2.2.1 Households and markets

Consider a time, maybe today, when you bought something from a business in a market. Perhaps it was lunch at school, clothing from a second-hand shop, or toothpaste. People in households often buy goods and services in markets. In modern economies, people buy things from businesses in markets for things they cannot or do not want to produce themselves. 

A market is a provisioning institution where people buy and sell goods and services at a price. Those who are willing and able to pay the price can access the goods and services.

Households vary in how much they interact with markets. Some households are very self-sufficient, producing most of what they need. They rarely engage with businesses. In contrast, some households are market-dependent, buying almost everything they need from them. Most households fall somewhere in between these extremes, as shown in Figure 1.

Households and businesses in markets rely on each other. The money flow between households and businesses in markets is key for markets to function. In addition, most households depend on businesses for some or most goods and services. Businesses need workers with knowledge and skills developed through household care work, though few businesses are aware of how dependent they are on unpaid care and domestic work.

Disruptions like the Covid-19 pandemic can hinder businesses from meeting human needs. If businesses close, or their supply chains are disrupted, they may not be able to offer their goods and services. Disruptions to incomes may prevent people from being able to pay for what they need. That’s why it’s important to strengthen the other provisioning institutions -- households, commons, and the state -- to provide some redundancy in producing the things we all need to survive and thrive. Resilient societies rely on this diversity and redundancy, just like resilient ecosystems do (Section 1.4.1).

Most households depend on well-functioning markets to meet some or most needs. Purchasing goods and services in markets has benefits for household members who can spend their time on other activities like care, paid work and leisure. But there are downsides to relying so much on markets, particularly when there are power imbalances between businesses and households.

However, businesses can profit in ways that harm society. When a business increases market power, and aims to maximise profits, it may become extractive. This behaviour weakens households by:

• increasing prices, as energy companies have done in recent years, reducing the money people have to meet their needs;

• keeping workers’ wages and suppliers’ prices low, as many global fast-fashion clothing manufacturers do in low-income countries, which undermine incomes for employees of fast-fashion firms and their households

• requiring long hours and providing poor working conditions, which undermines people’s ability to support their households. This can also lead to less self-sufficiency and greater market-dependence to meet basic needs;

• using manipulative marketing strategies, for example by using influencers in social media advertising that lead to unnecessary household spending or aspirational consumption (Section 1.3.1);

• not paying their fair share of the taxes, as is the case with some global technology companies, reducing the money that states have for social welfare programmes and physical infrastructure like roads and energy networks that households and businesses rely on;

• disrupting ecosystems through resource extraction and polluting waste, as is the case with global mining and fossil fuel industries (Figure 7), putting all life on Earth at risk, and creating ecological shocks that harm households.

Markets for care work, an area of high tension for households

Many households need to purchase care work at some point. In countries where it is common for both parents to work, families may pay for childcare or eldercare either outside or inside the home. Businesses that provide care can enhance the care choices available to households, which can contribute to household resilience over time.

However, paid care work involves tensions that can undermine care quality and care relationships:

• care workers often earn low wages: many people see care work as unskilled and similar to unpaid household work. This perception makes care work unattractive, leading to care shortages and a care crisis;

• paying for care is expensive for households: despite the low wages for care workers, care is often unaffordable, causing financial stress in household relationships if people want to work, but cannot afford to purchase care for household members;

• profit maximisation can undermine care quality: effective care requires time, making it costly for businesses. Reducing wages and time spent on care in order to maximise profits conflicts with the goal of providing effective care;

• global care chains: due to the care crisis in high income countries, many women migrate for care work. While this can benefit both caregivers and those needing care, it can also make caregivers vulnerable. Far from home, without adequate legal and social support, caregivers can be exploited, abused and trafficked. Migrant caregivers may also rely on others to provide care for household members left behind in home countries, creating a global care chain, discussed in greater detail in Section 2.3.3.

Recognising the relationships and tensions between households and businesses in markets can help us build more resilient economic systems that support human and ecological wellbeing. Societies and governments can shape supportive business activities while limiting business power, to ensure households are supported.

• Write this continuum on a piece of paper or copy Figure 1 into a digital document.

• Which goods or services are produced in your household and which are bought in markets? List all that you can think of and list them on the appropriate side of the continuum.

• Given what you know about the goods and services produced or obtained in the household or markets, where do you think your own household sits on this continuum?

• Which goods and services purchased in markets make a huge difference to your quality of life?

• Have you noticed any tensions or problems in your household that arise from buying goods or services from markets?

• Discuss your thoughts with one or more classmates and compare your households. What might account for differences and similarities?

