Encyclopedia of Law & Economics - 1800arthtmtest

src="img.gif" width="78" height="68" align=left >Encyclopedia of Law and

Bouckaert, B. and De Geest, G. (eds.), Aldershot, Edward Elgar (forthcoming)



Margaret F. Brinig

Professor of Law, George Mason University School of Law

© Copyright 1997 Margaret F. Brinig


1. Introduction  

2. Investing in Children: Fertility  

3. The Market for Babies: Adoption  

4. Transaction Costs in Adoption: Revocation  

5. Fraud in the Adoption Market: "Wrongful Adoptions"  

6. Open Adoption: Overcoming Transaction Costs  

7. Contracts for Children: Surrogate Parenting  

8. Foster Care and Agency  

9. Single Mothers  

10. Parents as Fiduciaries  

11. Efficiency as a Goal of the Law of Parent and Child  

12. Human Capital Investments in Children  

13. The Parental Covenant  

14. Conflicts between Parental and Childrens Interests

  15. Deadbeat Parents  

16. The Family Franchise  

  Bibliography on Parent and Child (1800)  

Other References  


1. Introduction  

Before families are created, the people involved are acting primarily as individuals. They thus

exhibit contract-like behavior rather than the firm-like behavior seen when the families are
functioning. In some respects, the creation of a family resembles a search for consumer
goods. However, people creating families are far more excited and involved than those
buying even the most exotic car. Further, the adults who determine the families in which
children will be raised are not simply but profoundly affecting parties who are silent in the
transaction, the children themselves. Parental contracts and indeed all behavior involving
children thus involves externalities.

When people think of producing babies, they do not usually contemplate markets. However,

in families where adoption occurs, it turns out that there are explicit markets. Even in the
majority of families, where parents are able to conceive their own children, their timing and
number involve economic behavior. For single women the decision of whether or not to bear
and raise the child is even more an economic one.

In most families, the market for babies is at work before the child is conceived. Parents

control the genetic qualities of their children when they choose each other as marriage or
sexual partners. They have some control over the type of offspring they produce by
attempting to choose the time for reproduction, since the difficulty of conception and
incidence of genetic problems both increase with the age of the mother. Some recent
biological evidence suggests that women can influence the incidence of conception not only
through the use of contraception but also through the type of female orgasm that takes place
during the intercourse leading to conception (Baker and Bellis, p. 903) . The timing of
intercourse during the menstrual cycle influences the probability of having male as opposed
to female children (Billings 1975, p. 103) .

Other children in the family, consciously or not, may influence the incidence of conception,

as they will compete for the same family resources once a new baby is born (Anderson and
Tollison, 1991) . Certainly the nursing of a child delays the onset of menstruation, and thus the
possibility of another conception. The very presence of a child in the family may make the
parents more tired, so that intercourse occurs less frequently than before the child was born.
Children may also attempt to monopolize the affections of at least one parent, interrupt the
parents during the times when intercourse would otherwise occur, or even cause so much
trouble that another child is not an obvious decision.

2. Investing in Children: Fertility  

A tremendous volume of literature, beginning with the work of Gary Becker, analyzes fertility

behavior among women of past and present societies (Becker, 1991;   Becker and Lewis, 1973 ;
Becker and Tomes, 1988 ). It is clear that the number of children born to Western women has
declined dramatically over the past forty years, when contraceptives became effective and
abortion legal. Both of these technological changes were accompanied by legal changes, as
the United States Supreme Court developed a right to privacy that encompassed contraceptive
use ( Griswold v. Connecticut ; Eisenstadt v. Baird ) and abortion choice (Roe v. Wade , Planned
Parenthood v. Casey   ). In the United States, since the abortion cases, most of the forces
shaping fertility behavior have been economic, as opposed to legal.

The reasons for having large numbers of children (a high infant mortality rate that required

many births before a single child would survive to adulthood, or an agricultural economy
necessitating large families to work the acreage) (Rubin et al., 1972) have been irrelevant for
many years. As Becker explains it, what has replaced the numbers is an emphasis on the
quality of children (Becker and Lewis, 1988) . In other words, we invest more in the way of
time and money in the smaller number of children we do have, a fact that contributes to the
rise of contract thinking.

There are still some ways in which law might profoundly influence fertility: no fault divorce,

the legislation regulating public assistance for mothers of dependent children, and,
theoretically, more direct policies encouraging single children such as those in place in China
(How, 1995) . This section will take up the question of single mothers later, but it is perhaps
worthwhile briefly noting the less obvious question of the effect of no-fault divorce on the
birth rate.

Brinig and Crafton(1994, p. 885-86) , looked at the effect of no-fault divorce on the birth rate.

Holding time and the number of marriages constant, they found that for the period 1965-87,
no-fault divorce had a negative and significant relationship to the birth rate. They explained
this result as a decreased investment by couples in their marriages as these became less
secure. Another way of looking at the same phenomenon is to consider the thinking of a
married woman considering or faced with pregnancy who realizes that her marriage is
unstable. Thirty years ago, when divorce was quite difficult and was coupled with substantial
stigma, the birth of a child might have seemed a stabilizing influence. Faced with the same
problem today, the married woman might well elect not to conceive or bear the child because
of the additional costs the child would bring and be subject to should the couple divorce.
(This in addition, of course, to the reluctance of most mothers to bring children into unhappy
families. ( Heup v. Heup , 1969) ). Divorced women with minor children remarry less frequently
than those without them (Becker et al., 1977, p. 1157, 1176) . It is also more difficult for a
woman with small children to be economically self-sustaining, since employment must
usually be more flexible for the single parent custodian (Fuchs, p. 44-45) .

3. The Market for Babies: Adoption  

Many couples are actively preventing conception until later in their marriages, and are

marrying later. These tendencies are counteracted to some extent by technological progress in
the area of infertility, but in any event, many are increasingly discovering difficulties in
conceiving a child. The demand for adopted children has increased dramatically since the
mid-1970s. At the same time, the supply of available babies has decreased.

Probably the most important change in the supply of children for the adoption market is the

ready availability of abortion. Another cause is the greater societal acceptance of unwed or
single parents, causing women who might otherwise give them up to carry children to term
and then bring them up themselves. Further, the modern emphasis on natural parents rights
slows the supply of available children. Because it has become so difficult to prove permanent
parental unfitness and the social work caseload has expanded geometrically, there are fewer
and fewer children to adopt. Instead, they remain in foster care, sometimes indefinitely,
because parental rights cannot be terminated and the parents maintain a token relationship
with them.

The increased demand and decreased supply coincide in a market where there cannot be the

expected price increase that would equate the number of parents demanding and supplying
children. All American states prohibit explicit baby selling and in most cases any payments,
made directly or through middlemen, that are not directly connected to the well-being of the
child. The result is analogous to other cases where government imposes a price ceiling: a
shortage develops, with a growing queue made up of parents wishing to adopt. (Prichard,
1984) . A market with such supply shortages typically sees a black market emerge. The market
for adoptable babies is no exception.

Richard Posner suggested that a market in babies would rectify many of the problems of the

adoption system (Landes and Posner, 1978;   Posner, 1987) . Posner's critics proclaimed that
sales of children reduced the children, or their mothers, to commodities. Further,
unscrupulous but wealthy parents might purchase children to abuse them. Ultimately
baby-selling became code for the foolish extreme to which its proponents could carry
law-and-economics (Donohue and Ayres, 1987) .

Posner's articles suggest that legalization of compensation would benefit most of the players

in the adoption market. In the market he describes, the supply of adoptable babies would
increase, given a legal market price. Adoptive parents would acquire the children they so
badly desired. Natural mothers would suffer less because they would be compensated for
bearing the children (Prichard, 1984, p. 346) . The market would provide incentives for the
pregnant women to take better care of themselves so the children would be healthier (Landes
and Posner, 1978, p. 329-30) . Arguably fewer women would terminate unplanned
pregnancies by abortion. Finally, the children would go to the parents who valued them most,
as evidenced by their willingness to pay the contract price and the mother's willingness to
forego it should she decide to keep the child.

Although child custody statutes and decisions begin with a "best interests of the child"

standard, most end with choosing the interests of one parent or one set of parents (Scott,
1992) , much as a Posnerian market would. For example, although (Posner, 1987, p. 152)  
briefly addresses concerns about abusive adoptive parents and a potential oversupply of older
or handicapped children, he concentrates on the benefits a market price confers on parents.
The market would remain regulated by the agencies screening adoptive parents in Posner's
vision, but primarily to reduce the chance that parents would acquire children to abuse them
(Prichard, 1984, p. 353-54) . Agencies could also match birth and adoptive parents, reducing
search costs for both parties to the transaction.

Although he is keenly aware of the costs of regulation in other contexts, (Posner, 1974) does

not spend much time in his adoption pieces discussing the welfare losses caused by adoption
agency regulation. The current costs are part of what makes the present adoption system so
frustrating. Now, agencies rather than price act to ration the scarce resource of adoptable
children among the many potential parents who want them. In Posner's system, price would
be the primary mechanism for allocating children, and agencies would serve a licensing

Although agencies do guard against abuse by adoptive parents, they also increase transactions

costs for both sets of parents. Agency investigations are not only expensive and annoying, but
they also greatly increase the time required for adoption (Brinig, 1993) . And because only the
final order of adoption prevents the natural parents from revoking consent, the six months
minimum waiting period while agencies investigate adds uncertainty to the transaction. Thus,
the transaction costs added by legislatures to protect natural parents custodial rights and
ensure suitability of adoptive couples may hurt more children than they assist. Virtually all
couples trying to adopt children are suitable (Adoption Factbook, 1989) . As Posner was quick
to note, we have no corresponding ex ante checks on parents who do not adopt. Because there
is no real way to predict what kind of parents most childless couples will make, agencies
make errors of overinclusion and underinclusion.

4. Transaction Costs in Adoption: Revocation  

As a society, we strongly presume that natural parents are the best custodians for their

children. (Holland-Moritz v. Holschuh, 1972),   State v. Meyers (1972) . By definition, then,
others are not as qualified. This emphasis on parental rights to custody as opposed to
childrens rights to the best custodian may lead courts and legislatures to second-guess the
parental consent for adoption.

