Economics of funeral homes and cemeteries

Cato’s Regulation Publication mostly brings  refreshing reads. The latest Winter issue brings this fascinating research article  on Funeral Homes and Cemeteries.   It is by David Harrington and Jaret Treber of Kenyon College. While reading this, Prof. Al Roth immediately comes to your mind as economics of goods and services in death markets gives a repugnant feeling..

There are two kinds of post-death services  – funeral homes and cemeteries. Now some US states allow these two to be merged and both services being offered under one roof. Some States have banned such combos (the idea of calling them as combos is interesting..) . The paper argues that states should lift bans on such combos as they provide more valuable and cheaper services:

Actually even earlier the funeral homes offered combos. Most were also furniture shops etc. No of people were lesser and there were less number of deaths.

In the 19th century, it was common for funeral homes to be more than just funeral homes. Many were also furniture stores or liveries. At the time, many towns had too few deaths to support stand-alone funeral homes. Hence, it was natural for the local cabinetmaker to also be the undertaker, keeping his woodworking shop busy making both cabinets and coffins. Similarly, many livery owners used their wagons to deliver freight or—draped in black cloth—to carry bodies to cemeteries.

During epidemics, the cabinetmakers of these combination firms were busy building coffins and having their wagons carry bodies to cemeteries. During happier times, these firms spent more time making cabinets and delivering freight. It is a morbid example of the “peak load” problem, the problem that producers face when their businesses experience surges and slumps in demand and they need to keep costly capital on hand to satisfy the surges. Today, electricity producers must be able to handle surges in demand when temperatures soar and people crank up the air conditioning. Then, funeral homes needed to handle surges in demand when epidemics heated up and families sent for the undertaker. 

This changed as cities grew and populations rose. Amd so did deaths. This led to so called combos:

Over the first half of the 20th century, funeral homes shed their partnerships with furniture stores and liveries as towns turned into cities and funeral directors handled more aspects of burial preparation. At the same time, commercial cemeteries became much more prevalent, both because many church and town cemeteries filled up and because consumers were willing to pay for graves and markers in newly created memorial and garden cemeteries.

Over time, funeral homes naturally gravitated toward combining with cemeteries rather than furniture stores or liveries. In 1934, Hubert Eaton built a funeral home within his Forest Lawn Memorial Park in Glendale, Calif., establishing the first
modern funeral home and cemetery combination. Today they are so common that funeral industry professionals commonly use the term “combination firms” to refer to the joint operation and/or ownership of cemeteries and funeral establishments. Some shorten the term even further, simply calling them “combos.” Similarly, a stand-alone funeral home now means one located outside of a cemetery, rather than being  independent of a livery or furniture store

The authors go on to discuss how these combos offer economies of scale and scope and make better sense. They do a cost benefit analysis and show there will be gains for the economy (as in lower costs) and more choices as well..

Interesting but difficult to read…

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