Ideas for longer activities and projects are listed in Subtopic 2.5 Taking Action

• Undervaluing the work of care - A Care Matters podcast with Professor Nancy Folbre, Professor Shereen Hussein and Dr. Naomi Lightman where they have a wide-ranging discussion about the tensions of markets providing care, the role of undervalued care in global care chains, and the difficulty of measuring the value of care considering its large positive social impacts. Difficulty level: medium

• The Economics of Care - A video interview from the Institute for New Economic Thinking with Nancy Folbre about the benefits and drawbacks of market-based care work. Difficulty level: medium

• Emma Dowling: Understanding the Care Crisis - A podcast interview (with transcript) with Professor Emma Dowling on why many societies find themselves in a care crisis and the links of the care crisis to the marketisation and financialisation of care work. Difficulty level: medium

Dowling, E. (2021). The Care Crisis: What Caused It and How Can We End it? London: Verso Books.

Fisher, D. (Host). (2023, October 26). Undervaluing the Work of Care [Audio podcast episode]. In CARE MATTERS. https://www.podbean.com/media/share/pb-4exsf-14d31a2?utm_campaign=embed_player_share&utm_medium=dlink&utm_source=embed_player

Institute for New Economic Thinking (INET). (2016). The Economics of Care. https://www.youtube.com/watch?v=vZEJV3kBQH0

Ironmonger, D. (2001). “Household Production and the Household Economy”. International Encyclopedia of the Social & Behavioral Sciences. https://doi.org/10.1016/B0-08-043076-7/03964-4

Razavi, Shahra (2007). “The Political and Social Economy of Care in a Development Context”. Gender and Development Programme Paper Number 3. United Nations Research Institute for Social Development. https://cdn.unrisd.org/assets/library/papers/pdf-files/razavi-paper.pdf

Link to Quizlet interactive flashcards and terminology games for Section 2.2.1 Households and markets

market: a system where people buy and sell goods and services for a price.

household: a system where people living together care for each other and do domestic work, often termed the 'core economy'

economy: all the human-made systems that transfer and transform energy and matter to meet human needs and wants

self-sufficient: a situation where an individual or a group can meet all their own needs themselves

market-dependent: a situation where an individual or a group is very reliant on markets to meet their needs

commons: a system where people self-organise to co-produce and manage shared resources.

state: a system that provides essential public services, and also governs and regulates other economic institutions

provisioning institution: a group of people and their relationships as they try to meet human needs and wants

price: an amount that must be paid to access a good or service; can be money or some other medium of exchange

circular flow of income model: a model showing the flow of money and resources or products back and forth between businesses and households and other economic agents in a cycle

firm: another word for a business, an organisation that produces and/or sells products

consumption: using resources and products to meet needs

consumer: someone who buys and uses resources and products ot meet needs

need satisfier: a specific way that people meet their needs

power: the ability to influence events or the behaviour of other people

subsistence: where a household or other group produces products mainly to meet their own needs

income: money received from work or investments

labour: work to achieve some goal

care: the act of providing what is necessary for the health, welfare, upkeep, and protection of someone or something

supply chain: the sequence of processes involved in the production and distribution of a product

redundant: something that is repetitive, not necessary under normal circumstances, but useful in unusual circumstances

resilient: able to recover after a disturbance

ecosystem: the interaction of groups of organisms with each other and their physical environment

break-even: when the revenue earned from selling a product equals the cost of producing the product

revenue: the money earned from selling a product

production cost: the amount of money needed to produce a product

profit: total revenue minus total cost

surplus: the term used in non-profit businesses for profit, or total revenue minus total cost

shareholder: a person or organisation that ownes a share, or portion, of a business

market power: the ability of a firm to influence the price of their product in a market, as well as other market conditions

reinforcing feedback: a situation where change in a system causes further changes that amplify the original change which can lead to tipping points in a system

entrepreneurship: setting up a new business and taking financial risks

extractive: taking something from other humans or from nature without trying to replace it or avoid harm

wage: payment for work

stakeholder: a person who has an interest in or is impacted by some activity

aspirational consumption: buying products in order to increase self-esteem and social status

tax: payment from individuals or organisations to the government, used to provide public infrastructure and services

social welfare: state programs supporting people to meet their basic needs, including supplemental income, food, housing, health care and other services

infrastructure: large scale physical systems that a society needs to function (roads, railways, electricity networks, etc)

pollution: the presence of a substance that has harmful effects on the environment

fossil fuel: a non renewable energy source including coal, oil, and natural gas, formed over millions of years in the Earth's crust from decomposed plants and animals

biomimicry: when humans observe nature and imitate its forms, structures and processes to develop human systems and products

Nature's Unifying Patterns: universal patterns of function, processes or structure in nature

optimise: to make the best use of something

profit maximisation: the strategy where a business tries to achieve the highest profit possible

multinational company: a company that operats in its home country and at least one other country

regulate: to control human activities with rules and regulations

care crisis: conditions in society where there is not enough care available, many lack of access to the care they need, and where people doing care experience increasingly difficult conditions

global care chain: a situation where caregivers from poorer countries migrate to wealthier ones, creating a global network of care relationships

exploitation: using and benefiting from resources; the term is often used negatively to imply using power to take advantage of a situation