human capital assets. Time devoted to educational activities and the production of human capital should be accounted for in a separate satellite.

On balance, the availability of relevant data and the relative simplicity of underlying concepts make the household production account a leading candidate for immediate development. Despite the difficulties outlined here, the theoretical and empirical bases for the inclusion of household production in satellite national accounts on a continuing basis are surely far sounder than was the understanding of accounting for market transactions when the United States made the leap into creating consistent sets of national accounts beginning with data from the 1920s and 1930s.

Recommendation 3.1: The Bureau of Economic Analysis should create satellite accounts reflecting the quantity and value of inputs and outputs in home production.

THE HOUSEHOLD AS A FACTORY

Individuals do not simply consume purchased goods: they combine these goods with inputs of their own time to generate what Becker (1965) referred to as commodities. Thus, a commodity, “lodging” for example, is produced using a purchased (or rented) housing stock and family members’ inputs of time into its maintenance and improvement. Meals are produced mainly at home, using purchased materials—raw food together with the services of kitchen appliances, tableware, napkins, and so on—and also the time of those who prepare the meals and clean up afterwards; inputs and output for this simple example are listed in Table 3-1.

As with any good that is produced in the market, there are a variety of ways of generating a given amount of any home-produced commodity. One could generate meals entirely through market purchases, by employing cooks who prepare meals using the purchased inputs noted above and cleaning persons to clear and wash the dishes. At the other extreme, one could grow one’s own vegetables, feed and slaughter one’s own animals, and use one’s own time to prepare the meals and to clean up afterwards. As another example, one could generate lodging by buying a house, then employing a butler to coordinate and effect all repairs. Alternatively, one could build the house and do all repairs and maintenance oneself, perhaps using some purchased materials. In each case, there is a large range of choices between the extremes. As with a market-based production technology, the household production function indicates for each commodity the tradeoffs between efficient uses of different methods to generate any given amount of the commodity.

The choices that individuals within a household make about how to produce commodities depend on their preferences, the relative prices of the goods and household members’ time that might be used to generate the commodities, their



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