Market and love: Ominous form of rational approach

In the conventional family system, children support their parents in their old age and parents support their children in their younger age. Thus, parents and children are embedded in a mutually beneficial exchange that is not performed in market but inside the family between parents and children. This happens through some implicit stipulation where the stipulation is founded not on personal benefit but on love for each other. Such stipulation is handed over from generations to generations without any oral or written settlements.
But what happens when children refuse supporting their parents at their old age? How would they support themselves in their old age? What is the economic implication of this kind of social setup? In a classic paper in 1958, titled A consumption Loan Model of interest: with or without social contrivance of money, Paul Samuelson answered that in an economy in which no goods keep, a person entering old age will perish by starvation since by the time he has reached everything he kept will have melted or perished. So, he has to find somebody who can provide him some provision in his old age in exchange for goods that he is willing to give the person now. For example, he can enter in an agreement with a young that for every chocolate he gives the young now, the young will give him exactly the one chocolate - no more no less assuming he has zero time preference rate. Therefore, the problem reduces to finding a young who will agree to enter into such an agreement. Samuelson with detailed analysis showed the impossibility of such arrangement since the young are not over-consuming; that means they have positive saving. For the trade, the young have to over-consume or they must have negative saving. While the objective of Samuelson was to prove that in an economy in which no goods keep (no money) free market will not get us to the socially optimum outcome, our motivation is to ask the following question: Even if the free market leads to the socially optimum, let's imagine, is it socially optimum to substitute the support by children for their parents in old age for a support through the trade in market such as finding a third person for providing support in old age in exchange for some goods? Can one conclude that this optimum is optimum at all even if free market leads to the socially optimum outcome by creating an arrangement in which the young are willing to support the old in exchange for some goods now?
This type of question is begging its relevance in the recent times when we see that students' debt has turned into a big problem. A father, for example, can take two approaches in supporting his son or daughter's education: He can support his son until he graduates from the college and bear all the expenses with some support from the son as well. Alternatively, he can support his son up to some age and leave him on his own and refuse supporting any more in getting education. In the second case, the son may opt for borrowing from market to support his education without relying on family. The second option comes from a very individualistic society context in which personal consumption overpowers the collective consumption and individuals have less regard for collective consumption. For example, a very self-oriented father will prefer personal consumption more than the collective consumption where the collective consumption is defined to be the sum of his own consumption and his son's consumption both current and prospective. That means the father is trading the love for his son in the market for personal consumption where the term 'love' is defined as the amount of support he gives to his son; he is substituting the love for his son for his own personal consumption.
Unfortunately, economics has taken such extreme turn in the recent times that the significance of values and love has totally faded and in academics and professional circles the term 'rational' has taken such an ominous form that whatever the consequence of such rational approach, it doesn't matter as long as the theory is founded on the so-called rational foundation. When Samuelson was trying to prove that free market can't lead to socially optimum solution, he didn't pause to ask whether such optimum, if achieved, is optimum at all or not. How much rationality is there in trading the love for a son in the market symbolised by the fact that the son must borrow from banks to support education otherwise he will be left to the street wandering like a street boy? Perhaps, the rationality is taking its toll and the time has come to mull over the issue.  
Nobel laureate economist Joseph Stiglitz in an article in the New Times titled Student Debt and the Crushing of American Dream published on May 17, 2013 rightly showed the reality of students' debt and its evil consequence. He argued that inability to borrow and to get education consequently is contributing to the rising inequality in the U.S.A. since the people in the bottom part of income distribution are being continuously marginalised by both the inability to borrow and the soaring tuition fees in the colleges. He further argued that while the median family income is quite stagnated now at $50000 compared to $46000 in 1980, the average yearly tuition fees in a four-year college has just skyrocketing with $22000 now compared to $9000 in 1980-81, adding further salt to the injury. The question arises why the tuition fees are increasing so fast even when the median family income is quite stagnated? What kind of contribution students' debt has to such increase? Interestingly, Stiglitz didn't pose this question at all in his whole analysis. It is more important to ask this question than finding a solution otherwise.