Birth mothers are almost universally forbidden from giving binding consent until after

children are born (Ely, 1992-93) because of the tremendous and overwhelming bonding
between parent and child that occurs at and shortly after childbirth. But even after arrival of
the child and a recovery period, courts scrutinize assent to adoption ex post more fervently
than they examine virtually any other transaction.

Looking at this judicial behavior charitably, we see that natural parents placing children will

feel tremendous regret (Deykin et al., 1984) . It is more likely, though, that we allow
revocation of this transaction despite unquestionable harm to the promisee adoptive parents,
and frequently the child, because of the tremendous primacy we give parental rights.
Although revocation does not occur very often (Adoption Factbook, 1989, p. 170) , the
possibility introduces very significant uncertainty into the transaction. Uncertainty creates
major effects in the adoption market in much the same way that the very small risk of a
catastrophe dominates the insurance market ( Friedman and Savage, 1948 ). There are, of
course, other transaction costs to adoption, including the fees charged by social service
agencies, the intrusive nature of the investigations and the waiting period that frequently
stretches for several years. As we have noted already, many of these costs serve to "ration"
the short supply of adoptable children, since price cannot. While fees may be charged on a
sliding scale, they are so high that critics of trans-racial adoptions have charged that adoption
has become a middle class phenomenon.

In adoption and termination cases, courts have extended the power of natural parents.

( Schmidt v. DeBoer , 1993 ) illustrates the expanded power of natural parents, particularly
unwed fathers, to withhold consent for adoption and how uncertainty invades the process. The
case was finally decided based on procedure: which state had the ability to grant an adoption.
The direct effects, particularly as portrayed in the popular press, show the human costs of
interstate custody conflicts. Despite more than two years placement in a suitable adoptive
home, Jessica (now Anna) was returned to her natural parents although it was her mothers'
deception that created the loophole voiding adoption.

Although some children enter the adoption market when their parents are found unfit, the vast

majority begin the process after their parents, like Jessicas mother, voluntarily relinquish
parental rights. Because there is no federal regulation or even federal court review of child
custody matters, each state has enacted its own adoption system, and these demonstrate the
tremendous variation typical of family law.

The conditions for revocation are not always explicit. In states with statutes leaving room for

question, the general consent law has been interpreted by judicial decisions. Some state
adoption systems treat consent for adoption much like agreement to any other contract. In
these states, once a parent has given valid consent (after birth), it becomes irrevocable
(Brinig, 1993) . Another group of states lists short time periods for revoking consent. These
give some time for the natural parent to have a change of heart, but the time period is short
enough that neither the child nor the adoptive parents will be greatly injured by revocation.
Other states has very strict revocation requirements, but does not make consent irrevocable.
These statutes provide that there can be no revocation except in cases where consent was
obtained by fraud, duress or coercion, where the consent itself is involuntary. If the states
require a standard similar to the commercial contracts definition of fraud, the defrauding
conduct would have to induce performance, would have to involve a material fact, and would
have to be performed by the other party to the transaction (Kronman, 1978 ; Darby and Karni,
1973) . In adoption cases the other party is usually a state agency, but in direct placement
cases it might be the adoptive parents themselves. A restrictive definition of the conditions in
which revocation is possible tends to value childrens rights to a rapid and certain placement
as opposed to those of the natural parents. In fact, those statutes that provide for no revocation
except in cases of fraud and coercion have restrictive definitions.

On the opposite, parents rights, end of the spectrum are states that permit revocation any time

before the final decree (Brinig, 1993) . Since the adoption process may take years, and usually
must take at least six months, bonds between the child and adoptive parent are almost certain
to form. In such states, a typical case will allow revocation in circumstances that would not
suffice for revocation of a commercial contract. In commercial cases, the threat must usually
be of a severe physical sort that would clearly cause a reasonable person to enter into a
contract where he would not otherwise, and cannot be merely ordinary economic
circumstances. In a natural "parents' rights" revocation state, duress may be the type of
hardship most single parents of unplanned children experience.

In between the two extremes are a number of states that allow revocation before final

placement or within longer time periods following consent (Brinig, 1993) . Physical or
psychological harm to children (and, at the same time, to adoptive parents) occurs when
natural parents are permitted to revoke long after they have given consent. In addition, there
will be other, market-driven, effects. Some parents may be so wary of adoption, particularly if
they have gone through one unsuccessful placement, that they withdraw altogether. This
prevents potentially loving, good parents from benefitting children. Adoptive parents have
other substitute sources of children -- these include the black market, where virtual certainty
can be purchased at some price. Further, parents insecure about the stability of adoptions in
their own states can look for children from other states or foreign countries. Because they are
so eager to raise children, adoptive parents as a group tend to be exceptionally well informed.
They will discover placements initiated in other states, and a quasi-legal intermediary
mechanism flourishes.

Alternatively, because of the natural parents' relative market power (Prichard, 1984, p.343) ,

she can behave opportunistically, extracting consumer surplus from the adoptive parents.
These additional payments might range from concessions by the natural parent to visitation
after adoption or listing in an adoption registry (Comment, 1986) . Where legal, the payments
might be more direct, such as greater reimbursement for prebirth expenses or loss of income.

In an empirical analysis of the effect of adoption revocations on the number of adoptions,

Brinig (1993) tested the effect of consent revocation legislation on the percapita adoptions in
states. Obviously other things beside revocation legislation affect the number of adoptions.
The number of available babies changes with alternatives to adoption such as abortion or
single parenthood. Unmarried women are more inclined to bear children as opposed to abort
them if single parenthood becomes socially acceptable and if they receive adequate public
assistance. The monthly rate for AFDC was therefore included as a controlling variable, as
was the number of abortions in the state for 1987. Factors influencing the desire to adopt
include couples income, and fertility rate, both of which are proxied by the percent of adult
women in the labor force. The results of regression analysis were that the number of unwed
births, the revocation statutes, and the median income were the best predictors of state
adoption rates.

5. Fraud in the Adoption Market: "Wrongful Adoptions"  

The idea that a "Market for Lemons" (Akerlof, 1970) , extends to adopted children sounds at

once abhorrent and seductive. However, given an adoption market, some amount of fraud
may be optimal (Darby and Karni, 1973 ; Nelson, 1970) . Fraud, like the prohibition of a free
market in babies, may be one of the costs of placing less desirable children--those who are
nonwhite, handicapped, or past infancy.

In many ways, the layout of the adoption market closely resembles the more familiar

"lemons" situation discussed by George Akerlof. A purchaser (an adoptive parent) acquires
something (a baby) at considerable cost (in terms of cash, time, and emotional investment)
from a seller (usually an agency). The seller possesses greater information (health or
emotional problems) about the subject of the transaction than the buyer (Stigler, 1961) . In
many cases, it is impossible for the adoptive parent to discover this important quality
information prior to consummating the transaction.

Once the child is placed with the adoptive parents and a major problem is discovered, the

question becomes one of remedy. The fact that children are involved, with their own interests
if not their own rights, changes the set of possible remedies from those appropriate in the
typical commercial fraud situation. In most cases, returning the children to their birth parents
or the agencies placing them (the equivalent of annulment) presents an unacceptable
alternative. Children need stability, particularly early in their lives. Disabled children may
need a stable loving home even more than those without special needs. Rescission of the
adoption contract therefore loses power as a device because of the third party effects, or
externalities, involved. In some cases, adoptions are annulled because of agency
misrepresentation or nondisclosure. In a growing number of cases, although the adoption
remains intact, distressed adoptive parents have sued the placing agencies. Courts have
allowed recovery in five of the ten cases reported before mid-1995. In three of these
successful suits, the child involved had life-threatening diseases. In all, the agencies
deliberately misinformed the parents that the child was healthy. The parents were able to
recover for past or future medical expenses although the agencies were not guarantors of the
childs health. Although the agencies knew of the genetic or other problems, the parents could
not have discovered the illness or disability through their own diligence.

In the other half of the reported cases, the parents suit was barred. In some, the defects,

though undesirable, were not substantial. For example, one child was deaf, while another
turned out to be unavailable for adoption because his father had never given consent. In
others, although the agencies might have negligently failed to discover the problem, plaintiffs
could not show fraud. Perhaps the agency was not the "least cost avoider" given the difficulty
of placing these children.

The special needs of hard-to-place infants creates another barrier to recovery: a heightened

burden of proof of fraud. Particularly if the adoptive parents were willing to accept a special
needs child, courts will be reluctant to penalize the agency by finding fraud and concomitant
damages even if the agency withheld some important medical or psychological information. If
these "wrongful adoption" cases became routine, the government would have even fewer
incentives to attempt permanent placement of disabled children, thus forcing still more to
remain in permanent foster care (Cass, 1987) .

Finally, as in the "wrongful life" cases brought a generation ago, the courts in the adoption

fraud cases confront situations where the damages are very difficult to measure. Even if the
child possesses some trait that the adoptive parent wished to avoid, he or she is nonetheless a
human being, capable of giving and receiving love. The courts typically find that the positive
aspects of having a child outweigh the negative. Taken as a whole, the child presents a net
benefit to the adoptive parents despite the agency misinformation.

6. Open Adoption: Overcoming Transaction Costs


In her celebrated The Joy Luck Club , (Amy Tan,1980) describes a mother who leaves infant

twin daughters beside the road in despair that she will die and in the hope that they will be
found and raised in a better life. She spends the rest of her life looking for them, and it is only
after her death that they are found. In a caselaw parallel, a Vietnamese woman places her
children in a Saigon orphanage after a harrowing journey through the wartime Central
Highlands (Doan Thi Guong An v. Nelson) . Both she and they end up in the United States,
where by the time she finds them, several of the children have been placed for adoption in an
American home.

Someone who acted in good faith will clearly be unhappy with any adverse outcome in such a

court case. When a family has been disrupted by war, or hardship, or death, need the ties be
cut as clearly as we sever them in adoption? From the perspective of the mothers, clearly
placement of the child was the appropriate action at the time (Painter v. Bannister) . From the
perspective of the child, should he or she know his heritage and how much the mother (or
father) loved him? The quest for each other by birth parents and children defies easy
characterization, but may be an example of "uncommensurables" (Sunstein, 1994) where the
legal effect of an action does not square with reality.

