Inflation's Cultural Impact: The podcast discusses how inflation acts as a "juggernaut" of social, economic, cultural, and spiritual destruction, influencing family dynamics and societal values.
Historical Economic Thought: The conversation explores the history of economic thought regarding family economics, tracing back to Greek household management and highlighting thinkers like Xenophon, Juan de Mariana, and Richard Cantillon.
Becker's Economic Approach: Gary Becker's Chicago School approach to family economics is critiqued for its rationalistic assumptions, such as static parental preferences, and its implications for understanding household decisions.
Interest Rates and Fertility: The discussion highlights a theory that suppressed interest rates lead to higher time preference rates, resulting in overconsumption and challenges in planning for future-oriented activities like having children.
Marriage and Divorce Trends: Inflation is linked to changing marriage and divorce trends, with a noted decline in marriage among middle and lower classes and stable family patterns among economic "winners."
Inflation and Income Inequality: The podcast emphasizes the role of inflation in exacerbating income inequality and fostering a culture of indebtedness, impacting family stability and economic opportunities.
Monetary Policy's Broader Effects: The conversation argues that monetary policy and inflation have far-reaching effects on cultural and family life, influencing decisions and behaviors beyond mere economic metrics.
Transcript
This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy. >> Jeeoff, welcome to Human Action Podcast. >> Hi, Bob. Thanks for having me. It's a real real honor to join you. >> Oh, I appreciate that. Glad you could be here. So you have a book on inflation in the family and I want to just go through and I know you've been doing the book tour and such but it's of particular relevance to this audience and specifically I noticed early on you mentioned how like the inspiration for you going down this path was a footnote in a GTO Holman book. Is that right? >> That's right. And it really corresponds with my introduction to the Austrian School of Economics. Uh the book we're referring to here is Gito's 2008 ethics of money production and uh I'm a relative newcomer to Austrian economics. I didn't even discover the school of thought until 2010. Uh interestingly at a conference at Hillsdale College which I know Bob you had uh been there for a bit and that was the first place I had heard the name of Mises or Hayek and so began to dive in and quickly found the >> mises.org org website and all the great resources there. And that title, the ethics of money production really caught my eye. So, uh, funny story on that. This was in the days I wasn't making much money and I was working at a school and I downloaded the PDF and I got tired of reading on the screen. So, printed it off uh in total and I got a nice finger wagging from one of my colleagues about using too much printer paper. But as I was reading through the book, uh, chapter 13 had this line, very important one, that said that fiat currency inflation is a juggernaut of social, economic, cultural, and spiritual destruction. And that's a very thoughtprovoking line, but as I was sort of living some of the cultural and social impacts, uh, especially as a young married guy trying to make ends meet, that really hit home in a very practical way. And so little did I know that about 11 about 10 years later I would be studying with Guido in the PhD program in AA France. And so that's a little bit of that story but that line has always stuck with me and uh as you noted was really the inspiration for my dissertation which has now been turned into this book. So that's the story of where this came from. >> Okay. Well great. So, I I imagine people have a general sense of where we're going with this and some of the particulars. But before we dive into that, let me just ask you cuz I was fascinated to see as I was looking through the book that you have a whole section like the the the history of economic thought on this topic before the rise of like the Gary Becker approach to, you know, social analysis using economic tools. So, can you maybe summarize some of the highlights of, you know, what was the state of the literature on this topic before the, you know, Chicago school lens? >> Sure. Yeah, I'd be happy to. And that that history of thought does go back quite a ways. For most folks who remember their econ 101 class, you might recall that the word economics in English is derived from the Greek okonomia. And that is actually a reference to a book by a Greek writer by the name of Xenopon. And it indeed was all about household management. And most folks are probably familiar with the term ooass when they go through their dairy section and see oas yogurt, right? This is but this is a reference to sort of like homemade goodness of you this yogurt, right? Uh but that's the idea of an ooas. It's a Greek household. And one thing that people should understand is that the Greek households, the ooas was it had a really significant division of labor. uh people who would have been regarded as I'll use air quotes here regarded as slaves had a lot of different occupations within these icos households. Everything from financial managers to farm managers to even uh medical and teaching services within a household. And so again, you've got an extensive division of labor. And when we think about the study of economics, that's one of the foundational principles is that we grow wealth and improve our standard of living by engaging in an extensive division of labor. And for the Greeks, this is happening in the ooas, the household. And as time develops, we see that really move throughout the rest of society. So this is uh really at the core. I I thought you know it's just interesting that there's been uh not as much work on family economics in the entire uh history of economics being done but it is interesting that the root of it was household management if you will. >> Well and what's interesting too is I don't think I it was ever called this like when I was going through school and for some people watching like I'm I'm not that old. Um but I I'm pretty sure like when my parents went to school there was it was called home like short for home economics. Yeah. Yeah. And so that that's been a point of confusion when I sometimes introduce my area of study here. I say family economics and it get somebody twist their head mean like home economics. Well, not exactly. What we're really looking at and this is a a reference to Becker and his work. He was calling on economists to look at the broader macroeconomy and see how uh those realities impact household life. And so in a sense I have that inspiration from uh professor Hollesman but then also from Becker who said let's take a look at macroeconomic variables and how it impacts the household. And so from uh the Greeks from Zenopon forward there is quite a string of uh of a history of economic thought around the family that's uh and that string is not um uh it's not as deliberate as it is incidental and and I can describe some of those thinkers but there there are breadcrumbs throughout the history of economic thought that point to economics and how uh the broader picture impacts household decisions but I'd love to touch on some of those if uh dive in. >> Yeah. >> Yeah. So, uh if you move on from from xenopon, we take quite a a jump forward and I like to as an Austrian go to the scholastic school and one figure in particular, Juan de Marriana. Now, a lot of your listeners are probably familiar with Deana and his strong condemnation of money debasement and saying that if a king or a prince does this, then that's grounds for tyrannicide. Right? So, a very controversial statement that got him into quite a bit of trouble in his day. But one of the things that in Deiana's writing that comes out very clearly is that it's the king's household, right? It's it's him and his servants and his family members who are the immediate beneficiaries of new money creation through this debasement process. And so De Marriana is concerned about moral questions here of excessive greed and so on and so forth and said look this is grounds for uh for removing a king uh detaching them from life itself for this kind of practice uh on moral grounds really. But De Marriiana is describing uh an effect that not too much later would be picked up by Richard Canton. And Richard Canteon 1700s there's a an essay on economics that we've got a great translation of at the Mises Institute that was overseen by Dr. Thornton and that's one of those great books that's available online for free. But it's Canton who really describes in household terms, and this is a really captivating bit of reading for me. He describes in household terms how when new money creation happens, you have these early beneficiaries, those first recipients of the new money creation. And he describes how their households will specifically be better off, better and higher quality food, better clothing, more ornate houses, and so on and so forth. So he describes those early recipients much like De Marriana had. But what Canton does is he then extends it to the later recipients and says look once that initial set of recipients has bid up prices then the folks who don't see their incomes increase or later recipients of new money creation they're left to deal with higher prices and they are harmed by this inflationary uh money growth. And so that really moves us forward into the 1700s and the thought there uh that that canon brings forward. But again, you know, Canton has his his main focus is not the family per se. >> It's just this is what the process of inflation looks like and how it manifests in society. >> Okay. Well, is it appropriate at this point to jump into like what Becker's approach was more specifically? Uh I I think we can go there and and of course Becker part of the Chicago school but we also when people think of the Chicago school they think of Milton Freriedman and of course his um his famous work on the positivist approach to economics really took hold and I think the rest of the Chicago school folks really um you know exemplified that and carried that approach forward. So for the listeners, the the positivist approach is really this approach of gathering data and putting that data into models to kind of discover economic law. And this is a a process that we as Austrians uh we uh take a little different approach. We want to take a logical deductive approach to derive economic law rather than this inductive approach. And so that's Becker's approach. Now there are some interesting things that come out of his um his book. So his famous book here um I like to have visual aids with me. So his book a treatise on the family really uh laid pulled together it was a treatise um that pulled together some of his early research from the 1950s and60s with other economists like Barrow and he consolidates it here in this book. Now, there's some some interesting things that come out of his approach. One of the things you have to do in positivism