The question asked here exactly resembles the housing price puzzle in the U.S.A. Why is the price of a standard house so high in the U.S.A. that is the home of 300 million people - a number little less than the double of the total population in Bangladesh - and that is a country with size more than 50 times of Bangladesh? While somebody will argue for higher income and other factors that would account for the exorbitant price of a standard house in the U.S.A., the fact is that even these factors would fail to account totally for this higher price dilemma. Similarly, the rising tuition fees dilemma has a strong root with students' debt. The problem is that to understand such relation between tuition fees and students' debt, we need to set the analysis in the Walrasian general equilibrium framework incorporating students' debt into such a framework. This is too complicated an issue to outline here.
 Now, the question is how to overcome such students' debt problem? What kind of measures can we contemplate in this regard? Do we need some measures that make borrowing for students cheap or do we need to  make some arrangements that make it easy for students to pay off loans such as making provisions for illness,  kinds of jobs they get after graduating etc.? These kinds of measure can solve the problem but not permanently. It looks fascinating when one takes the step that loan pay-off provision should match with the kinds of jobs students get or schools should compensate students if they fail to get expected jobs that can help them to pay off loans easily. Stiglitz cited this kind of measure that is taken in Australia where students' loan repayment varies according to individual income after graduation. This is laudable as long this can be sustained. But this measure may not be sustainable for long if tuition fees continue skyrocketing forcing students to borrow more and more and ultimately forcing government to make more adjustments to make provision that loan repayment should vary according to individual income. Moreover, whether businesses will respond to such policies of government over the time is also a big question. It seems that we have little hope of getting out of this students' debt trouble unless we go to the core of the problem.
PREFERENCES AND LOVE: Choices of economic agents are most often guided by their preferences: what they want, how they want, and what kind of combination they want. A father who is very self-centred and individualistic cares little about the consumption level of his children and will put less and less importance to it. On the other hand, a father who values highly his children's level of consumption both prospective and current will give more importance to their level of consumption. In both cases, we see that the father's choice of a particular combination of personal consumption and children's consumption is guided by his preferences but in a different form. In economics, the second kind of preference in which father cares a lot about his children's level of consumption has gone vanished and this is what the real spirit of Samuelson's Consumption-Loan Model is.  But the kind of confusion that economics profession has been caught in, is that the outcome is similar whether we substitute altruistic preferences by self-centred preferences.  In other words, it doesn't matter whether a father sells his love for his son in the market paving the path for his son to borrow on his own to support his education or whether a father supports his son to get education without inducing the son to borrow at all. The consequence that follows from the love-selling mechanism through student loans is drastic and it is quite evident now. Economics profession should at least know that in a society not everything should be traded in market and not everything qualifies to be traded in market.
Perhaps this kind of lesson has gone totally missing from the teaching of economics in the classrooms. Now, economists think that under the so-called rational foundation in which the so-called selffish and robotic human being strives to maximise utility, everything qualifies being traded. It doesn't matter whether a father sells his love for his son in the market through student loans or a son sells his love for his father in the market through social safety nets. What matters is that whether utility is maximised in doing both. Perhaps nothing can be more misleading than saying that a father's utility is maximised when he sells his love for his son in the market for student loans because father has less room to get the maximum solution or maximum utility even if we take that his utility solely depends on his personal consumption level.
The bottom line is that we should at least be aware that market is not a place where everything should be traded and everything can be traded, and the love of a son for his father and the love of a father for his son are among those things that must not be traded in market and must not be treated like ordinary market goods. To get a permanent cure of student debts problem, we have to realise this distinction. Then we can hope to bring a permanent and ever-lasting solution to such problems.
The writer is with the University
of Denver, USA.
 [email protected]