The law protects birth parents by hiding their identities from all who seek them, except in

some clear cases of emergency. This is clearly what adoptive parents want, as well, for the
protection allows them to determine when their children should be told of their adoptive
status. But increasingly states are responding to pressures by both birth parents and adoptive
children and enacting statutes permitting parents to leave identifying information with
adoption agencies. Although the provisions differ, they usually allow the adopted child, at his
or her option, to discover the birth parents identity at majority.

This may appropriately satisfy the longing felt on both sides of what seems to be a

genetic-based franchise (Millen & Roll, 1985) . The other option would be to move toward a
more open adoptive process, as some are urging (Holmes, 1994 ; Ames, 1992 ; Dowd, 1994) .
In open adoptions, both the birth and adoptive parents know each others identitities.

7. Contracts for Children: Surrogate Parenting  

Legal recognition of surrogate parenting continues to be contentious in the Untied States.

Over the past several years, several states have enacted legislation prohibiting or otherwise
regulating surrogacy. Since the landmark case of In re Baby M . (1988) , there have also been a
number of important state cases applying common law principles to this new technological
area. In Johnson v. Calvert (1993) , the California Supreme Court found that the surrogacy
agreement between the genetic parents and the surrogate implanted with their fertilized
embryo did not offend the state or federal constitution nor public policy. The surrogate was
therefore not the "natural parent" entitled to custody or visitation with the child. The court
suggested that the legislature resolve the public policy questions. To date, the state legislative
responses to the practice vary from a few that reluctantly acquiesce to a majority that find
such contracts illegal and therefore unenforceable (Wadlington, 1993) . Several states enforce
the contracts when they are regulated if there is no monetary consideration for the surrogate's

The chief product of all this legal activity is uncertainty. As we saw in the consent revocation

context, uncertainty itself begets more litigation, higher prices to attempt to secure conformity
with the contracts, and more opportunism on the part of all involved, particularly
intermediaries. More litigation comes to surrogacy just as it plagues other uncertain areas of
the law (Priest and Klein, 1984) . The higher prices charged by surrogates and attempted close
relationships with them may thus be bonding devices because the contractual remedy is
questionable or unenforceable (Kronman, 1985) .

On the other hand, the childless couple may become opportunistic, taking advantage of the

surrogate's pregnancy and relative poverty to extract concessions ranging from more
restrictions on her behavior during the pregnancy to letting them film the delivery. It is more
likely that the surrogate will behave opportunistically, however, because the couples demand
for their genetic child is very inelastic, meaning that they will still want the child even if the
"price" is raised (Prichard, p. 342-32) . She may therefore demand additional compensation
because "she is thinking about keeping the baby" or ask for continued contact once the child
is born.

Both what pushes some couples towards surrogacy and what makes observers nervous can be

explained in simple biological terms. As Professor (Epstein,1991) has noted, we are driven by
our genes to reproduce, and, more controversially, to behave in ways that will allow each
succeeding generation also to be fruitful and multiply. Infertile couples are tormented in part
because of this unsatisfied and fundamental need. They choose surrogacy over adoption
because they wish to have at least some of their own genetic code replicated in another human
being. Surrogate mothers are also affected by their biology. They may desire other genetic
children that they cannot afford to keep in their own families, and so be attracted to surrogacy
in the first place. They may simply enjoy being pregnant and the powerful feeling of creation
that comes with giving birth (Epstein, 1995;   Trebilcock and Keshvani, 1991) . But the dark
side of these good feelings is that women are not programmed to have children and then part
with them. A contract made beforehand, even though it may make the rational part of the
placing easier, cannot affect these biological drives. The regret that such a placement causes
does not pass away. It is large, probably larger than the $10,000 that a typical surrogate
receives, and it may not be anticipated beforehand.

If the surrogate has other children and therefore more information, about what giving up the

children will cost her, problems for the surrogate's other children surface, too (Brinig, 1995) .
How do they know that Mommy will not decide to give them away if she needs money or if
she decides that another couple needs them more than she?

Some object to surrogacy because, like real estate agents who get paid by commission

whether or not the closing ever takes place, placing agencies get compensated by the infertile
couple upon signing the surrogacy contract (Areen, 1988) . They may not insure that the
surrogates are adequately investigated or counseled. They may not do extensive checking
about the infertile couple, either. From a practical viewpoint, they are dealing with very
vulnerable people on both ends of the contract they are making, and that may encourage
"matches" with unsuitable players.

Now let us reconsider these three primary objections: regret by the surrogate, hardship on the

surrogate's other children, and exploitation by for-profit placing agencies. In economic terms,
the problems are incomplete information, substantial negative externalities, and rent- seeking.

Surrogacy contracts may be suboptimal because the surrogate cannot ex ante have perfect, or

even minimally adequate, information. It is not her ex post regret that drives the analysis. It is
that she cannot have predicted accurately what the situation will be at closing time. She
cannot have gauged precisely the long-term effects of what she promised before conception.
Even in the case of the marriage contract, which society positively favors, specific
performance of non-financial terms will never be ordered (Cohen,1987, p. 300) . In surrogacy,
knowing during pregnancy that specific enforcement was possible could make the pregnancy
a nightmare (Schneider, 1990, p. 128) , because the woman who changes her mind has every
incentive to hate and resent the child she carries. She might try to extract additional money
from the intended parents to guarantee that she will not engage in conduct that will harm
"their" child--engaging in reckless activities such as sky diving, drinking excessive amounts
of alcohol or caffeine, dieting, or injecting drugs to numb the pain of her three month
predicament after a statutory "turnback point."

The information problem at least justifies some intervention into a free surrogacy market. The

state might require counseling or provision of mental health follow-up services. It might
allow the customary ten-day period after birth before consent is finally--specifically
enforceably -- given. It might simply change the contract from a "fully enforceable"
agreement to one where the remedy is the more typical one of money damages (Epstein,
1995, p. 41) .

Contracts may become less than fully enforceable where there are substantial negative third

party effects. Although most contracts affect third parties at least indirectly, sometimes the
contracting parties must buy-off the affected outsiders. So long as the compensation takes
place, the contract remains efficient and enforceable. When the external costs are too high,
the contract may be prohibited criminally, enjoined, or just not enforced (Goetz, 1984, p. 15-17) .

Although any negatives flowing to the contracted-for child are probably outweighed by the

benefits of existence, the benefits of the contracted-for child's existence to the surrogates
other children are far more speculative (Trebilcock and Keshvani, 1991, p. 577) .

Family law theoretically places children first despite parental activities, witting or not, that

might seriously harm them. In our fascination with the adults involved in surrogacy
arrangements, these children are forgotten. Whether we ought to compensate them directly,
offer them family therapy, or just question whether surrogacy is a good idea, remains a policy
question (Posner, 1992, p.103-05) .

Middlemen, or finders, because they can reduce the transaction costs associated with search,

are highly desirable in many contexts (Posner, 1992, p. 427) . Where there are easy ways of
obtaining the information and making the efficient trades, one would expect that the market
would eliminate brokers because they were not eliminating costs in the system. However,
there are several features about this particular market that make this assumption problematic.
Two of these create incentives for brokers to enter the market. First, there is an extremely
inelastic demand for the "good" in question. The middleman may therefore extract the
"consumer surplus" from one or both parties to the transaction For example, in the debate on
the British surrogacy legislation, which ultimately prohibited commercial surrogate contracts,
one speaker noted that "the distress . . . of infertile couples who are anxious to have a child
should not be exploited for financial gain." (Parliament, 1985) To extract the surplus, the
middleman may engage in substantial and wasteful rent-seeking.

The second unusual feature is the legal uncertainty that has surrounded surrogacy. Because in

most states the law of surrogacy has been unsettled, lawyers can offer what looks like a
guarantee of greater success, a "watertight" contract. This, of course, may be a transitory
phenomenon as more legislatures react to the surrogacy question, so this apparent (and
illusory) insurance function will disappear. The third feature is that any "mistakes" will reveal
the relevant information to prospective contracting parties only at the expense of existing
children. That is, once the brokered contract fails, the parties' litigation itself will probably
have negative effects on the child. These might be financial, or could be emotional if the child
is ultimately removed or if the family encounters significant publicity. Because of their
incentive structure, as noted previously, these agencies may also act to reduce the beneficial
flow of information between contracting parties, causing some inefficient contracting. While
state legislatures may be moved by reasons that do not include economic efficiency, it is
surprising that commercial "baby brokering" is almost universally illegal (Atwell, 1988, p.
29-39) . In our jurisdictional market, if these middlemen were a good idea, presumably some
state would have experimented with them.

Yet a surrogate black market is a still worse alternative (Prichard, p. 343;   Landes and Posner,

p. 388) . If surrogacy becomes illegal and there are still people on both sides of the market
who want to participate in these transactions, as there will be, the consequences will be yet
more grave. First, the price will rise, in part to cover the risk of detection and in part because
measures must be taken to prevent detection. Illicit organizations that specialize in the black
market activity are likely to flourish, and these will extract their price, whether for
information or protection, from the participants. Finally, the black market would preclude any
legitimate information gathering and transmittal between the parties that legitimate state or
private agencies would otherwise provide.

However, just because surrogacy should not be precluded does not mean that the state needs

to encourage baby brokerage. In surrogacy, the finder (broker) is frequently paid as much as
the surrogate. It would be preferable either for the surrogate to reap this consumer surplus or
for the intended parents to have to pay less. The brokers should not extract this surplus.
Lawyers may be needed to handle the adoptions by the intended mothers, but should only
charge their--much lower--customary fee for this service.

Surrogacy may in fact be a kind of "demerit good," viewed instinctively as harmful regardless

of what the individuals participating in the transaction decide (Sunstein, 1994, p. 850) .
Society need not prohibit these goods, but may merely tax or otherwise regulate them to make
them less attractive, while not forcing participants into the black market.

8. Foster Care and Agency  

Many children do not live under their parents' care and protection, but that of state agencies.