in order to make your models work in a sort of elegant mathematic fashion is that you've got to make some assumptions about the way the world works. And one of the most startling examples of this was when Becker's describing parental choices around inheritance. He makes the assumption that over the lifespan of a family that parental preferences do not change. You read that and say, you know, this is not a real world assumption. We know that that some kids behave badly. Uh certain things happen in family life. Maybe your assets when you go to make the inheritance aren't quite what you thought they would be. This is really disconnected from real family life. And so that's one area where you take a look at the positivist approach and say, "Boy, these are really strong assumptions that don't really align with the real world." Now, uh, that's a strike against Becker. Now, what was interesting and I was kind of happy to see especially as I was working through the dissertation and and bookw writing process is that Becker at one point when he's talking about fertility choice uh another key area of family economics he mentions the importance of interest rates >> and that there is a positive correlation between interest rates and total fertility and so That's something that I did want to take a look at and explore a little more deeply and develop a theory in the Austrian tradition that looks at the impact of interest rates and how that would impact our behavior or what we call our our time preference rates. And so that was really a nice springboard for me to develop um an Austrian theory around the relationship between interest rates and fertility. So that's a an important section of my book. I think >> out of curiosity I mean does it move that other things equal? The lower the interest rate people have more kids. Uh actually the lower the interest rates uh right this is an indicator um if we've got a central bank that is suppressing interest rates this is going to drive a higher time preference rate. So what do we get when we have that suppressed interest rate? >> Well we tend to have overconumption on the part of households and this becomes a challenge. If we're consuming all of our income we don't have much savings for the future. And having children is really a future oriented sort of activity. Uh sort of thing you need to to plan a little bit for what's coming next. Not just nine months down the road, but you know 5 10 20 years or more. And so what um what I've theorized here is that a suppression of interest rates is going to drive more of that overconumption which makes having additional children uh a little more difficult. uh you might say it it fosters a climate or a culture of short- termism and certainly children don't really fit that kind of category that kind of plan that kind of way of living. >> Okay. Yeah. So just to what where I was where my intuition misled me there is because I was thinking there's a sense in which children are in a long-term investment right like it's the upfront cost and so and you know oh and if interest rates are lower other things equal you engage in longerterm projects but it's not that you're sinking you're not borrowing money from the bank in order to go have a kid and so that's kind of the difference is like building an apartment complex or something. >> Yeah. Yeah. Uh and and of course this this points to one of the things that um you know monetary policy doesn't impact everyone in the same way. >> Mhm. >> Right. And that's one of the points that can and all the Austrians have made is that with that interest rate suppression through increased money supply that there are some who benefit and then there are others who are harmed. And so uh this this observation kind of matches up with some work by Charles Murray. So, Charles Morano, he's a controversial author for a number of reasons, but setting that aside, his uh 2012 book entitled Coming Apart described how the upper echelons of society in the United States from the 1960s and forward have largely maintained traditional family life and traditional fertility patterns where it's uh the old nursery rhyme, you know, uh first comes love, then comes marriage, then comes the baby in the baby carriage, Right? He's he's saying that people who have been on the um the winning side of the economy over the last 60 years, they follow that traditional pattern. >> Mhm. >> Uh whereas much of the middle class and virtually all of the poor have set aside these traditional family patterns and uh so he calls it a new form of segregation. But as as I was reading Murray's work, it occurred to me, wait a minute, he is describing household realities for the beneficiaries of an inflationary economy and then the downsides for households that are uh that are on the wrong end of it. Now, Murray was not attempting to give a full explanation as to why this has happened, but he did point to things like education and how there's been a new approach to that since the 1960s. And he says that it's the return on brains that make some households wealthier and those who don't get the same amounts of education, they wind up worse off. Now, as I read that, I thought, well, wait a minute. It might not be so much the return on brains as it is the returns in a financialized economy. In other words, the industries that have benefited from financialization, the individuals who are in those industries, their households are better off. And wouldn't you know it, it's the households uh largely in and around the Washington DC area, areas where you have massive government expenditures, whether it's through um uh military-industrial complex, uh maybe the green industrial complex in some cases, you'll see those individuals and their households doing better and having uh a better shot, if you will, at sustainable household life, taking care of their kids, having the desired number of kids, investing in your children for education and so on and so forth. But those who have um uh not benefited from that process have uh been left behind. And if you're a young man who's, you know, maybe got an unstable work situation, you're in an industry that doesn't have much potential income growth, that frankly does not make you a great candidate for marriage. >> That's just the facts of it. And >> that's what Murray was observing. But I think we just have a um what I wanted to provide here was an Austrian explanation that's related to monetary policy and how it's made its way through culture and family life. >> Okay, thank you for that. And maybe just as as an I don't know if aside is the right word, but just to elaborate a bit more for people who aren't familiar like in the economics literature and just in generally like the the Becker approach to social issues, it's very I don't know rationalistic, let's say. And so like like the he might have something on the economics of crime. And so there the issue is not just moralistically like, oh, stealing is bad and let's punish it, but also well, hey, you know, if you're a criminal and you're rational and let's or let's at least model it as if you're just rational and looking at costs and benefits and if the punishment, you know, like and so that's like leads to things like maybe it's better to spend more money on catching criminals and giving them a light sentence versus, you know, grabbing one guy and giving him a, you know, throwing the book at him. Anyway, just that sort of approach which >> to some people strikes them as like, oh, that's I don't want to even think about these issues. But anyway, it's a nice lens if you if you want to go ahead and look at it like that to say, yeah, it's not that the axe murderer is sitting around, you know, engaging in Socratic introspection. But on the other hand, it's also not correct just to say, oh, these people are, you know, just all unhinged lunatics and and criminals don't respond to incentives what whatsoever. Like that's also that would be incorrect, too. >> Right. That that's a great point and I I want to um hook on to that word rational a little bit because one of the other thinkers who preceded Becker was Joseph Schumpeder and he had a passage in his famous book um uh on you know really the process of capitalism uh democracy and socialism. So this this book 1942 it was written and he has a passage in there about the loss of the what he calls the family motive. There's a really interesting passage there and in it he says that due to the successes of capitalism the wealth that it produces that eventually over time people will develop sort of a hyperrational outlook on life and we uh this is kind of scheer talking in predictive terms but he says that people will develop this hyper sensitivity to costbenefit analysis and everything will be sort of a uh coldly calculated decision. >> And because capitalism brings such prosperity, prosperity and uh enjoyable experiences that people will begin to diminish the value of family life and especially the value of children relative to the benefits that they experience due to the wealth that comes through the capitalist system. Now what's interesting there is that Schumpeder is really describing a capitalist system under conditions of intervention. He is describing I think a world where uh it's not far off from the world that we that we sort of have where you have uh values being sort of inverted uh where careerism is more important than say raising a family materialism more important than um maybe leisure activities. the arts or just enjoying a barbecue with your friends, right? Um, and so he's describing that world, but what he doesn't do is describe the the real mechanics of how we might get there as a society. How might we arrive at that more materialistic, rationalistic, um, or you might say hyperrational way of thinking. and is my viewpoint that this is one of the outcomes or consequences of living in an inflationary world where we do indeed need to think more about stock portfolios than we otherwise would have. >> We need to think more and more about returns to our time at work so we can service our debts and rising cost of living than we otherwise would. And so I I think that um uh Schumper was uh he was around the target but um but he missed identifying what might drive people to that kind of rationalistic mindset and then the devaluing of family life but especially devaluing of children. Mhm. Well, let me give you a chance here because you kind of just walked into the next point I wanted to make that I wanted to ask you like these more esoteric deep thought questions, but why don't we do the meat and potatoes that I'm sure you know some of the listeners are dying to know >> that like things like, oh gee, what's going on with the, you know, divorce rate and fertility in general? And >> I gather that at least part of your story is that you're saying this isn't just >> looking at oh what's happening on TV or something that inflation has something to do with a lot of these broader trends that a lot of people are worried about. >> Yeah. And so the these are some broad trends that have have different outcomes. So I'll kind of work backwards. Really when we we think about family economics