existence of Homo sapiens.
The conversion of hunter-gatherers into agriculturalists permitted the formation of states—most of them predatory gangs which extracted food or forced labor from farming populations whom they conquered and ruled. Until the industrial revolution, most people in agrarian countries lived in largely self-sufficient peasant households and villages and were forced to pay tribute, compulsory labor, or taxes to mafia-like rulers, who were often of a different ethnic nationality. The bureaucratization of government, foreshadowed in premodern imperial China, is largely an industrial-era phenomenon, dependent on mechanized economies which are sufficiently productive for taxes to support a permanent salaried officialdom.
Before the industrial revolution, both local and long-distance markets were scattered, shallow puddles of water on the deep bedrock of self-sufficient local peasant economies. The replacement of most household production and domestic provision by goods and services purchased in commercial markets or provided by government agencies is a phenomenon only of the last century and a half, even in the most advanced industrial countries.
Until the nineteenth century, corporate capitalism in its familiar form did not exist. There were mostly small mercantile operations based on partnerships or families. Large factories were often owned by the state, like the Venetian Arsenal and the U.S. “arsenal system” of government-owned arms factories that existed from the 1790s until the twentieth century. The earliest large-scale private corporations tended to be government-chartered monopolies responsible for creating and administering public works like toll roads and toll bridges. These were more like government contractors or public utilities than like corporations in the modern sense. Only in the second half of the nineteenth century, with the widespread adoption of general incorporation laws—which got rid of the requirement that all corporations be separately chartered by state or national legislatures—did modern corporate capitalism take off.
The nonprofit sector, too, is of recent origin. To be sure, in western Europe there were hospitals, orphanages, homes for the poor, and other charities from the Middle Ages onward. But these tended to be run by an official state church, which in practice was a government agency. The secularization, privatization, and bureaucratization of the nonprofit sector in the West has been a recent phenomenon of the industrial era.
As this history suggests, the greatest division in economic life is the historic one between family and nonfamily activities. The nonfamily realm, largely limited to the government in the agrarian era, only recently has been differentiated in many countries into the three new realms of the bureaucratic state and its two spin-offs, the private for-profit corporation and the secular nonprofit agency.
Familism versus Individualism
Arguably, then, the deepest division in modern societies is not between the Left and the Right, but that between familism and individualism. Individualists include most progressives and free market conservatives, as well as libertarians and socialists.
These four schools of thought did not exist before the industrial era, and indeed would have been incomprehensible in a world of peasants and landlords. They are branches of the same young tree. They share an individual-centered morality inherited from nineteenth‑century Euro-American romanticism, which in many ways was a secularized form of Protestant Christianity.
For romantic individualists, only freely chosen identities and obligations are legitimate. It follows that the family, like the nation—another community into which you are born without being consulted in advance—is an oppressive institution, from which individuals must be emancipated to fashion their own unique identities as autonomous workers and consumers. If the family cannot be abolished altogether, the hindrances it poses to the self-realization of its individual members can at least be minimized.
Given these moral assumptions, it is natural that individualists view the transfer of ever more goods and service provision from the oppressive family realm to the nonfamily realm of freedom and personal fulfilment as progressive. While they agree on the utopian goal—a global society of emancipated individuals, in which the influence of families and nations will be watered down or abolished—the rival socialist, liberal, conservative, and libertarian schools of individualism disagree about which recently invented nonfamily organizations—state bureaucracies? for-profit firms? nonprofits?—should perform tasks that were performed by human families for a third of a million years.
For example, individualists tend to agree that all parents of young children should be in the workforce full-time, in the service both of ever-growing GDP and personal self-realization by means of careers that they have chosen rather than inherited. But left-individualists want childcare to be provided by public bureaucracies while right-individualists prefer that young children be tended en masse by private commercial enterprises. When it comes to education, familists are sympathetic to homeschooling, while progressive individualists support monopolistic public schools and libertarians favor school choice.
In the twentieth century, labor organizations in Europe and the United States tended to reflect the strong familist values of their working-class members, who were often children or grandchildren of peasant farmers. The ideal of many labor activists, including the turn-of-the-century firebrand Mary Harris “Mother” Jones, was the one-earner family and the family wage. The male breadwinner would be paid enough to support a nonworking wife who cared for the children. The capture of organized labor in the late twentieth century by the college-educated overclass, however, along with the triumph of so‑called corporate feminism over maternalist feminism, has led both private and public sector unions to abandon their historic concerns about working mothers.
The co-optation of organized labor by the socially liberal managerial overclass means that familism is now defended chiefly by religious conservatives. The long-term decline in religious belief in Europe and North America might therefore suggest that familism, as a value system, may be on its way to extinction in the postindustrial West. It is easy to imagine a post-family economy. In order to enable both parents to work full-time, all children could be warehoused in public or private nurseries and schools practically from the moment of birth, seeing their parents only at nights and on weekends.