In the not-too-distant past, children whose parents could not care for them would have
remained in their families, living with uncles, aunts or grandparents until they could fend for
themselves (Hacsi, 1995) . In some parts of the country, boys would have been apprenticed at
a fairly early age to learn a useful trade. Only in cases of the very last resort would the family
have relied on public help, and that would have come in the form of foundling homes or
orphanages. These institutions were grim enough to inspire a wave of nineteenth-century
reform as well as immortalization in the tales of Dickens.

The foster care idea that ensued is that adults with experience as parents will take children

from families unable to cope with them, tend the children for awhile in a loving and stable
situation, and prepare them for their return to their own families who have meanwhile been
provided with community assistance (Mnookin, 1973) . In extreme cases, where parents are
unwilling or unable to resume relationships with their offspring, new (adoptive) homes will
take the parents' place. The foster relationship begins with a contract assuring all parties that
the arrangement is temporary, that the agency will pay some compensation to the foster
parents, that the agency will inspect the foster home, and that the agency may remove the
child for return to the natural parent or to another foster home in the agency's discretion.

Foster care was designed to be temporary, and was therefore never expected to be anything

but a "second best" solution. Instead, for a tragic number of children, it has become a
permanent way of life, for they are never returned to their birth parents nor adopted by others.
This seems to be especially true of African-American children, who are frequently placed
with relatives as part of "kinship care" (Hegar and Scannapieco, 1995) . They may be cycled
through a number of foster families, so that they never receive a sense of attachment and
stability. And, in some metropolitan areas, the system itself has become overwhelmed by the
scope and depth of the child care problem.

From an economic standpoint, foster care presents a classic principal and agent problem, with

the unhappy result exactly what the analyst predicts where agents do not have correct
incentives (Ross, 1973 ; Stiglitz, 1987) . The theoretical solution to foster care problems is to
correct the incentive incompatibility. But this is difficult because the agent's duties involve
vulnerable human beings with their own distinct interests and because the overseers are
government agencies, who also have conflicts in their missions.

As (Ross,1973) describes it, an agency relationship arises between two or more parties when

one, the agent, "acts for, on behalf of, or as representative for the other, designated the
principal, in a particular domain of decision problems" The concepts of principal and agent,
with the theoretical solutions to the problem, have been extended to law primarily in the
business context (Holmström and Tirole, 1987;   Hart, 1989 ). Reduced to its simplest terms,
combining more than one worker will take advantage of economies of specialization and
scale and will reduce transaction costs (Coase, 1937) . However, when the amount of effort
each worker contributes to the joint production of a unit of output cannot be measured, the
rational worker will shirk, free-riding on the others because the loss in his or her
compensation will be less than the reduction in contribution (Alchian and Demsetz, 1972) . In
order to reduce this shirking, managers monitor each employee's performance. If salaries are
sufficiently higher than unemployment compensation, the employees will work harder to
avoid losing their jobs. The theory is that the residual, or profit, should go to those who
employ the monitor--the owner. In the noncorporate context, this is the same actor.

In a recent extension of the principal-agent theory to the field of fiduciaries, (Cooter and

Freedman, 1991, p.1065) argue that the fiduciary is like the agent and the beneficiary the
principal, and that fiduciary law has developed to discourage misfeasance (the duty of loyalty)
as well as nonfeasance (through the duty of care). Cooter and Freedman suggest that
compensation through a variable rate for observable effort and a fixed rate for unobserved
effort will further discourage these problems.

In foster care, the foster parent serves as the agent of the birth parent (or the state, if the

parent is permanently unfit) and also the child, who is something like a third party beneficiary
of the adults promises. Like the agents in business, the foster caretakers have incentives to
shirk or even neglect the child in their care, except for their own sense of duty, the effects of
reputation (on their potential next foster placement), and, most important, the affection they
develop for the child in question.

On looking more closely at the foster question, we see two separate fiduciary problems. The

first is the tie between the foster parents and the state. Although both have an interest in
seeing the child cared for, their incentives may not be the same. The custodial (foster) parent
has day-to-day responsibility for the child, and the state (or the natural parent) cannot monitor
the care effectively. The foster parent, like the custodial parent after divorce, acts as a
fiduciary, or agent, for the children's custody and the allocation of any money paid by the
state. The other perspective for the same problem, and the one that is most applicable for the
foster parent rights cases, is that of the foster parent. From this vantage point, the state acts as
an agent to provide guidance and support and to resolve any conflicts fairly. Finally, the child
is always an implied beneficiary, or principal, looking to the foster parent for custodial
services and to the state for support and resolution of the ultimate custody question.

Usually caselaw and academic literature approach foster care from the birth parent's

perspective ( Smith v. Offer, 1977 ; DeShaney v. Winnebago Co., 1989 ; Kurtz, 1994 ). The
emphasis, then, is on parental rights, not upon any harm to children that might result from
removal, or even their feelings about which set of parents would be better for them (Doe v.
Kirchner) . Occasionally, individual courts have changed their perspective to the states,
valuing what would advance goals of the foster care system as a whole (Matter of J.C., 1982) .

When children are removed from foster care placement, the problem, as set up here, is that

the children who are subject to foster care in many cases do not have the same interests as any
of the adults involved: the foster parents who now care for them, their natural parents who
may have abused or abandoned them, or who may not have been "real" to the children for
many years, or "The State" which may have removed them from the only home they knew
and is threatening to remove them again.

As long as the family remains intact, birth parents view the upbringing of their children as a

joint enterprise, or "collective good." (Zelder, 1993 ; Weiss and Willis, 1985, p. 270) They see
how children thrive when they are appropriately cared for; they are rewarded by their smiles,
hugs, and imitation of themselves, as valued adults. However, when the family breaks up and
the children are placed elsewhere, the interests diverge. Although the parent probably still
loves the child, and is usually required by law to support him or her, they no longer reside
together, and visitation may be infrequent. The parent may be quite preeoccupied with
attempting to meet the conditions set before the child can return: securing employment,
dealing with substance abuse problems, settling adult emotional relationships. There are
economic strains as well, because the family now in part maintains two households,
eliminating economies of scale that were present before foster care placement (Weiss and
Willis, 1985, p. 269) . But more important, the natural or birth parents are now unable to have
day-to-day contact with their offspring. They cannot know exactly what the foster parents are
doing to care for the child (Weiss and Willis,1985, p. 270) , and cannot watch him or her grow
from "close up."

Finally, because the natural parent lives away from the children and sees them less frequently,

he or she may lose interest in the child or become preoccupied with other things (Weiss and
Willis, 1985, p. 288) . The natural parent would like to see the child happy in the new
situation, but not so happy that the real home will be forgotten.

The state as agent has monitoring problems as well, although monitoring is usually required

by the foster care contract. Too frequent visitation upon foster care parents, even if practical
from a staffing viewpoint, would only disrupt the temporary family foster care is designed to
create. The agencies are concerned with "rehabilitating" the natural parents, and may also be
overwhelmed by other truly horrible home situations in their caseload that require immediate
intervention. Like the natural parents, the government agents are concerned that a good, but
not great, relationship develop between foster child and foster parent. Thus the agency may be
apt to remove children who have been with a particular family for some time, despite any
harm to the child that may result (Matter of J.C.) .

Using Cooter and Freedman's (1991) analogy to principal and agent, the caring natural parent

as principal fears that the agent, the foster parent, will shirk (nonfeasance), undermine the
parents standing in the childs eyes, or worst of all, actually harm the child. From the foster
parent's perspective, the noncustodial birth parent is a complicated mixture of the source of
the child (who may be easy or very difficult to care for, depending upon whether the natural
parent was abusive or whether the child has other problems such as physical disabilities), the
agent for support, and source of the threat of removal. The agency is placed in the difficult
position of being at once an agent for the natural parent and an advocate (agent) for the child.
Finally, of course, there is the child. If quite small, he or she may be a helpless pawn in this
situation, desiring only love and some stability in life (Watson v. Shepard, 1976) . If the child
is older, he or she may manipulate most if not all of the adults involved (Ross, 1993) .
Because finding the residual claimants and even the monitors is problematic, it is difficult to
see how any contract could be written to give all these parties appropriate incentives.

The child and the various sets of parents do not have the same interests. Perhaps this is

obvious, since the children are concerned only about their own well being, while the parents
think both about their own consumption and the welfare of their children (Bernheim et al.,
1985, p. 1049;   Becker, 1974) . In the extreme, because giving up the child or having the child
forcibly removed may have been very painful, the natural parent may want emotional distance
from the child, may avoid the child services agency, or may even want to hurt the child. If
there is less visitation by a fit parent, both the natural parent and the child lose (Hetherington
et al., 1982) .

"Bad" foster parents care for children to get the money they are paid by the state. They do not

invest emotionally in the children in their care, a failure that hurts the child. "Successful"
foster parents are often at odds with state agencies because they do invest and become
attached. Removal will be costly for them and the child; long-term placement will make
adoption tempting.

To resolve the problems inherent in foster care because of its principal-agent problem, the law

must make the players' incentives compatible. For the natural parent, there must be no
"parental right" that will trump what is clearly best for the child. To prevent discretion and
uncertainty from running amok, time limits must be set after which "rehabilitation" comes too
late. Making the agency's incentives compatible with either, let alone both, sets of parents
(and possibly a third set if adoption is a possibility) is probably impossible. But they could be
made compatible with the child's interests in stability and safety (Bartlett, 1984) . This would
require rethinking the goals of the foster care system. If most children do not return
successfully to their parents' care, and a time limitation can be set, certainty could return to
the system. Such a move obviously requires some new empirical work, for there are many
questions without answers here. A system with set time limits and emphasis placed on the
child's choice and best interests might drastically curtail the number of voluntary placements.

Because children are not material goods, the particular type of principal-agent relationship

foster parents enjoy is fiduciary rather than market-like (Scott and Scott, 1995) . That is, the
duties required of foster parents more closely resemble family duties than commercial ones:
the foster parent, like the natural parent, must put the child's welfare before his or her own.

This hybrid relationship makes foster parent cases difficult for courts. Clearly foster parents

differ from teachers or nannies or babysitters. Yet because the relationship is designed to be
temporary, is incomplete ("title" remaining in the natural parent or state), begins most often
with contract, and carries with it some financial reward, foster parents do not have precisely
the same rights and obligations as do natural parents.

