Working Paper
Economics Theories of the Household

The aim of this paper is to review the principal assumptions and aspects of the unitary household model and collective models of household behaviour. Empirical studies are presented to assess whether the theories can offer adequate descriptions of household behaviour and to examine the types of policy implications that can be drawn from these. The paper concludes that the models reviewed lack the analytical tools to provide an understanding of the reality of households. Theories are unrealistic and therefore are of little use in the design of policies or projects which endeavour to help people.The review of the theories of the household shows that no particular approach is sufficiently advanced to dominate the field of household economics. Terminology used in household economic theories relies excessively on concepts from theories on consumer choice, or of the firm, and even on the theory of international trade (comparative advantage). These similarities cause problems when these well-known theories are utilized in an effort to understand the complex operations and behaviour of households in various cultures and societies.The neoclassical theories are basically founded on rather simplistic assumptions of human behaviour. They offer an easy way of eluding the intricate and challenging problems posed by households and their economic and social functions.To improve the well-being of the household (including all members) is not dependent on the application of market economy principles only. Non-market behaviour such as security, closeness, humanity, and social connections, is just as important.There is an urgent need to elaborate realistic household economic theories so as to break-out of the boundaries and limits that old theories have confined analysts and practitioners for so long. The development of a new economic theory of the household requires the incorporation of humane aspects of household operations into the theoretical assumptions. A completely new economic viewpoint should be adopted to see the human being and her economic operations through a broader framework which includes the market system as a special case.There is an urgent need - and this should not be underestimated - to design realistic household economic theories so as to overcome the confines imposed by the old theories on analysts and practitioners for so long. The development of a new economic theory of the household requires the brave incorporation of the humane aspects of household operations into theory assumptions. A completely new economic viewpoint should be adopted to see the human being and his economic operations in a broader framework which includes the market system as a special case.