there's three categories. Uh the three are family formation or marriage uh and then fertility choices. The third then is divorce as you mentioned and divorce is the least uh studied and least understood phenomenon because look we know there are many many reasons why marriages break apart but when you look at survey data and when people talk about the causes of divorce uh money or finances is one of the leading uh reasons I now here's a here's a terrible economist joke but when I raise this question to new audiences I say what's the leading cause of divorce course and they start chitchatting. It's this and it's that. I said, "Well, marriages, right? You can't you can't." All right. So, yeah, dad jokes. There you go. >> Well, anyhow, financial >> I thought you were going to say half the crowd would say men and the other half would say women. >> Yeah, there you go. But, uh but this this is the case, right? Um financial tension, questions around money, deceit around money. Uh these are some some major categories. Now uh the question I want to address here though is what has happened to divorce rates over time. Um really interesting kind of phenomenon has happened and again I I use Charles Murray's work as kind of a springboard for this. He was examining family life since the 1960s up to 2010. But what's happened in that period is that from the 1960s and 70s, we do see that inflationary period that really gets a kickstart with the funding of the Vietnam War and the welfare state. Then move forward to the 1970s. We come off the gold standard under Nixon's temporary uh suspension of uh convertability. >> He had to protect us from those speculators. Come on. >> Those darn speculators, man. Uh so >> back in the port dollars minding his own business. Yeah. >> Yeah. Yeah. And and so this is a period where uh most people know right this is the 60s and 70s this is a real spike in the divorce rate and indeed that was the case. Uh and then you look at the 1980s and that that divorce rate kind of levels off. Now, an overly simplistic approach. If somebody were to say inflation in the family and oh, divorce, oh, you're just saying that uh when prices go up, divorce happens. No, not exactly. What has happened over time is that indeed there was a leveling off of divorces in the 1980s and then about late 80s up until today, divorce rates have continued to decline. Mhm. >> Well, what I'm making the argument for is that what has happened is that there has been a liquidation of marriage among the middle and lower classes. And so the marriages that are forming in the 1980s and later tend to be amongst two college graduates who have very similar values, very similar earning potential and so on and so forth. And they are among again tend to be among the winners in an inflationary world. They work in industries that are largely stable. They're not riddled with job loss and uncertainty and their family lives remain relatively stable. And so that I think is a better explanation for the the pattern that we've seen in divorce rates over time. So it is not as simple as oh inflation up divorce is up. it that's not exactly what's happening because we have to factor in what what has been happening to divorce rates over time. So I hope that makes sense. Uh >> but that's just one category that's really important in family economics that I think has been underststudied. We don't totally understand the um the causes for the rise and then fall. But I think that what I've described here is um is hopefully somewhat accurate. There's been this liquidation of marriage among u the middle and lower classes and that's why they don't have as many divorces. So, >> okay. So, and it actually ties into your joke, right? Let me say this to you and make sure. Are you saying something like when it was unexpected and yet like you had a bunch of families that were formed under like the old rules of the game as it were the 50s and 60s and then the inflation of the 70s going in the early 80s hit >> that was just kind of out of the blue for a lot of people and it really strained traditional marriages. Yeah. But then once you're through that shock and now we're in the new normal and and inflation, you know, came down from what it was like in 79 or whatever >> that you're saying going forward people are more robust that they're not getting married in the first place, >> right? >> Okay. >> They're not getting married in the first place. So, right, cohabitation, um, much more common. And, and look, I'm not saying that, uh, this is one of the the challenges of writing a book like this. When you introduce a new variable that hasn't really been discussed, that variable being that inflation matters to family life. >> Folks will think, oh, well, you're saying that, you know, culture doesn't matter, feminism doesn't matter, education. No, no, no. All of these things matter. It's just that, uh, inflation hasn't been really given its its due to this point. Uh and so it is the case that if you look at divorce rates say in the 1970s and then later to the 80s uh that no fault divorce law became uh really the uh the standard approach throughout the states and um there is a a bit that I talk about on that and uh actually there's an economist I believe he's at the University of Michigan um Wolfers Steven Wolers if I remember his first name um but he did a study taking a close look at this uh using some econometrics and so forth and said that no fault divorce did have sort of an immediate and positive impact. In other words, new no fault divorce law divorces go up. Uh but then it it stabilized uh that was sort of a short-lived increase in divorce rates. And his explanation, and I think it's it's a reasonable one, was that those people who took advantage of the no fault divorce laws, those marriages were already on the rocks to begin with. >> So, they were already teetering on the edge of of coming apart anyways. And so, that's how he explains that that short-term bump in inflation rates that are derived from no fault divorce law. So, not saying that divorce law doesn't matter. um custody law that has been shown to matter in divorce decisions. It's just again the point of bringing this book forward is that inflation and the cultural uh consequences of inflation they also matter. >> Yeah. And I guess to it sounds like you're trying to as Austrians typically do that they're aware of, you know, some of the more hyper rationalistic models and like those tendencies, but they also just don't say let's assume for modeling purposes that people really are like that and kind of, you know, try to be realistic that for for example, another one where I I've seen the reaction you're talking about is if somebody says, "Hey, you know, if the government starts paying unwed mothers to have more babies, don't be surprised when they have more babies and people will say, "Oh, so you're saying, you know, some particular, you know, 18-year-old just sitting at home and like runs a spreadsheet and then decides to go have a baby with, you know, her boyfriend and then break up with." And it's like, "No, that's not what they're saying." But with million, tens of millions of people in the relevant demographic and you all of a sudden introduce this new >> incentive that Yes. statistically in the aggregate over decades, you're going to see an effect of that. Like that's >> Yeah. And Yeah. And that's a cultural effect, right? It's it's um uh one of the categories of the inflation culture that I talk about in the book is the the enhancement or the growth of moral hazard. Uh it's the idea that you're going to take some risks or take on some uh some challenges or risky behaviors that you that you wouldn't otherwise because there's this idea that yeah, there's some kind of back stuff. I I should be able to fall back on uh really society kind of bailing me out, if you will. Mhm. >> Uh we we've talked a lot in um Austrian circles about the impact of say corporate bailouts um that's one type of manifestation of moral hazard in the banking industry or the auto industry. But there's also this mentality that uh among the poor if you look around and say well well there are some fallback mechanisms. I mean I can pretty easily go and uh get income supplements or housing subsidies. uh this is available to me and that becomes especially true in a second generation of people who have grown up under the welfare state and the fallback mechanisms that it does provide and so again as you said Bob it's not that you know some young woman is doing what you said she's you know looking at okay I'm 18 you know now I'm eligible for benefits all right you know where where am I going to find myself impregnated that that's not that sort of process but a general sense that there is that sort of fallback mechanism. It's modeled for us and um it unfortunately is one of the impacts of the welfare state of course. Now I think I should probably comment on this just a little bit. Um there's been a lot of discussion as you said about the impact of welfare state uh incentives that it creates and and it does again have some impact on family life, family formation. uh but I was really drilled on this in my uh dissertation um and the question was about well what about the welfare state what about the ideology of interventionism that's important >> but if we look at the US data I'll just ask the question which came first the the mechanisms of inflation through our central bank or the uh the welfare state the great society of of Lynen Johnson well we were on a a a slow but steady and and certainly I think in in some of your recent podcasts you've walked through that you know the Fed has not always behaved in the same way right there have been different eras in which there have been accelerations >> of uh uh of money money printing uh other times where it hasn't been as um as extreme. So it's not as though the Fed has had a single monolithic um you know on-ramp to the same inflation rate. We know that that's not the case. But, you know, you think of the lifestyles that um that emerged in the 1920s. I mean, we call it the roaring 20s for a reason. It's not just the stock market, but you look internationally at the inflationism that was happening in the 20s, and you see some cultural effects in Hungary, in Germany of uh more extreme forms of inflation. But that uh those are just some historic episodes running up to the creation of the American welfare state that you know were were inflationary periods. And so what is um what is really the the cry of the the or the origins of the welfare state? It's that well the poor can't make ends meet so we've got to subsidize their lifestyle. Well why were they unable to make ends meet? Mhm. >> It's because they were already living in an inflationary world where the the necessities of life were becoming increasingly difficult to afford. And so I make the argument that look inflationism even though it's not as bad as it could have been all the time. that preceded the welfare state and is often the reason that people ask for uh welfare solutions and that leads to what uh I and others have described as an intervention spiral. Right? Instead of undoing the