Matthew Yglesias has a very silly column in Slate arguing that more divorces would stimulate the economy, because creating more households creates more demand for things households need.
This is a perfect example of being penny wise and pound foolish. Most importantly, the cost in human misery of divorce would far outweigh the short-term economic benefit. But even at the economic level, the short-term demand from new households would, I believe, be more than offset by the loss of productivity as married men became divorced men.
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Big point he's missing is that it would lead to MUCH less disposable income, as more would be spent on rent, and would lead to less equity, since it's more likely that split up people rent rather than own.
Penny wise and a dollar short is right.
This was one of the dumber ideas I've seen recently.
Not only would there be less disposable income as Kleinsmith says, but there would be more bankruptcies and foreclosures.
Divorce is a great way to cause poverty. In fact, there are times I wonder what the economic crisis would have looked like if we had a lower divorce rate. I suspect that a disproportionate number of the families that ended up losing homes were families that had had a divorce in the past. someone should research that.
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