9. Single Mothers  

Men and women are complementary factors in childrearing. Women may be more likely to

perform their role without prodding (or channeling) than men, for as Seltzer (1994) puts it,
men, as opposed to women, feel responsible to the children of women to whom they are
married. Thus, men are likely to contribute in cash or kind when they are certain of
fatherhood, and when they can interact with the child. They are more likely to invest when
they have the ability to monitor, either through frequent contact with the child or through trust
of the maternal "agent." They are also more likely to keep their support commitments when
they do not have new families to distract them or drain financial resources. All of these
reasons suggest why marriage, as opposed to some alternative family arrangement, is
necessary for "first best" childrearing. Children aren't just factors to be ignored or non-actors
whose preferences should be lumped in with their parents (Anderson and Tollison, 1991) .

This argument accepts some of the premises advanced by such writers as Lupu (1994) ,

namely, that children, rather than their parents, ought to be central, and the fact that there are
two parents presents advantages for the child. But after these agreements, our roads diverge.
Lupu sees the two parents as contesting and checking one another to ensure that the child is
brought up well, with society intervening at points where they can or will not perform this
mediating function. They may also be viewed as complements working together and taking
advantage of each others differences: specializing, if you will.

Despite the desirability of dual parenting, the number of children born to unmarried women

(as a percent of all births) has increased substantially in the last twenty years, with the unwed
white rate nearly tripling (Brinig and Buckley, 1996) . During that time, many social
commentators argued that such trends were benign. Some touted the benefits of single
motherhood (Fineman, 1994) , while others argued that cultural conservatives should not
impose their views of morality on indigent women who are responding rationally to their own
environment (Sugarman, 1995) .

Recent studies offer more detailed support for the conservative critique of increased unwed

birth rates (Whitehead, 1993) . The absence of a father is seen as the single most important
cause of poverty (Wojtkiewicz et al., 1990) . Involved natural fathers provide strong role
models, discipline, and a dependable source of income. Without these benefits, children do
much less well than those from married families (Moffit, 1992;   McClanahan and Garfinkel,
1989;   Gottshalk, 1990).  

The focus of attention has therefore shifted from the consequences to the causes of

illegitimacy, particularly to welfare subsidies for illegitimacy. The most direct subsidy to
illegitimacy in the United States is the Aid to Families with Dependent Children (AFDC)
Program, now the Personal Responsibility and Work Opportunity Act (1996) which offers a
cash subsidy to mothers of children whose cannot or do not fully support them. Illegitimate
births under the AFDC program are on the rise, and at present constitute about one-third of all
AFDC children. Support for single parents goes beyond AFDC to include Food Stamps,
Medicaid, and WIC, which are all regulated by the new legislation.

From an economic perspective, it is uncontroversial to suggest that the AFDC program results

in increased unwed births. Subsidize something, and theoretically you will always get more of
it. However, critics of welfare reform argue that public assistance cuts will not reduce unwed
birth rates because they have not done so in the past. If this is so, the proposed cuts in welfare
payouts would harm children without benefitting society.

Welfare supporters also argue that illegitimacy rates are more closely correlated with

exogenous (external) social norms than with welfare subsidies. What has happened, they say,
is that the social stigma of illegitimacy, always weaker for blacks, has declined for whites,
and this has made all the difference. However, this does not exclude the possibility that
welfare subsidies may affect illegitimacy rates.

Social norms might not be exogenous, and might instead be shaped in part by welfare

subsidies (Brinig and Buckley, 1996) . Welfare subsidies to illegitimacy, beginning in the
1950s, might have slowly affected social norms. Unwed women are probably not completely
insensitive to economic subsidies. Indeed, we might expect stronger reactions to increases in
public assistance as social norms weaken. This might explain why illegitimacy rates increased
while real AFDC payouts declined from 1975-90.

To date, most empirical studies have failed to detect a significant positive welfare coefficient

( Ellwood and Bane, 1985;   McLanahan and Garfinkel, 1988 ; Kimenyi and Mbaku, 1
995) .
Some studies report ambiguous results, such as a significant positive AFDC coefficient for
some but not other measures of welfare availability (Plotnick, 1990) . A longitudinal work
based upon survey data reported that the fact that the mother received welfare prior to
conception was significant in predicting the childs legitimacy status, but that the amount of
the welfare payment was not (Duncan et al., 1988) . Shelly Lundberg and Robert Plotnick
(1995) reported a significant positive welfare coefficient for white unwed births, but not black
unwed births. Duncan and Hoffman (1990) reported a positive but insignificant welfare
predictor of black teenage illegitimacy. A review of these studies comments that "[t]he failure
to find strong benefit effects is the most notable characteristic of this literature." (Moffit,
1992) .

Brinig and Buckley (1996) estimated unwed birth rates for whites and blacks in each state for

each year from 1975 to 1990, using economic, welfare and social predictors of illegitimacy
and found that the AFDC coefficient was significantly associated with increased unwed births
for both blacks and whites. Of the social predictors, those suggesting weak community
support systems (or social capital) were associated with higher unwed birth ratios. There were
significantly more unwed births in cities, and the percent Black coefficient was uniformly
positive and significant. Cities are apparently more likely to lack the social networks which
promote marriage and sanction deviancy while because illegitimacy is associated with an
urban underclass. High divorce rates were also related to illegitimacy both because of a
breakdown in social structures and because the pool of potential unwed mothers is higher in
high divorce states.

10. Parents as Fiduciaries  

Implicit rather than express contracts between parents and children bind families together.

While the contractual terms used to be far more widely recognized than they are at present,
they have never been legally, as opposed to morally, enforceable. The current trends toward
thinking of the family in contract terms and recognizing more and more childrens rights tempt
some to question the wisdom of the assumptions made by any implicit family agreements. In
any event, the family contract will likely remain illusory and unenforceable because more
than contract binds the members of a family together.

Eroticism aside, the relationship between parents and young children is not the same as the

bond between their parents, and for good reason. Children are not merely "little adults."
Although the vast majority of them possess the potential for meaningful adult contributions,
their needs during childhood and even adolescence are quite different from their parents or
even other emancipated peoples. Children do not make decisions like adults. They require a
special kind of legal protection to accompany satisfaction of their primary needs. In order to
be free to just be children, they need to rely on adults, usually their parents, to make adult
decisions. The parents thus act as fiduciaries: trustees or stewards of their offspring (Scott and
Scott, 1995) . Treating children as independent legal actors in any but the narrowest range of
circumstances limits not only their ability to be children but also their parents ability to be
good parents. This is not to say that children shouldnt be considered independently of the
adults who act in their names, when the interests of parents and child conflict.

An implicit contract between parent and child was detailed by William Blackstone, writing

between 1765 and 1769. In this premodern time, the language of contract was not out of
place, for Western families have not had their current structure for very long (Glendon, 1980) .
In Blackstone's time, the contract involved the parent having the duty to provide support,
protection, education, discipline and religious instruction in return for the childs providing
wages during minority and support and protection in the the parents old age, honor and
reverence, subjection, and obedience (Brinig, 1994, p. 299-300) .

The fact that this contract transcends the generations may seem problematic. Yet, as the Bible

says, the sins of fathers may devolve upon their children. Accepted wisdom dictates that
societies receive the customs and institutions of their ancestors (Rawls, 1971, p. 284-94) .
There will also be a "passing down" of attitudes about parenting. For example, one researcher
claims that in single-earner families, the father's attitude toward the fathering he received as a
youngster will be the most consistent predictor of the time spent with his children (Barnett
and Baruch, 1987, p. 37) . Finally, economists write that altruism within the family occurs in
part because of the expectation of future inheritance from a parent (Epstein, 1992, p. 89;  
Buchanan, 1983) .

Scholars have concluded that many of the current perceptions of childhood postdate the

change from an agricultural to an industrial economy ( Zainaldin, 1979;   Glendon, 1980) . In an
agrarian economy, children over the age of five were assets, since they could work around the
farm or household. As cottage industry and then factory production developed, the feeding,
clothing, and educating of children became more of a consumption activity than a financial
investment (Becker, 1993) . The only positive input children could provide for the total family
financial picture was their income (Stern et al., 1975) , which theoretically belonged to their
parents. And when child labor laws and compulsory education statutes were enacted, even the
relatively small income that most children could provide evaporated.

Whatever power a contract analogy might have held in Blackstone's time, its usefulness

becomes questionable when we analyze the contemporary family as an economic unit. This
problem is particularly evident when we consider the incentive structure within the family.
Currently the incentive provided for investment in children is almost entirely subjective.
Parents may "spend" time or money on their children because they are altruistic (McGarry and
Schoeni, 1994;   Woodhouse, 1993) . They may invest in their children because they feel some
sort of duty to do so (Becker, 1993) . They may act because they take pride in their children's
achievements, either because these enhance the family reputation or their own immortality
(Buchanan, 1983) . They may be thinking in terms of some eventual reciprocity, at least in
terms of a meaningful relationship with their children as adults (Brinig, 1994;   Cox and Stark,
1993) . They do not act because they expect any sort of reward, especially not in a monetary

The law still presumes that some sort of a formal relationship exists in the family setting.

Clearly parents enjoy enormous discretion and privacy as they raise their children (Scott and
Scott, 1995) , although Blackstones contractual family seems to have eroded from both sides.
The state now plays a far greater role in family life, and children have been given independent
rights. But there are limits upon what they can do legally, in part because they cannot make
adult decisions. Becker and Murphy (1988) suggest that the limitations on childrens ability to
contract suggest a role for the state in creating Pareto efficient investments both in them and
the elderly.

Recently, children have been given some autonomy in areas of personal privacy, such as

contraception and abortion ( Planned Parenthood v. Danforth, 1976;   Bellotti v. Baird, 1979)  
though the Supreme Court has upheld statutes giving parents of immature pregnant minors
the right to be informed in most cases of their daughter's pregnancy (Planned Parenthood v.
Casey, 1992) . As the child approaches majority, he or she may also acquire decision-making
power in terms of elective medical care, and child custody placement with divorcing parents.
Children over age seven are able to testify in most cases, and where criminal behavior
directed at them is involved, even younger children may be witnesses if they understand the
difference between right and wrong (Scott, 1992;   Sanger and Willemsen, 1992) .

