Cohabitation’s Transaction Costs

Studies compete for the most accurate representation of the risk to a marriage posed by living together before the wedding, but most estimations predict somewhere around a 33 percent increased risk of divorce . Regardless of magnitude, however, they all claim the same thing: that premarital cohabitation is highly correlated with unsuccessful marriages.

There are a lot of conjectures as to why this may be, and they’re all probably partly right. I want to discuss one that doesn’t seem to get as much airtime, however: that the transaction costs of breaking up after a couple has begun to cohabit are often so high that splitting, even amid relationship difficulties, is implicitly discouraged.

Transaction costs, in an economic context, are the costs of making an exchange not directly associated with the price itself. If I, for example, have decided to buy a car from a friend who lives three hours away, one of those transaction costs is the drive to and from his house. The price my friend is asking for his car is not included in this type of cost, but the gas it takes to get there and back is. In the context of the breakup of a cohabiting couple, transaction costs are numerous and weighty. Disentangling finances and possessions, finding other residences, and moving out are no small costs.

This idea occurred to me in the wake of a breakup. I dated my high school sweetheart well into college, at which point we began to drift apart. We never lived together, but for a long time I never even thought of breaking it off simply because of how entrenched in our lives our relationship had become.

That is, I was making the decision to stay in the relationship not because of the relationship itself, but rather because of all the transaction costs I’d have to deal with if I ended it: the awkwardness of having many mutual friends, the Facebook relationship status change, that we knew each other’s families well. That everyone”and I mean everyone” who knew us expected us to get married. At some point I realized that these factors were keeping me from really considering a breakup, and I was able to look past them to whether our relationship”in a vacuum, so to speak”was worth keeping.

But what happens when a couple lives together before they get married? These transaction costs are magnified to such an extent that it’s nearly impossible just to walk away. Doubts about the relationship are swept aside because to address them would mean to look on Craigslist for a new apartment and furniture.

Then the wedding bells ring, and suddenly a couple who would probably have broken up if they hadn’t lived together is married. Later, when several years have agitated all of the problems that were present to begin with to a point they can no longer take, they divorce. By moving in together before they were married, the couple put the weight of their lifetime decision more on that preliminary step than on the wedding itself.

So what does this mean? Well, we can’t date people in a vacuum. There will always be costs associated with breakups that don’t have to do with the pain of missing or hurting the other person; some are unavoidable. Furthermore, the economics framework”while often a unique lens”is never the ultimate measure of a relationship, and the reduction of love to cost-benefit analysis is unhelpful and callous.

However, we can minimize these transaction costs so that we don’t make decisions based on them only. In twenty years the only thing that will matter is whether you’re in a relationship that is mutually enriching”so keep your separate residences for now.

Laura Mitchell is an economics student at George Mason University.

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