root cause of repealing the root cause of the problems that we see today, we slap on legislative or regulatory band-aids that um lead to other unintended consequences. And also Jeeoff, if you can maybe elaborate a bit because I I think like a let's say a standard conservative for example hearing this and like seeing the title of your book and everything might just say, "Oh yeah, like it's it's hard to buy a house now because of inflation and you know you're a young man and of course that's going to delay the formation of a family. You know that's which is all true. But in the Austrian tradition specifically, it's not just that oh inflation's bad because it makes things expensive. Mhm. >> It's that it causes the boom bus cycle at least, you know, the way that and that. So again, it's it's not simply that oh wow, stuff gets more expensive over time. It's that these wild swings in the business cycle with unemployment and people getting thrown out of work, >> right? >> That that also in the Austrian view is ultimately one of the offshoots of inflationism. >> Yeah, that that's right. So, uh, some of the conservative talking points have been, and I I saw, I think a clip from Tucker Carlson a while back, and it might have been at a CPAC event or something like that, and he was railing against uh, credit card issuance to young people, you know, 25, 30%, you know, these, you know, they're gouging, they're making life harder. And as an Austrian said, well, yeah, high interest rates, that that's not real great to deal with it, but what's the root cause? The root cause of this cycle is the suppression of interest rates, right? And this is something that we need to be concerned about and I think is uh unique to the Austrian school that we sound the alarm when interest rates are driven below what you know the market would would produce and and so yeah that that suppression is really the key that we want to look at. So yeah, you're you're right. That is definitely a conservative talking point. And so we we've got an opportunity, I think, >> to speak to our conservative friends uh and really uh do a good job hopefully of informing them of the the harmful effects of the Federal Reserve's interest rates oppression. Well, and that I mean just to expand on that, it seems to me and you tell me if I'm overstepping here that >> part of the the contribution you're making here with your book is to say to like the average, you know, let's say MAGA person or I don't know what what label you want to put on, but who in some kind of particularly with the tariff issue >> saying all you, you know, libertarian economists and even you Austrian types specifically, yeah, we we get where you're coming from. Economic liberty is great, but you know, there's bigger things. there's more important stuff going on like cultural issues and kids, you know, look at all these and it seems like you're kind of showing the these aren't just completely divorced, no pun intended, divorced concepts that that actually you should care about the central bank even if you don't care just about GDP, real GDP growth that actually >> this affects a lot of those other cultural social issues that conservatives care about. >> Yeah, Bob, I think you're hitting the nail on the head. I I I share those concerns. Uh you know, as a Christian, as a person who appreciates uh traditional values and so on, I I see that there is a problem here. Short short- termism, materialism, uh you know, rampant indebtedness for, you know, I work at Cornerstone University and we have students at every university throughout the country going into debt and this is causing um or is contributing to some significant adulthood milestones. I I see the problems, but their solution is to add additional interventions. Uh but ours is to say time out. Let's look at what's gotten us here. And inflation is a major part of that picture of our cultural decay. And and that's why uh it it is an interesting shift for me because my dissertation was entitled the family in the inflation culture. But for most publishers, that's not a very appealing title. So a more snappy title if you will was inflation in the family but I think that the dissertation really that title really gets at it >> is that there are these cultural effects that um that come about. So I that come about from an inflationary monetary policy. So uh so those three there actually three categories of cultural effect. Uh I mentioned um uh moral hazard but also there's two other key ones. One is the enhancement or the acceleration if you will of income inequality. So this is something that again uh hearkens back to the canion effect of rising wealth inequality that comes about under an inflationary regime. Uh and then the third one is a culture of indebtedness because uh Gito's um ethics of money production has a nice chapter on how to be frugal in the traditional sense in an inflationary environment is financial suicide. >> Uh but what is going to make you succeed? Well, this comes back to houses, right? Well, it's to get into the housing market and to leverage as much as you possibly can as early as you can. Uh so the old advice about when should I buy a house is well yesterday right it's to get in early and with as much credit leverage as you can uh and that is uh what we call the debt culture in the book but >> just on that point Jeeoff if you don't yeah I've been at at seminars you know for my consulting work with various groups that it just my travels took me to places where I would be sitting in seminars of people >> like teaching the audience like having workshops on here's how you become like a house flipper on the weekends that you know that kind of thing. >> And in there like I I've heard people from the state and they're what's funny is they're not wrong in terms of the narrow thing what they're saying saying like oh don't ever pay down why would I ever want to pay down my mortgage debt 30-year fix when I don't care what the house is like. All I know is I got to wait just 5 years and inflation's going to mean I can rent that place out for more than the mortgage payment. Like I don't care what the place is like. You know what I mean? Like that kind of thinking. And in its own terms, especially back like when there was the deduction on the the interest. So anyway, it was it was amazing that you know certainly you make a Dave Ramsey fall out of his chair or something, but in terms of the advice that yeah, if you're in this environment right now and banks are willing to give you 30-year loans at a fixed interest rate on on real estate, like worst that you know, you could just bulldoze the place in 10 years and start from scratch and you're probably still going to do okay. So anyway, I'm just saying that yeah, that's all driven because of this inflationary environment >> and and that that is sort of a subcategory or maybe you might call a consequence of that that debt culture that rush into debt. It it breeds financial fragility at the household level. And so uh and it's not just houses. I mean, you spend a little time, you know, scrolling uh YouTube shorts or Tik Tok, you'll have folks out there saying, "Oh, here's a great scheme to leverage your credit card and go ahead and buy luxury watches and then flip them." You know, everybody's, you know, it's arbitrage, man. you know th this is uh this is a practice that goodness sakes I mean that just is so far removed from sort of the conventional traditional approach to households or individual finance and we can look at that and say my gosh you're setting yourself up for financial ruin but and that could be true but what about your family right if you're a a a person who's maybe you know on the side not telling your spouse you're opening up extra credit cards to go do this for that uh to leverage your way and take advantage of the arbitrage like yeah you're you're real swift there fella you are setting yourself up for um a very bad financial outcome and then there's impact on your family life this is there's no way around this and you know other forms of um sort of this financial fragility that I get really concerned about because as I work with young people especially young men who are really into their sports if you're on sort of the middle class to lower end of things. You might not be taking financial risks by leveraging into houses and flipping them and doing credit cards to flip luxury goods, but you might be sport gambling. >> Mhm. >> In order to hit it big. And that's another form of that's probably moral hazard as well, just increased risk takingaking. Uh, and that's a major concern. Again, if you're that sort of young man and you're trying to um, you know, court a young lady uh, and she realizes that these are your financial habits, good luck. That that does not bode well for family formation, uh, let alone your own personal financial situation. And so um it it really it just kind of puzzled me as I was doing the literature review for the dissertation in this book >> that many economists of different stripes mainstream Chicago uh Keynesians were making some connections between uh say rising house prices and delays in marriage but nobody was taking just the one additional step to say that gee monetary policy might have something to do with rising home prices. And so in a sense, I feel like this was a very uh sort of elementary um exercise on my part, but I was really um set back when I realized nobody nobody took that extra step. And and I think that's one of the benefits of studying Austrian economics is we do get trained in uh a little bit longer causal uh causal chains and explanations for what's happening in the real world. Whereas the positivist approach is to say plug X variable, you're going to get Y variable. How long does it take and and not go much farther beyond that? And so uh and for me this approach has been very um rewarding on a lot of fronts. As an undergrad, I studied uh history as well as economics. Um also have some theological training. So, I have uh a little bit of um you know, well, not a little bit, I have a lot of interest in in cultural, social, and even moral um um moral attitudes that prevail in society. And so, this project uh allowed me to take kind of an integrated approach to what's happening in family life. And so, um yeah, so that's kind of where this all came from. >> Okay. Well, great. Yeah. just my the joke when I was back when I was an academia and go to like these lunch brown bag seminars and people would come and present their papers with the econometric and I would just always say the grad students like you got to get two stars in the in the results otherwise it's not important you know in terms of like you know they would do the regression analysis which >> yeah so and that was one that was uh something I acknowledged right away we are looking at a data set about family formation fertility divorce over 60 plus years so to find statistical significance because there are so many things that matter in family formation, fertility, and so on that we're probably not going to get these knock them dead econometric results and wow the mainstream folks. Uh that's not really what I'm trying to accomplish here. trying to say that that um you know monetary policy inflationism has an impact on culture and the way we live our lives and that manifests in what we've seen in family over the past 60 years or plus 60 years or more. >> Well, that's a great place to wrap up folks. My guest has been Jeff Dgner. The book is Inflation and the Family. Jeff, thanks for your time here today and for writing the book. >> Oh, thank you, Bob. I appreciate the invitation. Sure thing. Thanks everybody for tuning in. We'll see you next time. >> Check back next week for a new episode of the Human Action podcast. In the meantime, you can find more content like this on mises.org. [Music] [Applause] [Music] [Applause] [Music] [Applause]
