The nature of the family in economics

Neoclassical and institutionalist approaches

Abstract

This paper provides a review of the family economics literature, by focusing on the question how different schools of economics view the nature and the function of the family. First, we present the black box model of households, which considers the family as a consumption unit acting as a unitary decision maker. After that we turn to the neoclassical approach, which views the family as a collective decision-maker and focuses on the issue of optimal resource allocation within the household. Last but not least, we describe the fundamentals of the institutional economics approach towards the family, which regards it as a contract and a governance structure for transactions. In the course of the review, we cover the shortcomings of each model, and we show how the newer approaches complement the older ones.