Get Married! Say Economists.

Today,we all received a sagely advice from our professor: "Get Married."

For the sake of economic welfare enhancement, if not in the name of love, haha.

In a society where the market for annuities is thin, a person has no access to guaranteed streams of funds to finance his/her old age. And as a risk-averse person facing longetivity risks ( we all dunno when exactly we will die),he/she under-consumes in present time to save for old age. The individual could have consumed more but he/she is too 'kiasi'. By the time he/she really dies, he/she leaves a large sum of unintended bequest. It is not because he/she is altruistic, just because he/she oversaves when still alive, hence not consuming to the fullest potential. On the other extreme, a risk-loving person would tend to over-consume when he is young and live a miserable poor life when he is old. And the longer he lives, the worse-off he becomes. This is not the ideal situation as well. So, is there anything to be done to optimise the situatuon?

Ahuh.. Then there comes the solution: Just Get Married! Hehe. A marriage is like an insurance that helps to hedge the longetivity risks.

"In marriage, spouses generally agree to pool resources while both partners are living, and to name each other as beneficiaries in their wills...In this sense, the longetivity risks of each spouse is hedged to some extent by her spouse. If one spouse lives too long, it is very likely that the other has not, and has left the long-lived partner a bequest."

Hee, and of course, there is the cost savings from stretching the potentials of physical capitals. Both of u share the expenses of a house, a car etc and reap economies of scale by minimising excess capacity!hahaha.

For a 30 year-old man, wealth equivalent gain from marriage is 11.7 to 13.6 %( compared to being single)! Gains increases with age as mortality risk increases. For a 55 year-old man is is 20% while 75 year-old it is 30% ! Haha, so it is never too late to get married. Or should I say the later the better? hee. The assumption here is that the man marries a woman of his age. When an old man marries an old woman, their mortality risks are both high, when one outlives the other in near future, he/she will be left with a comfortable sum.

Heh, economists are always being referred to the most pessimistic and sadistic professionals because they always assume there is tradeoff in everything. And of all things, they have to justify the advantaves of marriage using such a pragmatic approach. If i were to maximise my utility, I should then marry a 90 year-old man, coz in that way i will be seeing the coverage from this insurance very soon :P

Bahhh....if only humans are all 'profit-maximising' creatures. If only they aren't so irrational and emotional when it comes to loving a person and wanting to get married to him/her regardless. If only all they think about getting married is whether they have anything to gain. Then this theory works very well.

Having said that, I think I can never become an economist. Because I am simply too bad at calculating the returns to whatever I have given. Moreover, giving in itself is already utility enhancing. :)