Household production function

Jump to navigation Jump to search

Consumers often choose not directly from the commodities that they purchase but from commodities they transform into goods through a household production function. It is these goods that they value. The idea was originally proposed by Gary Becker, Kelvin Lancaster, and Richard Muth in the mid-1960s.[1] The idea was introduced simultaneously into macroeconomics in two separate papers by Jess Benhabib, Richard Rogerson, and Randall Wright (1991);[2] and Jeremy Greenwood and Zvi Hercowitz (1991).[3] Household production theory has been used to explain the rise in married female labor-force participation over the course of the 20th century, as the result of labor-saving appliances.[4] More recently with the rise of the DIY or Maker movement household production has become more sophisticated. For example, consumers can now convert plastic wire into high-value products with inexpensive 3-D printers in their own homes.[5][6]

Example[edit]

A simple example of this is baking a cake. The consumer purchases flour, eggs, and sugar and then uses labor, know-how and time producing a cake. The consumer did not really want the flour, sugar, or eggs, but purchased them to produce the cake for consumption (instead of buying it, e.g., from a bakery).

See also[edit]

References[edit]

  1. ^ Muth, Richard F. (1966). "Household Production and Consumer Demand Functions". Econometrica. 34 (3): 699–708. doi:10.2307/1909778. JSTOR 1909778.
  2. ^ Benhabib, Jess; Rogerson, Richard; Wright, Randall D. (1991). "Homework in Macroeconomics: Household Production and Aggregate Fluctuations". Journal of Political Economy. 99 (6): 1166–1187. doi:10.1086/261796. JSTOR 2937726.
  3. ^ Greenwood, Jeremy; Hercowitz, Zvi (1991). "The Allocation of Capital and Time over the Business Cycle". Journal of Political Economy. 99 (6): 1188–1214. CiteSeerX 10.1.1.156.835. doi:10.1086/261797. JSTOR 2937727.
  4. ^ Greenwood, Jeremy; Seshadri, Ananth; Yorukoglu, Mehmet (2005). "Engines of Liberation". Review of Economic Studies. 72 (1): 109–133. doi:10.1111/0034-6527.00326. JSTOR 3700686.
  5. ^ http://finance.yahoo.com/news/using-3d-printer-print-household-203945154.html
  6. ^ Emergence of Home Manufacturing in the Developed World: Return on Investment for Open-Source 3-D Printers. Technologies 2017, 5(1), 7; doi:10.3390/technologies5010007

Further reading[edit]