Despite this growing independence, children are usually incapable of enforcing their parents'

contracts. The first reason this is so, and that courts will not interfere in most families,
involves an unwillingness to disturb family privacy. Kilgrow v. Kilgrow (1958) is a classic
case involving an intact family. Mr. Kilgrow sued his wife for failing to abide by her
premarriage agreement to educate the children in parochial school. The court declined to
become involved, fearing that otherwise courts would have to deal with a flood of "intimate
family disputes." Second, the court did not wish to "interpose its judgment" about proper
child rearing. Taking an extreme position even for a legal academic, Wendy Fitzgerald (1994,
p. 40) recently argued that if children could enforce their parents' obligation to support them,
children might evolve legally from the status of chattel to some form of personhood. She
states that "children will remain excluded" from personhood because "[t]heir experiences and
perspectives of dependency find no recognition in any legal model positing an exchange
between autonomous individuals."

Courts do not usually allow the type of intervention Fitzgerald suggests, even when family

privacy has already been breached by the parents' divorce. Children cannot sue to recover
unpaid child support under a parental agreement or divorce decree, although courts may
permit suit based upon promises made solely for the child's benefit. Nor will courts entertain
the childs action if he refuses to submit to parental authority or to live with either parent.

As the cases make clear, to some extent the duty to pay child support rests upon parents'

reciprocal obligations of custody and support. There is also an important relationship between
the duty of support and the ability of the parent to exercise control over the child. For
example, in Oehler v. Gross, (1991) a 17-year-old girl refused to live with her father, who
was willing to have her reside with him. She sought reimbursement for apartment rent, and
the court denied that he had an obligation. "It is quite clear from reviewing this record that the
father is not refusing to support his daughter. Rather, he is refusing to allow his daughter to
dictate the proper allocation of support monies." She somehow was not living up to her part
in the family scheme.

Even the parents may not be able to enforce the implicit family contracts. As Kilgrow shows,

courts are reluctant to invade the privacy of the intact family even when basic parental
decisionmaking is involved. If one spouse goes so far as to abuse the child, the other has the
duty to protect the child, but there is no way to compel affirmatively good behavior. The only
remedy seems to be breaking up the family by filing for divorce. If the spouses divorce, there
are still limits to enforcement. Decades of federal intervention have not ameliorated a child
support enforcement problem: only 63% of the amount ordered is collected (Chambers, 1995 ;
Brinig and Buckley, 1996) . Visitation cannot be tied to child support. Nor may the
noncustodial parent force the other to spend the child support money for the childs benefit
rather than her own. For children, then, the right to enforce contracts becomes illusory. They
must rely on other institutions to assure parental cooperation in their upbringing. Because
they cannot enforce contracts, the rationale for something like a fiduciary status becomes

Finally, analysis of many of the third party enforcement cases under the principal-agent

framework of Cooter and Freedman, 1991, p. 1065-69) reveals a ratification problem. The
presumption is that the child constructively ratifies the contract by providing what might be
called "childhood services," pursuant to the implied contract described earlier. Although
many of these functions have been attenuated today by state involvement with the family
(Becker and Murphy, 1988) , parent and child still operate on a reciprocal basis, and the
child's function at a minimum involves accepting parental support and advice. Rescission of
ratification occurs when the child refuses to abide by the parent's wishes. The child may
refuse to go to the college of the parent's choice, or to live on the college campus. In the
extreme, the parent may be "abandoned" by the child. In such a case, the child will be unable
to enforce support.

11. Efficiency as a Goal of the Law of Parent and Child  

The legal aspects of the family have long been treated as a world of their own, separate from

any practical or theoretical connection to theories of liability in other fields. This division
occurred partly for historical reasons--the rules governing marital separations and parental
obligations developed before modern contract and tort theories, and they developed in a
separate (ecclesiastical) system of courts--and partly because, under the influence of
formalism, theories of civil obligation focused on the prerequisites for liability. Modern
theory, influenced by the insights of law and economics, has shifted its focus from liability's
prerequisites to its consequences (Posner, 1992) ; Goetz and Scott, 1983) . Traditional contract
analysis, for example, may have asked whether parental obligations are sufficiently definite or
sufficiently voluntary to constitute enforceable agreements. Under the influence of law and
economics, scholars now are apt to examine the incentives that might be supplied by various
contract remedies (Ellman, 1990) . The result is to focus attention on the policies that family
laws are designed to promote.

In analyzing parenthood as a form of civil obligation, and in identifying the policies that are

served by modern divorce law, the most striking observation is the identification of the
interests that are not protected. Parenthood, like marriage, historically involved the exchange
of support for services, though this time it was the trading of the father's obligation for
support in return for the child's services during minority, and the lifelong exchange of
affection reciprocated by what Blackstone called "honour." Termination of parental rights
historically occurred only where the parent egregiously violated these obligations, so that the
child deserved to be rescued and released from the duties of a relationship that had effectively
ceased to exist. As children become more emancipated, and acquire their own "rights," the
idea of parental fault, or unfitness, becomes problematic. However, the parents still have a
duty to perform as good parents while the relationship exists, a duty that they cannot vary
(Hogge v. Hogge, 1993;   Huckaby v. Huckaby, 1979) . And breach of the parental contract
could still give rise to liability. Presumably, to the extent tort --or contract-- reward is
prohibited by the law, decisionmakers in the legislative or judicial branch must have
determined that the costs of allowing recovery, whether in restitution (tort) reliance or
expectation, exceed the benefits (Brinig and Carbone, 1988, p. 898 ; Katz, 1988, p. 544-45;  
Cooter and Eisenberg, 1985, p. 1467-75) .

Such an analysis of the benefits and costs of increasing children's rights has never been

undertaken with any rigor. While, for example, the costs of a fault determination for divorce
are deemed self-evident by anyone familiar with the older system, the costs of a parental
non-enforcement system have not been weighed against the possible benefits of a more
expansive system of awards to children whose parents have behaved egregiously. The
benefits are those traditionally identified with civil obligation--deterring breach and
encouraging reliance over the life of the relationship. Within the family, deterring breach
translates into lower rates of child abuse and more investment in the children, including
mothers who might stay in the home to raise them or couples who decide to stay married "for
the sake of the children." (Scott, 1990) .

Encouraging such reliance primarily means encouraging both parents and children to think in

terms of lifelong reciprocal obligations. A decision to preclude consideration of parental
misconduct (except by terminating parental rights) could be justified, therefore, either on the
ground that the cost of the determination is too high (because of over-zealous enforcement
and consequent invasions of privacy and parental prerogatives, or the bitterness any lawsuit
can cause) or because of a conclusion that the interests to be served by such a determination
(primarily the interests associated with perpetuating traditional parental roles) are not very
important. Either way, the interests sacrificed must be considered along with the costs. The
difficulty of determining the degree of fault on the parent's or child's part should not be used
to cloak important societal decisions about what makes the best family.

12. Human Capital Investments in Children  

One observable manifestation of the change in family functions over time is that as recently

as when our parents were children, elderly people frequently lived with their childrens
families. Children provided the security when parents could no longer work (Brinig, 1993) .
Granted, there were fewer octogenarians or nonagenarians and there were more children in
most families to share the expense of housing and caring for an aged parent. But the change
in functions affects more than children. In some industrialized nations, even though children
are "useless" during childhood, aged parents, who have stopped most labor force production,
remain far more integrated into the economy and their families' lives than in the United States
(Rubin et al., 1972) .

The legal, as opposed to social, treatment of children in families has always presumed a lack

of anything approaching formal contract between them and their parents. Because of the
presumption that parents will act in their childrens best interests (Parham v. J.R., 1979) ,
parents are given almost all legal decision-making power when it comes to interactions with
the outside world. Thus, children cannot sue their parents for simply being bad parents
(Burnette v. Wahl, 1978) , nor for failure to provide the education or other amenities that the
children feel appropriate. In divorce cases, this is described as a problem of standing. The
child doesn't have the ability to enforce court-ordered support nor to ask for increased
support to meet additional expenses (Yarborough v. Yarborough, 1933;   Kelleher v. Kelleher,
1974) . In other words, they cannot enforce the implicit agreement by which their payments
may be bound.

Even though there is no legal enforcement of the contract, there may be some other

mechanism in place to motivate parents to invest in children. Becker and Murphy (1988)  
suggest that state provision for education encourages optimal investment in children, if
bequests are taken into account. In some Western countries, because adult children will be
expected to support their now infirm parents, such investments have a financial as well as a
psychic reward. In North America and Western Europe, elderly parents are expected to
support themselves out of some combination of accumulated earnings, pension plans, and
social security (Kline, 1992, p. 200) . Unlike the elderly in non-Western industrialized nations,
our elderly largely live alone or in nursing homes (Bernheim et al., 1985, p. 1074) .

Reduced to its simplest non-mathematical terms, the argument is that positive investments in

children will depend in part upon the parent's expectation of reciprocal care in advanced age
(Posner, 1996). Since families tend to mirror patterns of care through the generations (Kolko,
1992, p. 244-76) , the parent's current involvement with his or her own parents reflects these
expectations. Of course, the family expectations will not be the only thing influencing
investment, so the empirical work controls for other factors as well.

Studies have examined the investment in children based upon the number of children in the

family (Becker and Lewis, 1973;   Becker and Tomes, 1988 ). Economists have related the
number of children to such factors as parental income, years of education, and the divorce
rate. Another way of measuring investment in children is to calculate the time spent on their
care. Studies have already modelled time spent on children as a function of their age, income,
gender, and the employment status of each parent. (Parkman, 1996)  

Other measures of investment in children may be quantifiable. One obvious additional

measure of parental investment is the parents' financial outlays (Zelder, 1993) . A data source
measuring this outlay is the payment of agreed-upon or court-ordered child support by
noncustodial parents (Weiss and Willis, 1985) . Another data source measuring successful
parenting is the child's performance on standardized tests given to all children in school
systems. Unfortunately, as well as these positive contributions, families also experience
negative "investments," akin to dissipation or wasting of assets (Whitehead, 1993) . The data
source measure that relates directly to children is parental child abuse.