Inflation’s Impact on Marriage and Children
Summary
Transcript
This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's your host, Dr. Bob Murphy. >> Jeeoff, welcome to Human Action Podcast. >> Hi, Bob. Thanks for having me. It's a real real honor to join you. >> Oh, I appreciate that. Glad you could be here. So you have a book on inflation in the family and I want to just go through and I know you've been doing the book tour and such but it's of particular relevance to this audience and specifically I noticed early on you mentioned how like the inspiration for you going down this path was a footnote in a GTO Holman book. Is that right? >> That's right. And it really corresponds with my introduction to the Austrian School of Economics. Uh the book we're referring to here is Gito's 2008 ethics of money production and uh I'm a relative newcomer to Austrian economics. I didn't even discover the school of thought until 2010. Uh interestingly at a conference at Hillsdale College which I know Bob you had uh been there for a bit and that was the first place I had heard the name of Mises or Hayek and so began to dive in and quickly found the >> mises.org org website and all the great resources there. And that title, the ethics of money production really caught my eye. So, uh, funny story on that. This was in the days I wasn't making much money and I was working at a school and I downloaded the PDF and I got tired of reading on the screen. So, printed it off uh in total and I got a nice finger wagging from one of my colleagues about using too much printer paper. But as I was reading through the book, uh, chapter 13 had this line, very important one, that said that fiat currency inflation is a juggernaut of social, economic, cultural, and spiritual destruction. And that's a very thoughtprovoking line, but as I was sort of living some of the cultural and social impacts, uh, especially as a young married guy trying to make ends meet, that really hit home in a very practical way. And so little did I know that about 11 about 10 years later I would be studying with Guido in the PhD program in AA France. And so that's a little bit of that story but that line has always stuck with me and uh as you noted was really the inspiration for my dissertation which has now been turned into this book. So that's the story of where this came from. >> Okay. Well great. So, I I imagine people have a general sense of where we're going with this and some of the particulars. But before we dive into that, let me just ask you cuz I was fascinated to see as I was looking through the book that you have a whole section like the the the history of economic thought on this topic before the rise of like the Gary Becker approach to, you know, social analysis using economic tools. So, can you maybe summarize some of the highlights of, you know, what was the state of the literature on this topic before the, you know, Chicago school lens? >> Sure. Yeah, I'd be happy to. And that that history of thought does go back quite a ways. For most folks who remember their econ 101 class, you might recall that the word economics in English is derived from the Greek okonomia. And that is actually a reference to a book by a Greek writer by the name of Xenopon. And it indeed was all about household management. And most folks are probably familiar with the term ooass when they go through their dairy section and see oas yogurt, right? This is but this is a reference to sort of like homemade goodness of you this yogurt, right? Uh but that's the idea of an ooas. It's a Greek household. And one thing that people should understand is that the Greek households, the ooas was it had a really significant division of labor. uh people who would have been regarded as I'll use air quotes here regarded as slaves had a lot of different occupations within these icos households. Everything from financial managers to farm managers to even uh medical and teaching services within a household. And so again, you've got an extensive division of labor. And when we think about the study of economics, that's one of the foundational principles is that we grow wealth and improve our standard of living by engaging in an extensive division of labor. And for the Greeks, this is happening in the ooas, the household. And as time develops, we see that really move throughout the rest of society. So this is uh really at the core. I I thought you know it's just interesting that there's been uh not as much work on family economics in the entire uh history of economics being done but it is interesting that the root of it was household management if you will. >> Well and what's interesting too is I don't think I it was ever called this like when I was going through school and for some people watching like I'm I'm not that old. Um but I I'm pretty sure like when my parents went to school there was it was called home like short for home economics. Yeah. Yeah. And so that that's been a point of confusion when I sometimes introduce my area of study here. I say family economics and it get somebody twist their head mean like home economics. Well, not exactly. What we're really looking at and this is a a reference to Becker and his work. He was calling on economists to look at the broader macroeconomy and see how uh those realities impact household life. And so in a sense I have that inspiration from uh professor Hollesman but then also from Becker who said let's take a look at macroeconomic variables and how it impacts the household. And so from uh the Greeks from Zenopon forward there is quite a string of uh of a history of economic thought around the family that's uh and that string is not um uh it's not as deliberate as it is incidental and and I can describe some of those thinkers but there there are breadcrumbs throughout the history of economic thought that point to economics and how uh the broader picture impacts household decisions but I'd love to touch on some of those if uh dive in. >> Yeah. >> Yeah. So, uh if you move on from from xenopon, we take quite a a jump forward and I like to as an Austrian go to the scholastic school and one figure in particular, Juan de Marriana. Now, a lot of your listeners are probably familiar with Deana and his strong condemnation of money debasement and saying that if a king or a prince does this, then that's grounds for tyrannicide. Right? So, a very controversial statement that got him into quite a bit of trouble in his day. But one of the things that in Deiana's writing that comes out very clearly is that it's the king's household, right? It's it's him and his servants and his family members who are the immediate beneficiaries of new money creation through this debasement process. And so De Marriana is concerned about moral questions here of excessive greed and so on and so forth and said look this is grounds for uh for removing a king uh detaching them from life itself for this kind of practice uh on moral grounds really. But De Marriiana is describing uh an effect that not too much later would be picked up by Richard Canton. And Richard Canteon 1700s there's a an essay on economics that we've got a great translation of at the Mises Institute that was overseen by Dr. Thornton and that's one of those great books that's available online for free. But it's Canton who really describes in household terms, and this is a really captivating bit of reading for me. He describes in household terms how when new money creation happens, you have these early beneficiaries, those first recipients of the new money creation. And he describes how their households will specifically be better off, better and higher quality food, better clothing, more ornate houses, and so on and so forth. So he describes those early recipients much like De Marriana had. But what Canton does is he then extends it to the later recipients and says look once that initial set of recipients has bid up prices then the folks who don't see their incomes increase or later recipients of new money creation they're left to deal with higher prices and they are harmed by this inflationary uh money growth. And so that really moves us forward into the 1700s and the thought there uh that that canon brings forward. But again, you know, Canton has his his main focus is not the family per se. >> It's just this is what the process of inflation looks like and how it manifests in society. >> Okay. Well, is it appropriate at this point to jump into like what Becker's approach was more specifically? Uh I I think we can go there and and of course Becker part of the Chicago school but we also when people think of the Chicago school they think of Milton Freriedman and of course his um his famous work on the positivist approach to economics really took hold and I think the rest of the Chicago school folks really um you know exemplified that and carried that approach forward. So for the listeners, the the positivist approach is really this approach of gathering data and putting that data into models to kind of discover economic law. And this is a a process that we as Austrians uh we uh take a little different approach. We want to take a logical deductive approach to derive economic law rather than this inductive approach. And so that's Becker's approach. Now there are some interesting things that come out of his um his book. So his famous book here um I like to have visual aids with me. So his book a treatise on the family really uh laid pulled together it was a treatise um that pulled together some of his early research from the 1950s and60s with other economists like Barrow and he consolidates it here in this book. Now, there's some some interesting things that come out of his approach. One of the things you have to do in positivism in order to make your models work in a sort of elegant mathematic fashion is that you've got to make some assumptions about the way the world works. And one of the most startling examples of this was when Becker's describing parental choices around inheritance. He makes the assumption that over the lifespan of a family that parental preferences do not change. You read that and say, you know, this is not a real world assumption. We know that that some kids behave badly. Uh certain things happen in family life. Maybe your assets when you go to make the inheritance aren't quite what you thought they would be. This is really disconnected from real family life. And so that's one area where you take a look at the positivist