Towards A Definition Of Non‐Market Activities

Recent attempts to measure value of household work and other non‐market activities have been based on a simplistic interpretation of Opportunity Cost of Time Theory; this paper attempts to refine this and develop practical definitions from basic Utility Theory. First a distinction is made between economic and other activities, the former being the only ones subject to dollar‐measurement; we recognize economic activities can occur outside the market and focus our analysis upon these latter. In the framework of Becker‐Lancaster a Household‐Production Function is posited which produces jointly such non‐market economic activities‐called indirect utility‐and welfare or satisfaction‐ called utility. A criterion for identifying the indirect utility activities (Third‐Person Criterion) is outlined, and related to time‐use survey data. Finally, four practical estimation methods are outlined: simple opportunity cost of time; gross replacement cost; individual function replacement cost; and the full production function approach. This latter, which includes evaluation of capital contributions, is deemed theoretically most valid but for present purposes least practical because of lack of data on domestic capital stock. The paper concludes that there exists both a theoretical basis for valuing non‐market activities, and the necessary data to apply the formulas developed.