Monday, August 13, 2007

”MAYBE I’LL BE THERE TO SHARE THE LAND” * (Until the Value goes up Enough and then it’s Splitsville.)

This post comes by way of The Indiana Law Blog, citing an article in the August 12th edition of the New York Times, “Buy Low, Divorce High”.

The Indiana Law Blog is one of the Author’s favorite sites and helps him to keep up with law developments in the “Crossroads of America.”

States the NYT Article, “Buy Low, Divorce High”:

A little-noted side effect of the property boom of the past decade has been the real-estate-enabled divorce. Home values might have slid in some markets, but in the New York City region, where prices remain high, divorce professionals like therapists and lawyers, along with real estate brokers, say unhappily married couples are cashing in appreciated homes to underwrite a split.

“The equity that there is in real estate is one of the impetuses why there are so many divorces,” said Nancy Chemtob, a Manhattan divorce lawyer, adding that the net worth of her clients has doubled in the past three years mainly thanks to real estate. The price of the average Manhattan apartment was $1.3 million as of June, up 7 percent from a year ago, according to the real estate brokers Brown Harris Stevens.


MOVIN’ ON UP (AND OUT?)

Marriages are many things, but in the Author’s opinion, they nearly all function as economic “partnerships”. Love might bring people together, but money, or the lack thereof, keep couples together or rends them apart.

Couples combine their incomes, or perhaps other skills, and their assets, into economic relationships to buy homes, rear children, operate businesses, or for other reasons. And often the “strength” or “durability” of a marriage depends on the economic state of the marriage.

When one marriage participant is financially dependent upon the other, the financially dependant participant has little choice but to remain in the relationship despite potentially negative endogenous and exogenous non-economic factors. (The Author loves using these big economic terms).

Contrast the foregoing relationship with one in which each marriage participant is financially independent or capable of being economically self-sustaining. These relationships are economically less “durable”. And rapid improvements in a marriage participant’s wealth or income can provide a quick exit from the relationship.

SHUFFLE OFF FROM BUFFALO, OR HERE COMES THE ECONOMICS

Economists are familiar with this phenomenon. Even though divorce rates are declining over all, as far back as 1977 the economist Gary Becker showed that couples experiencing any unexpected, drastic rise in net worth are at risk of divorce. (The same holds true for a drastic decline in net worth.)

Extrapolating from survey data, Dr. Becker concluded in The Journal of Political Economy that “a greater deviation between actual and expected earnings increases the probability” of divorce.

Although couples who see their incomes rise steadily generally stay together, those who make more money than they ever expected are vulnerable to divorce. They realize that they are less financially dependent on each other and that they might have chosen different spouses if they had more choices at the time, said Dr. Becker, who teaches at the University of Chicago.

Dr. Becker, who won the Nobel Prize in 1992, also explored in his divorce study the economic argument for what many people today call trading up, or finding a trophy spouse.

Noting that 75 percent of men and more than 70 percent of women remarry within 15 years of a divorce, he found that divorced men with higher earnings have the greatest likelihood of remarrying. This implied, in his view, that men who have come into wealth have an incentive to divorce because they believe they could better their situation.

“They feel, given their status now, they can find other people of a type that appeals to them more than when they got married,” he said in a telephone interview
.

FOR RICHER OR POORER, FOR BETTER OR WORSE


From considering the foregoing, it appears that Richer or Better can break up a marriage about as easily as Poorer or Worse. And the Little Children take the Hindmost.

A LESSON LEARNED IS A LESSON TWICE EARNED
(In a Butt-Head voice, “uh, eh, huh, huh, or something”).

*A line from the song “Share the Land” the Canadian band “The Guess Who”.