approach and say, "Boy, these are really strong assumptions that don't really align with the real world." Now, uh, that's a strike against Becker. Now, what was interesting and I was kind of happy to see especially as I was working through the dissertation and and bookw writing process is that Becker at one point when he's talking about fertility choice uh another key area of family economics he mentions the importance of interest rates >> and that there is a positive correlation between interest rates and total fertility and so That's something that I did want to take a look at and explore a little more deeply and develop a theory in the Austrian tradition that looks at the impact of interest rates and how that would impact our behavior or what we call our our time preference rates. And so that was really a nice springboard for me to develop um an Austrian theory around the relationship between interest rates and fertility. So that's a an important section of my book. I think >> out of curiosity I mean does it move that other things equal? The lower the interest rate people have more kids. Uh actually the lower the interest rates uh right this is an indicator um if we've got a central bank that is suppressing interest rates this is going to drive a higher time preference rate. So what do we get when we have that suppressed interest rate? >> Well we tend to have overconumption on the part of households and this becomes a challenge. If we're consuming all of our income we don't have much savings for the future. And having children is really a future oriented sort of activity. Uh sort of thing you need to to plan a little bit for what's coming next. Not just nine months down the road, but you know 5 10 20 years or more. And so what um what I've theorized here is that a suppression of interest rates is going to drive more of that overconumption which makes having additional children uh a little more difficult. uh you might say it it fosters a climate or a culture of short- termism and certainly children don't really fit that kind of category that kind of plan that kind of way of living. >> Okay. Yeah. So just to what where I was where my intuition misled me there is because I was thinking there's a sense in which children are in a long-term investment right like it's the upfront cost and so and you know oh and if interest rates are lower other things equal you engage in longerterm projects but it's not that you're sinking you're not borrowing money from the bank in order to go have a kid and so that's kind of the difference is like building an apartment complex or something. >> Yeah. Yeah. Uh and and of course this this points to one of the things that um you know monetary policy doesn't impact everyone in the same way. >> Mhm. >> Right. And that's one of the points that can and all the Austrians have made is that with that interest rate suppression through increased money supply that there are some who benefit and then there are others who are harmed. And so uh this this observation kind of matches up with some work by Charles Murray. So, Charles Morano, he's a controversial author for a number of reasons, but setting that aside, his uh 2012 book entitled Coming Apart described how the upper echelons of society in the United States from the 1960s and forward have largely maintained traditional family life and traditional fertility patterns where it's uh the old nursery rhyme, you know, uh first comes love, then comes marriage, then comes the baby in the baby carriage, Right? He's he's saying that people who have been on the um the winning side of the economy over the last 60 years, they follow that traditional pattern. >> Mhm. >> Uh whereas much of the middle class and virtually all of the poor have set aside these traditional family patterns and uh so he calls it a new form of segregation. But as as I was reading Murray's work, it occurred to me, wait a minute, he is describing household realities for the beneficiaries of an inflationary economy and then the downsides for households that are uh that are on the wrong end of it. Now, Murray was not attempting to give a full explanation as to why this has happened, but he did point to things like education and how there's been a new approach to that since the 1960s. And he says that it's the return on brains that make some households wealthier and those who don't get the same amounts of education, they wind up worse off. Now, as I read that, I thought, well, wait a minute. It might not be so much the return on brains as it is the returns in a financialized economy. In other words, the industries that have benefited from financialization, the individuals who are in those industries, their households are better off. And wouldn't you know it, it's the households uh largely in and around the Washington DC area, areas where you have massive government expenditures, whether it's through um uh military-industrial complex, uh maybe the green industrial complex in some cases, you'll see those individuals and their households doing better and having uh a better shot, if you will, at sustainable household life, taking care of their kids, having the desired number of kids, investing in your children for education and so on and so forth. But those who have um uh not benefited from that process have uh been left behind. And if you're a young man who's, you know, maybe got an unstable work situation, you're in an industry that doesn't have much potential income growth, that frankly does not make you a great candidate for marriage. >> That's just the facts of it. And >> that's what Murray was observing. But I think we just have a um what I wanted to provide here was an Austrian explanation that's related to monetary policy and how it's made its way through culture and family life. >> Okay, thank you for that. And maybe just as as an I don't know if aside is the right word, but just to elaborate a bit more for people who aren't familiar like in the economics literature and just in generally like the the Becker approach to social issues, it's very I don't know rationalistic, let's say. And so like like the he might have something on the economics of crime. And so there the issue is not just moralistically like, oh, stealing is bad and let's punish it, but also well, hey, you know, if you're a criminal and you're rational and let's or let's at least model it as if you're just rational and looking at costs and benefits and if the punishment, you know, like and so that's like leads to things like maybe it's better to spend more money on catching criminals and giving them a light sentence versus, you know, grabbing one guy and giving him a, you know, throwing the book at him. Anyway, just that sort of approach which >> to some people strikes them as like, oh, that's I don't want to even think about these issues. But anyway, it's a nice lens if you if you want to go ahead and look at it like that to say, yeah, it's not that the axe murderer is sitting around, you know, engaging in Socratic introspection. But on the other hand, it's also not correct just to say, oh, these people are, you know, just all unhinged lunatics and and criminals don't respond to incentives what whatsoever. Like that's also that would be incorrect, too. >> Right. That that's a great point and I I want to um hook on to that word rational a little bit because one of the other thinkers who preceded Becker was Joseph Schumpeder and he had a passage in his famous book um uh on you know really the process of capitalism uh democracy and socialism. So this this book 1942 it was written and he has a passage in there about the loss of the what he calls the family motive. There's a really interesting passage there and in it he says that due to the successes of capitalism the wealth that it produces that eventually over time people will develop sort of a hyperrational outlook on life and we uh this is kind of scheer talking in predictive terms but he says that people will develop this hyper sensitivity to costbenefit analysis and everything will be sort of a uh coldly calculated decision. >> And because capitalism brings such prosperity, prosperity and uh enjoyable experiences that people will begin to diminish the value of family life and especially the value of children relative to the benefits that they experience due to the wealth that comes through the capitalist system. Now what's interesting there is that Schumpeder is really describing a capitalist system under conditions of intervention. He is describing I think a world where uh it's not far off from the world that we that we sort of have where you have uh values being sort of inverted uh where careerism is more important than say raising a family materialism more important than um maybe leisure activities. the arts or just enjoying a barbecue with your friends, right? Um, and so he's describing that world, but what he doesn't do is describe the the real mechanics of how we might get there as a society. How might we arrive at that more materialistic, rationalistic, um, or you might say hyperrational way of thinking. and is my viewpoint that this is one of the outcomes or consequences of living in an inflationary world where we do indeed need to think more about stock portfolios than we otherwise would have. >> We need to think more and more about returns to our time at work so we can service our debts and rising cost of living than we otherwise would. And so I I think that um uh Schumper was uh he was around the target but um but he missed identifying what might drive people to that kind of rationalistic mindset and then the devaluing of family life but especially devaluing of children. Mhm. Well, let me give you a chance here because you kind of just walked into the next point I wanted to make that I wanted to ask you like these more esoteric deep thought questions, but why don't we do the meat and potatoes that I'm sure you know some of the listeners are dying to know >> that like things like, oh gee, what's going on with the, you know, divorce rate and fertility in general? And >> I gather that at least part of your story is that you're saying this isn't just >> looking at oh what's happening on TV or something that inflation has something to do with a lot of these broader trends that a lot of people are worried about. >> Yeah. And so the these are some broad trends that have have different outcomes. So I'll kind of work backwards. Really when we we think about family economics there's three categories. Uh the three are family formation or marriage uh and then fertility choices. The third then is divorce as you mentioned and divorce is the least uh studied and least understood phenomenon because look we know there are many many reasons why marriages break apart but when you look at survey data and when people talk about the causes of divorce uh money or finances is one of the leading uh reasons I now here's a here's a terrible economist joke but when I raise this question to new audiences I say what's the leading cause of divorce course and they start chitchatting. It's this and it's that. I said, "Well, marriages, right? You can't you can't." All right. So, yeah, dad jokes. There you