If it is correct that there at least used to be an intergenerational pact for support at the time of

dependency, investment in children should be highest where more elderly people are cared for
by their adult children. Conversely, where many elderly people live alone, their children
should not be investing as much in minor children. Brinig (1993) looked at both United States
and international evidence of both positive and negative contributions by parents, examining
whether provision for the elderly was an important contributing factor to the investment. The
independent variables included general demographic information as well as the elderly living
alone that alternatively might explain the investment. The percentage of elderly living alone
was statistically significant, and was in the direction expected: more positive investment
(reflected in test performance) occurred where a lower percentage of elderly lived alone; more
negative investment (abuse or nonsupport) where there were more elderly on their own.

This does not rule out the possibility that, if the culture supports reverence for the aged

ancestor for a non-economic reason such as religion (Posner, 1996) , the economic result may
hold true as well: the elderly citizen will be supported by his adult children. A deeper regard
for all family members will increase benefits for both the children and the elderly (Becker,
1993) . One would expect the investment in children that is reflected in the analysis above
(Epstein, 1989, p.1466) .

There are therefore two recommendations, besides the suggestion for further study, that might

be made. One assumes that the economic motivation is dominant: if public provision for the
elderly results in less investment in children, some thought might be given to discontinuing or
limiting public support. The other assumes that the cultural motivation dominates, although
the economic effect might follow. Under this alternative view, the Western nations, which are
the ones with the least significant connection between adults and their parents, might try to
strengthen these ties. The beginning of a process of strengthening these ties could be made by
heavy investments of time and money in our own children, perhaps induced through a
"well-chosen combination of taxes on adult consumption and subsidies of childrens goods
and services," (Fuchs and Reklis, 1992, p. 44) or by providing the example in offering homes
for our elderly parents (Cox and Stark, 1994) .

13. The Parental Covenant  

Parents presumptively act in their children's best interests. They are bound by invisible,

illusory contracts to do so. But what enterprise engages us, then? As with the married couple,
this chapter argues that there is an analogy for parent and child relations that holds more
promise than the contract. The human parties to a covenant may enjoy horizontal equality,
although parents and children are typically in a more vertical relationship.

The implicit contracts discussed so far may be better described as default or off-the-rack

provisions or that they substitute for what parties wanted ex ante (Scott, 1992;   Scott, 1987) .
However, since both the parents in question may not want these obligations, even beforehand,
default provisions dont completely answer the objection. Some parts of family life are
invariable because they are necessary for the family to meet its historical and present-day
societal obligations, the externalities of the parental exchange. They make the family what it

These obligations translate from the boundless and undeserved love that flows in families.

Covenantal love is quite different from economist Gary Becker's definition of altruism
(Becker, 1991, ch. 8) , which he derives from a single family member's caring. In addition to
requiring only one active party rather than the two or more needed for covenant, Beckers
definition of altruism also implies that the altruist must have the means to withdraw support
from the rest of the family. It does not imply sacrifice without expectation of reward.

We have already seen that children don't make choices the same way adults do, for important

economic reasons. To get their physical wants satisfied, they need to be selfish [loudly so],
their wants-suppliers altruistic (Anderson and Tollison, 1991) . They need to be careful of
what they have, at least until they reach adulthood. Since they have (meaning actually
possess) very little, and even have limited human capital as yet, losing what they do have
becomes enormously important. Hence they are more risk averse. (Brinig, 1995) They also,
despite feelings of "immortality" in their teen years, have nearly infinite discount rates. When
very young, they cannot understand that an object that rolls under a table is still there where
they can't see it (or that covering one's eyes doesn't make you invisible). Their sense of time,
as Goldstein, Freud, and Solnit (1973) note, is different from the adults' around them. A
month to an eighteen-month-old is forever. Delaying gratification, putting off
television-watching until after homework is finished, requires parental intervention. Planning
for any extended period is impossible even more than with many adults.

Children need parents to supply these deficits. In a first-best world they need male and female

parents to supply the physical needs as well as emotional ones. They need interested people to
invest in their human capital in order to make them productive in the future. Men and women
are complementary factors in childrearing.

14. Conflicts between Parental and Childrens Interests  

Because of the limitations of childhood, we have noted that parents are presumed to act in

their childrens best interests (Parham v. J.R., 1979, p. 590) . Parents may be led to act in their
childrens best interests simply because they love them. They may so act because to do
otherwise is to invite tremendous social disapproval (Scott and Scott, 1995) . Their childs'
best interest may coincide with the parents--having a nice home to live in benefits both parent
and child (Weiss and Willis, 1985) . Teaching a child to be helpful and neat will benefit the
parent who then does not need to live in a chaotic pigsty. They may be acting "properly"
because they are making the type of investment discussed earlier: anticipating an eventual
reward of cash or kind.

Courts approach the problem of parent's and child's conflicting interests in a number of ways,

although usually repeating the axiom that parents are presumed to act in the child's best
interests. In some more recent cases, children are given independent rights that carve away at
the parental domain. The parental role as fiduciary is lost in the facts of these families with
problems. The parent or child becomes the winner; not both. In the process, parenting
becomes something both more temporary and less important, in short, less covenant-like.

We have not yet seen the limit of the extension of childrens rights. Now, according to some

courts, minors can exert a privacy interest in their own homes and possessions (In re Scott K.,
1979) . Statutes give them the right to independently seek medical care where they might wish
to keep the information private. They can sue their parents in tort for unintentional wrongs or
those so "extreme and outrageous" as to violate the essential bonds between parent and child
(Mahnke v. Moore, 1951 ; Akenbrandt v. Richards, 1992 ).

The question of Kaldor-Hicks efficiency comes up in families because parents often make

decisions that may be optimal for themselves, but perhaps harmful for the children (Becker
and Murphy, 1988) . For a mother and father to both work outside the home may not be the
best situation for the children. It may be necessary for financial survival of the family, and it
may provide the additional funds needed to purchase items such as private schooling or
sleep-away camp. Entering the labor force may be necessary for the psychological well-being
of the parent who had stayed home to care for the children when they were very young
(Brinig, 1993, p. 466-67) . He or she may be better equipped to deal with the children's needs
after a day spent in some sort of meaningful activity with adults. In any even, the well-being
of the entire family is considered in making this type of decision, which will be Kaldor-Hicks

In the family setting, the more difficult efficiency problem occurs when the parents separate

or divorce. Then mother and father may well be making an agreement that is efficient for the
two of them, considered separately (Zelder, 1993) . However, the decision to dissolve the
family almost always disadvantages the children, sometimes very substantially (Chambers,
1984, p. 504) . Because the divorce process is usually painful for the adults, they do not
always think about compensating the children: the absence of the non-custodial parent and the
financial losses that are inevitable in most divorcing families. Perhaps for this reason, state
legislatures and courts provide some remedies for children of divorcing families that are not
available in intact families. Good examples of these are the provision of support beyond the
child's minority, or the requirement that the non-custodial parent supply medical insurance or
college tuition (Kujawinski v. Kujawinski, 1978;   Curtis v. Klein, 1995) . Such Kaldor-Hicks
compensation is not perfect, and may be inadequate in most cases, but it may be enough to
deter couples on the margin from separating and causing the children harm. Nothing within
existing civil theory, however, provides a basis for considering the wisdom of these
developments toward Kaldor-Hicks as opposed to Pareto efficiency, in which everyone
involved would actually, as opposed to theoretically, be made at least as well off.

15. Deadbeat Parents  

Family deadbeats seek to avoid legal obligations, abandoning their spouses and children to

public welfare or private charity (Brinig and Buckley, 1996) . They are the stuff of Dickensian
novels and of Grimm's fairy tales. They were the immigrants who never sent back for their
wives, and the pioneers who cast off their families to move West. They were Theseus at
Naxos and Leatherstocking on the prairie. They lived lives without second acts, and, because
they have always been with us, we have the laws of support, alimony and divorce. For them,
the West offered freedom from family responsibilities as well as political freedom.

Deserted wives historically could assert a variety of remedies against their spouses. Desertion

was a ground for divorce, and states mandated child support obligations. Children were also
protected through child abuse and compulsory education legislation. There is, however, a
wide variance among states in family support obligations, and deadbeat spouses have an
incentive to move to low-payout and low-collection states (Brinig and Buckley, 1996) .

Nearly a quarter of the more than four million family support cases involve deadbeat dads

who have crossed a state line. Deadbeat migrants are apparently attracted to jurisdictions that
permit them to scale back family obligations, such as Florida, which did not collect 85% of
the child support due in 1992. The recent example of Virginia shows how sensitive collection
rates are to state collection efforts. In the early 1980s, Virginia ranked thirteenth in the child
support collection. But after state funding for collection was cut in 1986, the state fell to
forty-ninth place. After this decline became a political issue in 1989, Virginias collection
rates improved dramatically.

Brinig and Buckley (1996) conducted an empirical examination of migration trends within

the United States for the period 1985-90, looking among other things for the indices of a
nonpayment of child support. They found few surprises among predictors of the noncustodial
parents who did not pay child support. The Unwed Births and Divorce coefficients were both
significant and positive. A state with a climate supporting unwed births would appear to be
one in which divorce bears less stigma as well. The coefficient for women in the labor force
was also significant and negative. Husbands whose wives are working spend more time with
their children and are apparently likely to have a closer attachment to them after divorce
(Brinig and Alexeev, 1993) . Similarly, the joint custody dummy was also negative and
significant. Parents appear more likely to support their children when they maintain close
contact with them through joint custody orders (Weiss and Willis, 1985) .The AFDC
coefficient was positive and significant, suggesting that fathers might be more likely to
abandon their families when the state will be generous in assuming the support obligation.

