It’s clear that the debate over gay marriage is very hot in the US right now.  However, it’s been mostly confined to moral grounds.  Why don’t we look at it from an economic perspective?

This argument does not discuss calling the union of two homosexual individuals a “marriage” versus a “civil union.”  I will save that argument for another time.

[Note: much of sections 2-3 are drawn from:
Dnes, Antony W. The Economics of Law. Mason, OH: Thomson Corporation, 2005. 189-204.
and inspired by lectures from classes I have taken at William & Mary. ]

I. Comparative Advantage and Specialization

First I would like to introduce the concept of gains from trade.  Assume there are two countries and only two goods in the world.  Country A can produce either ten footballs in an hour or five cars in that hour.  Country B can produce seven footballs in an hour or six cars in an hour.  If these countries decide to fill their needs without trade, they will need to divide their labor between footballs and cars.  However, if they decide to trade, then each country can specialize in what it does best, and there will be more total footballs and cars in the world than if the countries did not trade.

i.e. 24 hours in a day.  Country A and B produce footballs half the time and cars the other half.  This means country A will produce 12*10 = 120 footballs and 12*5 = 60 cars per day.  Country B will produce 12*7 = 84 footballs and 12*6 = 70 cars per day.  This is a total of 204 footballs and 130 cars per day.  If both countries trade, A will specialize in footballs and B will specialize in cars.  A will produce 24*10 = 240 footballs and B will produce 24*6 = 140 cars.  The gains from trade in this case are 32 footballs and 10 cars per day based on specialization. (how these gains are split is another matter)

Obviously, this example is simplistic because there are many countries and many goods.  But the point is that when countries agree to work together and trade, societal gains from specialization can and often do occur.

II. How Marriage Works Like Trade

When two people agree to get married, they [usually] live together and make arrangements to work together financially.  In a traditional heterosexual marriage, a woman would specialize in doing domestic work and the man would specialize in his career.  The woman’s domestic work enabled the man to devote much more time than he would otherwise have to his career.  Without a wife, he would have to cook his own food, clean his own clothes, etcetera, but with a wife, he has much more time to focus on work.  Thus, he can get more done at work and most likely earn a higher salary.

The woman’s domestic job of cooking, cleaning, and raising children is made easier because the husband ensures her that she does not need to worry about income.  She can focus on domestic tasks such as making sure her children grow up in an environment she finds desirable.  Her domestic tasks are much easier with a husband supplying income rather than if she had to worry about both domestic tasks and working.

Clearly, today couples do not always completely specialize in domestic tasks or working at an outside job, and women are the “breadwinners” of many households.  However, gains from trade can still occur.  Men and women can do the domestic tasks they find easiest or more fulfilling, and they can also decide if one of them should spend more time working a job over domestic chores versus the other in order to optimize their situation.

III. What does Marriage Need to be Successful?

One potential fear of an individual when entering into a marriage is the possibility of divorce.  If one spouse leaves the other, it can be a heart-wrenching experience.  This experience can be made even worse if one leaves the other, and does so without leaving any financial support.

Take for instance a married couple, with a husband working and a wife foregoing a career to stay home and raise children and do domestic tasks.  If the husband leaves the wife after 15 years and is not forced to pay any damages, she will be left with nothing and no likely viable career options.  Fortunately, when a couple is married, damages are required to be paid upon divorce in most circumstances.

If, however, damages were not required to be paid upon one individual leaving the other, one party might feel very averse to getting married in the first place.  Thus, with no damages at all, many marriages that may have occurred will occur later or not at all, simply due to financial aversion.

IV. How Does Gay Marriage Tie in?

Homosexual couples can benefit from the same exact gains from trade that heterosexual couples can.  However, many of these homosexual couples cannot get married, so they are afraid to simply start living with one another and rely on the other person to pull down a living, because they know they could be left at any time without certainty that they would be paid damages.  Thus, fewer homosexual couples can benefit from gains from trade, and thus, our economy produces less than if they could.

In short, prohibiting gay marriage makes it hard for two parties to engage in mutually beneficial economic activity, because they do not have the same remedy for damages that heterosexual married couples do.  Mutually beneficial economic activity increases societal wealth.  Because a contract, or a marriage contract in this case, can give more incentive for homosexual couples to engage in mutually beneficial economic behavior, allowing homosexual couples to get legally married will increase societal wealth.

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