go. >> Well, anyhow, financial >> I thought you were going to say half the crowd would say men and the other half would say women. >> Yeah, there you go. But, uh but this this is the case, right? Um financial tension, questions around money, deceit around money. Uh these are some some major categories. Now uh the question I want to address here though is what has happened to divorce rates over time. Um really interesting kind of phenomenon has happened and again I I use Charles Murray's work as kind of a springboard for this. He was examining family life since the 1960s up to 2010. But what's happened in that period is that from the 1960s and 70s, we do see that inflationary period that really gets a kickstart with the funding of the Vietnam War and the welfare state. Then move forward to the 1970s. We come off the gold standard under Nixon's temporary uh suspension of uh convertability. >> He had to protect us from those speculators. Come on. >> Those darn speculators, man. Uh so >> back in the port dollars minding his own business. Yeah. >> Yeah. Yeah. And and so this is a period where uh most people know right this is the 60s and 70s this is a real spike in the divorce rate and indeed that was the case. Uh and then you look at the 1980s and that that divorce rate kind of levels off. Now, an overly simplistic approach. If somebody were to say inflation in the family and oh, divorce, oh, you're just saying that uh when prices go up, divorce happens. No, not exactly. What has happened over time is that indeed there was a leveling off of divorces in the 1980s and then about late 80s up until today, divorce rates have continued to decline. Mhm. >> Well, what I'm making the argument for is that what has happened is that there has been a liquidation of marriage among the middle and lower classes. And so the marriages that are forming in the 1980s and later tend to be amongst two college graduates who have very similar values, very similar earning potential and so on and so forth. And they are among again tend to be among the winners in an inflationary world. They work in industries that are largely stable. They're not riddled with job loss and uncertainty and their family lives remain relatively stable. And so that I think is a better explanation for the the pattern that we've seen in divorce rates over time. So it is not as simple as oh inflation up divorce is up. it that's not exactly what's happening because we have to factor in what what has been happening to divorce rates over time. So I hope that makes sense. Uh >> but that's just one category that's really important in family economics that I think has been underststudied. We don't totally understand the um the causes for the rise and then fall. But I think that what I've described here is um is hopefully somewhat accurate. There's been this liquidation of marriage among u the middle and lower classes and that's why they don't have as many divorces. So, >> okay. So, and it actually ties into your joke, right? Let me say this to you and make sure. Are you saying something like when it was unexpected and yet like you had a bunch of families that were formed under like the old rules of the game as it were the 50s and 60s and then the inflation of the 70s going in the early 80s hit >> that was just kind of out of the blue for a lot of people and it really strained traditional marriages. Yeah. But then once you're through that shock and now we're in the new normal and and inflation, you know, came down from what it was like in 79 or whatever >> that you're saying going forward people are more robust that they're not getting married in the first place, >> right? >> Okay. >> They're not getting married in the first place. So, right, cohabitation, um, much more common. And, and look, I'm not saying that, uh, this is one of the the challenges of writing a book like this. When you introduce a new variable that hasn't really been discussed, that variable being that inflation matters to family life. >> Folks will think, oh, well, you're saying that, you know, culture doesn't matter, feminism doesn't matter, education. No, no, no. All of these things matter. It's just that, uh, inflation hasn't been really given its its due to this point. Uh and so it is the case that if you look at divorce rates say in the 1970s and then later to the 80s uh that no fault divorce law became uh really the uh the standard approach throughout the states and um there is a a bit that I talk about on that and uh actually there's an economist I believe he's at the University of Michigan um Wolfers Steven Wolers if I remember his first name um but he did a study taking a close look at this uh using some econometrics and so forth and said that no fault divorce did have sort of an immediate and positive impact. In other words, new no fault divorce law divorces go up. Uh but then it it stabilized uh that was sort of a short-lived increase in divorce rates. And his explanation, and I think it's it's a reasonable one, was that those people who took advantage of the no fault divorce laws, those marriages were already on the rocks to begin with. >> So, they were already teetering on the edge of of coming apart anyways. And so, that's how he explains that that short-term bump in inflation rates that are derived from no fault divorce law. So, not saying that divorce law doesn't matter. um custody law that has been shown to matter in divorce decisions. It's just again the point of bringing this book forward is that inflation and the cultural uh consequences of inflation they also matter. >> Yeah. And I guess to it sounds like you're trying to as Austrians typically do that they're aware of, you know, some of the more hyper rationalistic models and like those tendencies, but they also just don't say let's assume for modeling purposes that people really are like that and kind of, you know, try to be realistic that for for example, another one where I I've seen the reaction you're talking about is if somebody says, "Hey, you know, if the government starts paying unwed mothers to have more babies, don't be surprised when they have more babies and people will say, "Oh, so you're saying, you know, some particular, you know, 18-year-old just sitting at home and like runs a spreadsheet and then decides to go have a baby with, you know, her boyfriend and then break up with." And it's like, "No, that's not what they're saying." But with million, tens of millions of people in the relevant demographic and you all of a sudden introduce this new >> incentive that Yes. statistically in the aggregate over decades, you're going to see an effect of that. Like that's >> Yeah. And Yeah. And that's a cultural effect, right? It's it's um uh one of the categories of the inflation culture that I talk about in the book is the the enhancement or the growth of moral hazard. Uh it's the idea that you're going to take some risks or take on some uh some challenges or risky behaviors that you that you wouldn't otherwise because there's this idea that yeah, there's some kind of back stuff. I I should be able to fall back on uh really society kind of bailing me out, if you will. Mhm. >> Uh we we've talked a lot in um Austrian circles about the impact of say corporate bailouts um that's one type of manifestation of moral hazard in the banking industry or the auto industry. But there's also this mentality that uh among the poor if you look around and say well well there are some fallback mechanisms. I mean I can pretty easily go and uh get income supplements or housing subsidies. uh this is available to me and that becomes especially true in a second generation of people who have grown up under the welfare state and the fallback mechanisms that it does provide and so again as you said Bob it's not that you know some young woman is doing what you said she's you know looking at okay I'm 18 you know now I'm eligible for benefits all right you know where where am I going to find myself impregnated that that's not that sort of process but a general sense that there is that sort of fallback mechanism. It's modeled for us and um it unfortunately is one of the impacts of the welfare state of course. Now I think I should probably comment on this just a little bit. Um there's been a lot of discussion as you said about the impact of welfare state uh incentives that it creates and and it does again have some impact on family life, family formation. uh but I was really drilled on this in my uh dissertation um and the question was about well what about the welfare state what about the ideology of interventionism that's important >> but if we look at the US data I'll just ask the question which came first the the mechanisms of inflation through our central bank or the uh the welfare state the great society of of Lynen Johnson well we were on a a a slow but steady and and certainly I think in in some of your recent podcasts you've walked through that you know the Fed has not always behaved in the same way right there have been different eras in which there have been accelerations >> of uh uh of money money printing uh other times where it hasn't been as um as extreme. So it's not as though the Fed has had a single monolithic um you know on-ramp to the same inflation rate. We know that that's not the case. But, you know, you think of the lifestyles that um that emerged in the 1920s. I mean, we call it the roaring 20s for a reason. It's not just the stock market, but you look internationally at the inflationism that was happening in the 20s, and you see some cultural effects in Hungary, in Germany of uh more extreme forms of inflation. But that uh those are just some historic episodes running up to the creation of the American welfare state that you know were were inflationary periods. And so what is um what is really the the cry of the the or the origins of the welfare state? It's that well the poor can't make ends meet so we've got to subsidize their lifestyle. Well why were they unable to make ends meet? Mhm. >> It's because they were already living in an inflationary world where the the necessities of life were becoming increasingly difficult to afford. And so I make the argument that look inflationism even though it's not as bad as it could have been all the time. that preceded the welfare state and is often the reason that people ask for uh welfare solutions and that leads to what uh I and others have described as an intervention spiral. Right? Instead of undoing the root cause of repealing the root cause of the problems that we see today, we slap on legislative or regulatory band-aids that um lead to other unintended consequences. And also Jeeoff, if you can maybe elaborate a bit because I I think like a let's say a standard conservative for example hearing this and like seeing the title of your book and everything might just say, "Oh yeah, like it's it's hard to buy a house now because of inflation and you know you're a young man and of course that's going to delay the formation of a family. You know that's which is all true. But in the Austrian tradition specifically, it's not just that oh inflation's bad because it makes things expensive. Mhm. >> It's that it causes the boom bus