16. The Family Franchise

After the legal ties of infancy and parental responsibility disappear, something remains

(Brinig, 1996) . Just what that something is may change. Some of the bond between parent
and adult child undoubtedly is primordial and emotional, and therefore unlikely to change
with years and fortunes. Whether the siblings maintain that sort of relationship with each
other and, together, vis à vis their parent, depends to some extent upon whether the parent is
viewed as a net good, in which case a franchise model operates ( Hadfield, 1990;   Rubin, 1978 ;
Mathewson and Winter, 1985 ), or a net neutral or bad, in which case the "state of nature"
governs (Kronman, 1985) . Law makes a critical difference in what is chosen -- the franchise
or the largely unenforceable agreements of the state of nature. And law will certainly be
involved where family governance fails: there may be elder abuse, estate problems, suits to
enforce statutory duties of support, quarrels over competency, and the increasingly popular
disputes over grandparent visitation.

From the point of view of the older person, when their child becomes an adult there may still

be hope of enforcing the implicit contract made when the child was young -- I will take care
of you, love you, invest in you, and in return be cared for you when I am enfeebled (Brinig,
1994;   Posner, 1996) . But the younger person, at least one without the expectation of
inheritance, has the opportunity for gaining quasi-rents, for the big parental investment was
all made in the adult's youth, and without his or her explicit concurrence (Epstein, 1989) . " I
never agreed to have you live with me, and I have a life of my own" may be the child's
response to the parent's incapacity. The adult child may therefore think of self and siblings as
individuals in isolation from each other and from their parents.

There are two possible models for describing the behavior of what might be described as

mature families (or related adults): one is the state of nature; the other is the franchise. The
appropriate model depends in part upon the parents' health, cheerfulness, and mental
youthfulness. It will also hinge on whether the parents' estate is seen as large, small, or
negative. Thus there may be a shift between paradigms as the parent ages or his or her fortune
changes. Siblings may act as franchisees during their forties and their parents late sixties, and
with the independence of sovereign nations during their own late fifties and their parents'
eighties, as the parents become less pleasant to deal with or the bond market crashes. On the
other hand, the siblings may begin as "independent nations" and end up as franchisees if their
parent wins the lottery. Both models are therefore worth considering, and, to repeat, we can
influence which one dominates by our choice of law.

Students of human nature have seen the obvious parallels between the associations of adult

children and their elderly parents and those of unrelated citizens and communities. Locke
([1776] 1976) , in his Second Treatise on Government , describes extended families residing
together under the father's guidance or "rule" through their own consent, that is, through their
new and voluntary contract. Without such an agreement, the former infants are at liberty to
govern themselves, or to unite at will with other societies or communities. The relationship
with their extended family is in many ways similar to the relationship between sovereign

However, if an elderly parent has property the younger generation wants, the estate then acts

like collateral to induce the young to do what pleases the older people (Posner, 1996;  
Buchanan, 1983; Rubin et al. 1979). Perhaps the absence of any such bond between adult
siblings is the reason these relationships tend to be weaker, becoming intensely competitive
as the elderly parents near death (Klein and Leffler, 1981) . At the same time the competition
for the scarce parental resource is growing, other things that would bind the siblings together
are fading. The siblings may now see in each other the traits they most disliked in their
parents: indecisiveness, greed, and intolerance, especially if they are reminded of these
characteristics by the old people themselves (Posner, 1996) . In families without a great deal
of wealth to pass on or where the elderly person is senile, the model also may explain certain
types of hands-tying behavior: moving far away from the family home so as not to have too
many visits from the aged parent or to avoid uncomfortable decisions like the question of
moving the parent to a nursing home. On the other extreme, the hands-tying behavior may be
building the apartment-addition that will only be useful for the in-law to occupy.

Alternatively, at least some elements of these extended families are like franchise

arrangements: the older person is the franchisor, with reputational stakes as well as "up front"
investment in the middle-aged generation ( Kornhauser, 1983;   Ben-Porath, 1980, p. 3 ). The
adult children are franchisees, who have reaped the benefit of their parent's educational and
other investment in them, and who now actively operate their own family units with the
name, possibly the fortune, and the reputation of their parents at risk.

Like the commercial franchisor, the elderly parent has a heavy specific investment in the

family name as well as in the children he or she has raised (Brinig, 1996) . The parent almost
never terminates the parental relationship: although there may be threats of disinheritance,
these usually will not be credible. However, the parent may well prefer, or even insist on,
frequent monitoring. This serves two functions. First, the parent may actually desire the
contact with the child. In addition to maternal or paternal affection, she or he may genuinely
value the child as a friend. The parent may also be lonely, and one's children may be better
company than are other old people, especially when friends begin to die off. Posner, (1996,
p. 63-64) suggests that the elderly have relatively few relationships with non-family members
of different age cohorts, and fewer total as they become very old. Finally, the parent may be
monitoring the child's activities, to make sure that the family tradition, whatever it is, is being
carried on. Of course, keeping in touch with one's children was simple in the era when many
parents did not live long, and those who did were likely to own the farm their children
worked or even the home the children lived in. As we have moved away from our ancestral
homes and off to faraway parts of the country or world, we of course distance ourselves from
our parents and make monitoring more difficult. We are also less likely to support them,
given Social Security, Medicare, and pensions (Brinig, 1994;   Ben-Porath, 1980, p.6) .

For the children who are franchisees, the relationships are complex. Children sometimes vie

not to support their parents. They compete in rivalries about which grandchildren are most
successful, about whose job is the best, sometimes about who has best been able to keep up
the family traditions. Yet they still care about brother or sister (Kronman, 1985, p. 22) . And
they have a common interest in maintaining the family name, and perhaps in keeping the
family property, or genetic endowment, intact (Bergström, 1995) . This interest is more
apparent in rural communities, as it was in Continental feudalism. What may be more
important now, as John Langbein argues, is human capital. (Langbein, 1988) The parents'
investments in our human capital occurred when we were young, and we now have the
opportunity to reap "rents" from them. Whether we choose to repay the parents for their
investment will depend in part upon non-financial considerations: love, guilt, and generalized
emotional intermeshings (Becker, 1993) . It will depend also on state requirements, such as for
support of the elderly, or legislation against elder abuse, both of which involve a coercive
type of state intervention. Finally, it will depend upon whether the unpleasant short-term
burdens of caring for the older person outweigh the longer term benefits, either in memory or

The child may be concerned that, like the commerical franchisor, the elderly parent may "up

the ante" by requiring increasingly more onerous performance. Such opportunism could take
the form of whining, complaints about physical ailments, demands for attention that point up
the competition among siblings. To some extent, the escalation is inevitable given the
deteriorating health of the parent. The franchisee-child has the problem, like the parent of an
infant faced with a onslaught of crying, of differentiating the selfish behavior from the
genuine concerns.

One of the immediate puzzles is the question of why the elderly parents are more concerned

with the long-range benefit of the family's reputation than are their adult children. The answer
may lie in the concept of wasting assets (Posner, 1996, around 27) . If an adult is conceived of
as having two goals, lifetime consumption and preserving "trademark capital" for the future,
the first goal will predominate during most of life. As there is less and less time to enjoy
present consumption, however, the second goal will ascend, until, shortly before expected
death, it will occupy a preeminent position in the elderly person's utility function. As the
parents approach old age, the competition motive frequently prevails. Those who have read
Kenneth Arrow know about the phenomenon of cycling. As with Kronman's contracts and the
state of nature (1985) , the answer to the cycling problem is to require unanimity: the building
of consensus as to the appropriate division.

Buchanan (1983, p. 78) has proposed a rigidly defined succession rule such as primogeniture

to prevent rent-seeking, or strategic behavior. If all are certain from the beginning that only
one child can inherit and which child that one is, the cycling will not occur. Of course, this
analysis is challenged by hundreds of years of English history in which younger sons killed
off their older siblings or sent them off to fight in the Crusades.

Modern nations have emphatically rejected the customs of primogeniture, and has made it

unprofitable to use violence to end the cycling phenomenon. Yet more and more tales of
families apparently "fall apart" when an elderly parent passes away and the estate, or even the
personal property, has to be divided among the siblings. Not only have we abolished
primogeniture and prohibited property gains through murder, but we have also done much as
a society to insure that there won't be too much in most people's estates to squabble over.
Most elderly people live on their own. Most of them support themselves through some
combination of social assistance and Medicaid, pension plans and private savings. The elderly
live long enough at this turn of the century to use up most of the resources they have saved,
and perhaps more, leaving debts to nursing facilities and hospitals. We have accomplished
enough in medical technology to prolong the physical body past the point where mental
activity has reached a point of diminishing returns: a point, in fact, where the old person may
actively dislike his or her existence (Posner, 1996, p. 16) .

The relationship between elderly parents and their children depends upon whether the elderly

person has, or is expected to have, property left to devise at the end of his or her life. If there
is property, competition for it will prevail (Ben-Porath, 1980, p.7) If there is no property (as
may be the case with many elderly women who have outlived their husbands and any
resources put aside for old age), a different kind of competition prevails. The siblings may
engage in a "hot potato" avoidance game, which may hurt the elderly person directly
(particularly the woman, since most victims of elder abuse are women), or indirectly as she
sees that she is no longer valued, or even wanted, by the children for whom she sacrificed so
much. If the commercial franchise has no value, the franchisees may well breach the franchise
agreement and start out on their own, abandoning the franchise (Land O'Lakes v. Fredjos,
1992) . The franchisor will go out of business (Malcomson, 1984, p. 486-87) . With people,
adjustment for the failing franchise is not so simple. Rejection of elderly people has always
been a concern, but not a common law concern. Some jurisdictions have fairly recently
enacted requirements that adult children provide for their "aged and necessitous" parents
(Branes and Frolick, 1993) , and still more recently have drafted legislation to deal with the
increasingly visible phenomenon of elder abuse.

The fact that elder abuse is on the rise suggests that this application of the franchise model

may also be testable. Positive contacts with one's parents may be signals to your own children
of how you wish to be treated some day (Cox and Stark, 1993) . They may also evidence
Buchanan's (1983) rent-seeking, an angling for parental affection in expectation of a larger
testamentary gift. On the other hand, all other things being equal, more adults should abuse
their parents when the "franchise" fails -- as the size of the parent's expected estate decreases.
In order to verify the franchise story empirically, reliable statistics on elder abuse would be
needed. On an individual level, other things held constant would include whether the parent
lived with the child, the size of the parent's estate, the number of siblings in the child's family,
the income of the child's family, and the life expectancy of the involved parent.

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