The automation of more and more goods production and routine services need not lead to mass unemployment. On the contrary, the automation of most production is compatible with ever-increasing employment outside of the home in a growing personal service sector. More and more former household services—cooking, cleaning, childcare, eldercare—can be outsourced from the family and provided to consumers by paid private sector workers or paid government employees or, in theory, by the paid employees of nonprofit agencies.
But this postindustrial, post-family service economy is hardly a glorious millennium to be welcomed. If such an outsourced family chore economy were characterized by an egalitarian distribution of income and wealth, most adults would spend most of their lives doing each other’s laundry, as it were. On the other hand, if income and wealth were highly unequal, most workers would directly or indirectly provide menial services for a small rich oligarchy, in a high-tech version of Downton Abbey.
Restoring the Home Economy
Fortunately, the erosion of the family is not the inevitable result of technology. To be sure, until something like the universal replicators of science fiction are found in every garage or basement, the production of most goods at home is unlikely to revive, to the disappointment of neo-agrarian distributists. Most advanced manufacturing and telecommunications will continue to be carried out by corporations, often immense national and multinational oligopolies, or large-scale public utilities.
But many other kinds of goods production and service provision can be kept in the family household or restored to it, even in a high-tech economy in which most people are wage earners for at least part of their lives. By the household economy, I do not mean the small family businesses that are idealized by nostalgic reactionaries—small firms that often pay the lowest wages and have the worst labor practices. I mean the use of advanced technology in the actual production of goods and provision of services for use, rather than for sale, by the family in its own home.
In addition to allowing more conventional paid work for others to be done from home (as has occurred in the aftermath of Covid-19), technology can also replace commercial or public services with unpaid labor augmented by appliances in the household, including home office equipment and small-scale rapid prototyping devices. For example, videoconferencing as well as access to internet databases, recorded lectures, and online grading by AI could enrich homeschooling for students of all ages.
Unfortunately, GDP as currently measured does not count technology-enabled unpaid labor at home. One perverse consequence is that a high-tech familist economy, in which fewer people work for wages and more work was done at home with the help of advanced technology, might have a lower GDP than an individualist economy with more primitive technology but a larger share of the population in the workforce. For this reason, GDP ought to be scrapped as a measure of economic health. It should be replaced by a measure that focuses on technology-enabled labor productivity in all realms of the economy, not just the market, and therefore does not implicitly encourage labor for wages rather than housework.
The greatest difference between a familist society and an individualist society might concern whether to respond to growing income by seeking more consumption or more leisure. In the individualist society, once basic manufactured goods were available to all, most people might nevertheless choose to continue to work long hours away from their families in order to afford either high-status versions of standard, widespread manufactured goods—Maseratis instead of Hyundais—or high-status luxury services like those provided by personal shoppers, pedicurists, or plastic surgeons.
But interpersonal arms races for trophy goods and trophy services are unlikely to incentivize investment in productivity growth in standardized, mass-produced consumption goods or home appliances that augment unpaid domestic labor. In a familist society, such wasteful and frivolous competition for high-status consumption would be kept in check by high consumption taxes which would fall on luxuries but exempt necessities. To influence the trade-off between buying a luxury car and having a second child, a familist government would make raising children cheaper and owning luxury cars more expensive.
What about the welfare state? Here a familist society might depart radically from the individualist model, by making the nuclear or extended family—not the individual—the unit for purposes of welfare policy and taxation. Tax credits for childcare and eldercare should go not to individuals but to the family unit, including perhaps the grandparents or siblings or other relatives. Multigenerational families, not the government, should decide on the division of caregiving labor within the family.
Property taxes on homes should be lower for families with children than for individuals, and perhaps eliminated altogether for multigenerational and extended families under one roof. Purchases of machinery to be used in home production with unpaid domestic labor, like microwave ovens, washer-dryers, refrigerators, dishwashers, home office printers, and perhaps 3-d printers, should be treated by tax authorities as capital investments by the “Family, Inc.,” not as consumption.
Potentially eternal tax-exempt family trusts, with contributions from different family members over time, could be set up for multigenerational families of limited means. Money could be withdrawn without penalty for a variety of purposes approved by the family as a whole. Modest family trusts could be designed so that they will not be depleted by means tests for certain public benefits, like the individual asset test for Medicaid-funded nursing home care. In a familist economy, even the poorest families could have entailed estates.
We need a Copernican revolution in the way we think about the economy. Our Ptolemaic economists and economic policymakers treat the market as the center of the social system, orbited by family, state, and civil society. Where is the Copernicus who will provide a vision of a society in which the state, the market, and the nonprofit sector are properly understood to be satellites of the family?