cycle at least, you know, the way that and that. So again, it's it's not simply that oh wow, stuff gets more expensive over time. It's that these wild swings in the business cycle with unemployment and people getting thrown out of work, >> right? >> That that also in the Austrian view is ultimately one of the offshoots of inflationism. >> Yeah, that that's right. So, uh, some of the conservative talking points have been, and I I saw, I think a clip from Tucker Carlson a while back, and it might have been at a CPAC event or something like that, and he was railing against uh, credit card issuance to young people, you know, 25, 30%, you know, these, you know, they're gouging, they're making life harder. And as an Austrian said, well, yeah, high interest rates, that that's not real great to deal with it, but what's the root cause? The root cause of this cycle is the suppression of interest rates, right? And this is something that we need to be concerned about and I think is uh unique to the Austrian school that we sound the alarm when interest rates are driven below what you know the market would would produce and and so yeah that that suppression is really the key that we want to look at. So yeah, you're you're right. That is definitely a conservative talking point. And so we we've got an opportunity, I think, >> to speak to our conservative friends uh and really uh do a good job hopefully of informing them of the the harmful effects of the Federal Reserve's interest rates oppression. Well, and that I mean just to expand on that, it seems to me and you tell me if I'm overstepping here that >> part of the the contribution you're making here with your book is to say to like the average, you know, let's say MAGA person or I don't know what what label you want to put on, but who in some kind of particularly with the tariff issue >> saying all you, you know, libertarian economists and even you Austrian types specifically, yeah, we we get where you're coming from. Economic liberty is great, but you know, there's bigger things. there's more important stuff going on like cultural issues and kids, you know, look at all these and it seems like you're kind of showing the these aren't just completely divorced, no pun intended, divorced concepts that that actually you should care about the central bank even if you don't care just about GDP, real GDP growth that actually >> this affects a lot of those other cultural social issues that conservatives care about. >> Yeah, Bob, I think you're hitting the nail on the head. I I I share those concerns. Uh you know, as a Christian, as a person who appreciates uh traditional values and so on, I I see that there is a problem here. Short short- termism, materialism, uh you know, rampant indebtedness for, you know, I work at Cornerstone University and we have students at every university throughout the country going into debt and this is causing um or is contributing to some significant adulthood milestones. I I see the problems, but their solution is to add additional interventions. Uh but ours is to say time out. Let's look at what's gotten us here. And inflation is a major part of that picture of our cultural decay. And and that's why uh it it is an interesting shift for me because my dissertation was entitled the family in the inflation culture. But for most publishers, that's not a very appealing title. So a more snappy title if you will was inflation in the family but I think that the dissertation really that title really gets at it >> is that there are these cultural effects that um that come about. So I that come about from an inflationary monetary policy. So uh so those three there actually three categories of cultural effect. Uh I mentioned um uh moral hazard but also there's two other key ones. One is the enhancement or the acceleration if you will of income inequality. So this is something that again uh hearkens back to the canion effect of rising wealth inequality that comes about under an inflationary regime. Uh and then the third one is a culture of indebtedness because uh Gito's um ethics of money production has a nice chapter on how to be frugal in the traditional sense in an inflationary environment is financial suicide. >> Uh but what is going to make you succeed? Well, this comes back to houses, right? Well, it's to get into the housing market and to leverage as much as you possibly can as early as you can. Uh so the old advice about when should I buy a house is well yesterday right it's to get in early and with as much credit leverage as you can uh and that is uh what we call the debt culture in the book but >> just on that point Jeeoff if you don't yeah I've been at at seminars you know for my consulting work with various groups that it just my travels took me to places where I would be sitting in seminars of people >> like teaching the audience like having workshops on here's how you become like a house flipper on the weekends that you know that kind of thing. >> And in there like I I've heard people from the state and they're what's funny is they're not wrong in terms of the narrow thing what they're saying saying like oh don't ever pay down why would I ever want to pay down my mortgage debt 30-year fix when I don't care what the house is like. All I know is I got to wait just 5 years and inflation's going to mean I can rent that place out for more than the mortgage payment. Like I don't care what the place is like. You know what I mean? Like that kind of thinking. And in its own terms, especially back like when there was the deduction on the the interest. So anyway, it was it was amazing that you know certainly you make a Dave Ramsey fall out of his chair or something, but in terms of the advice that yeah, if you're in this environment right now and banks are willing to give you 30-year loans at a fixed interest rate on on real estate, like worst that you know, you could just bulldoze the place in 10 years and start from scratch and you're probably still going to do okay. So anyway, I'm just saying that yeah, that's all driven because of this inflationary environment >> and and that that is sort of a subcategory or maybe you might call a consequence of that that debt culture that rush into debt. It it breeds financial fragility at the household level. And so uh and it's not just houses. I mean, you spend a little time, you know, scrolling uh YouTube shorts or Tik Tok, you'll have folks out there saying, "Oh, here's a great scheme to leverage your credit card and go ahead and buy luxury watches and then flip them." You know, everybody's, you know, it's arbitrage, man. you know th this is uh this is a practice that goodness sakes I mean that just is so far removed from sort of the conventional traditional approach to households or individual finance and we can look at that and say my gosh you're setting yourself up for financial ruin but and that could be true but what about your family right if you're a a a person who's maybe you know on the side not telling your spouse you're opening up extra credit cards to go do this for that uh to leverage your way and take advantage of the arbitrage like yeah you're you're real swift there fella you are setting yourself up for um a very bad financial outcome and then there's impact on your family life this is there's no way around this and you know other forms of um sort of this financial fragility that I get really concerned about because as I work with young people especially young men who are really into their sports if you're on sort of the middle class to lower end of things. You might not be taking financial risks by leveraging into houses and flipping them and doing credit cards to flip luxury goods, but you might be sport gambling. >> Mhm. >> In order to hit it big. And that's another form of that's probably moral hazard as well, just increased risk takingaking. Uh, and that's a major concern. Again, if you're that sort of young man and you're trying to um, you know, court a young lady uh, and she realizes that these are your financial habits, good luck. That that does not bode well for family formation, uh, let alone your own personal financial situation. And so um it it really it just kind of puzzled me as I was doing the literature review for the dissertation in this book >> that many economists of different stripes mainstream Chicago uh Keynesians were making some connections between uh say rising house prices and delays in marriage but nobody was taking just the one additional step to say that gee monetary policy might have something to do with rising home prices. And so in a sense, I feel like this was a very uh sort of elementary um exercise on my part, but I was really um set back when I realized nobody nobody took that extra step. And and I think that's one of the benefits of studying Austrian economics is we do get trained in uh a little bit longer causal uh causal chains and explanations for what's happening in the real world. Whereas the positivist approach is to say plug X variable, you're going to get Y variable. How long does it take and and not go much farther beyond that? And so uh and for me this approach has been very um rewarding on a lot of fronts. As an undergrad, I studied uh history as well as economics. Um also have some theological training. So, I have uh a little bit of um you know, well, not a little bit, I have a lot of interest in in cultural, social, and even moral um um moral attitudes that prevail in society. And so, this project uh allowed me to take kind of an integrated approach to what's happening in family life. And so, um yeah, so that's kind of where this all came from. >> Okay. Well, great. Yeah. just my the joke when I was back when I was an academia and go to like these lunch brown bag seminars and people would come and present their papers with the econometric and I would just always say the grad students like you got to get two stars in the in the results otherwise it's not important you know in terms of like you know they would do the regression analysis which >> yeah so and that was one that was uh something I acknowledged right away we are looking at a data set about family formation fertility divorce over 60 plus years so to find statistical significance because there are so many things that matter in family formation, fertility, and so on that we're probably not going to get these knock them dead econometric results and wow the mainstream folks. Uh that's not really what I'm trying to accomplish here. trying to say that that um you know monetary policy inflationism has an impact on culture and the way we live our lives and that manifests in what we've seen in family over the past 60 years or plus 60 years or more. >> Well, that's a great place to wrap up folks. My guest has been Jeff Dgner. The book is Inflation and the Family. Jeff, thanks for your time here today and for writing the book. >> Oh, thank you, Bob. I appreciate the invitation. Sure thing. Thanks everybody for tuning in. We'll see you next time. >> Check back next week for a new episode of the Human Action podcast. In the meantime, you can find more content like this on mises.org. [Music] [Applause] [Music] [Applause] [Music] [Applause]