The Economics of Ann Romney

Ann Romney, after a boorish attack from Democratic operative Hilary Rosen — who sneered that she “has actually never worked a day in her life” — responded in traditional family-first terms. Which is fine, but I wish she had responded in plain economic terms.

The Romneys are unusual in that they have five children and in that they are very wealthy. But like families with fewer children and less money, Mitt and Ann Romney as parents faced essentially two kinds of scarcity in their household: scarcity of economic resources and scarcity of parental time. (It is worth remembering that the word “economy” comes from the Greek word for household.) The Romneys solved that problem with a classic application of gains from trade and comparative advantage.

Mrs. Romney is by all accounts a very bright and ambitious woman, but there is not much in her educational background (Harvard B.A. from the extension program) or subsequent biography that suggests she was going to be well suited to a career like her husband’s. But let us assume, for the sake of argument, that she could have, had she so chosen, become a senior-level executive at a medium-to-large business enterprise — not CEO of ExxonMobil, but not making minimum wage, either. The typical salary range for chief financial officers at U.S. corporations runs from $61,786 to $265,882, according to Payscale.com, depending upon the size and complexity of the business and the particular industry. Let’s assume that Mrs. Romney would have earned top dollar, $265,882. Would it have been a good idea for her to go to work?

According to one estimate from a hostile party, Mr. Romney earned about $6,400 an hour at Bain Capital. The Romneys’ personal net worth is somewhere between $190 million and $250 million, but that understates things a bit: The Romneys set up a trust for their grandchildren worth an additional $100 million or so.

Assuming a 2,000-hour work year, Mrs. Romney as a higher-end CFO would have earned about $132.94 an hour, or about 2 percent of her husband’s hourly wage. A 40-year career at $265,882 would have given Mrs. Romney lifetime earnings equal to about 3.5 percent of the family’s net worth.

The Romneys, who are notably charitable people, have given away far more money than Mrs. Romney probably would have earned in a career that would be considered by most of us wildly successful and highly paid.

Conclusion: Ann Romney is economically a hell of a lot smarter than Hilary Rosen.

The marginal value of the wages earned in a typical C-level career would have been almost nothing to the Romneys. But there is that other scarce resource: parental time.

It is difficult to put a dollar value on parental time, but it is clear that to the Romneys one hour of Mrs. Romney’s time at home with the family was worth far more than one hour in C-level wages; further, a 2,000-hour annual block of time invested in earning C-level wages would have fundamentally changed the character of the Romney household for the worse, while providing negligible economic benefit. Instead, she provided the family with a critical good that Mr. Romney, for all his riches, could not acquire without her cooperation. If we think of the household as a household, Ann Romney’s decision to stay at home makes perfect economic sense: Her decision to be a full-time mother enormously improved the quality of life for Mr. Romney, for the couple’s five sons, and — let’s not overlook this critical factor — for Mrs. Romney herself.

Mrs. Romney’s personal investment model — marry a man who turns out to be wildly successful in business and politics, escape the tedium of what is sometimes described romantically as “a career,” have five children and the pleasure of raising them — is not open to everybody, of course: The supply of future centimillionaires is limited, and they are not easy to identify. But making intelligent decisions about forming a household and about the division of labor within that household is an option open to many of us, though unhappily not to all of us, given the state of the family.

Ms. Rosen’s remarks were criticized as being snide; the real problem is that they were stupid.

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