Encyclopedia of Law & Economics - 1800 PARENT AND CHILD



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


The law and economics of parent and child involves several models. Before thechild becomes part of the family, the actions of the parents resemble those ofmarket participants, with the appropriate paradigm contract. Nonetheless, thefact that children are the "goods" over which adults bargain, mandates somegovernment intrusion on contractual freedom. Once parents and child form afamily, the social importance of the relationship and the legal helplessness of thechild suggest that the relationship differs significantly from contract. In fact, theongoing family is in many respects like a firm, and the principal-agent paradigmaids understanding. When the children become adults, or when the family isdivided by divorce, the relationship of parent and child change but do notdisappear. The relationship then approaches the franchise.

JEL classification: K19, D10, D13, J13

Keywords: Family, Parent, Child, Contract, Principal-agent, Franchise.

1. Introduction

Before families are created, the people involved are acting primarily asindividuals. They thus exhibit contract-like behavior rather than the firm-likebehavior seen when the families are functioning. In some respects, the creationof a family resembles a search for consumer goods. However, people creatingfamilies are far more excited and involved than those buying even the mostexotic car. Further, the adults who determine the families in which children willbe raised are not simply but profoundly affecting parties who are silent in thetransaction, the children themselves. Parental contracts and indeed all behaviorinvolving children thus involves externalities.

When people think of producing babies, they do not usually contemplatemarkets. However, in families where adoption occurs, it turns out that there areexplicit markets. Even in the majority of families, where parents are able toconceive 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 iseven more an economic one.

In most families, the market for babies is at work before the child isconceived. Parents control the genetic qualities of their children when theychoose each other as marriage or sexual partners. They have some control overthe type of offspring they produce by attempting to choose the time forreproduction, since the difficulty of conception and incidence of geneticproblems both increase with the age of the mother. Some recent biologicalevidence suggests that women can influence the incidence of conception notonly through the use of contraception but also through the type of femaleorgasm that takes place during the intercourse leading to conception (Baker andBellis, p. 903). The timing of intercourse during the menstrual cycle influencesthe probability of having male as opposed to female children (Billings 1975, p.103).

Other children in the family, consciously or not, may influence the incidenceof conception, as they will compete for the same family resources once a newbaby is born (Anderson and Tollison, 1991). Certainly the nursing of a childdelays the onset of menstruation, and thus the possibility of anotherconception. The very presence of a child in the family may make the parentsmore tired, so that intercourse occurs less frequently than before the child wasborn. Children may also attempt to monopolize the affections of at least oneparent, interrupt the parents during the times when intercourse would otherwiseoccur, or even cause so much trouble that another child is not an obviousdecision.

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 thenumber of children born to Western women has declined dramatically over thepast forty years, when contraceptives became effective and abortion legal. Bothof these technological changes were accompanied by legal changes, as theUnited States Supreme Court developed a right to privacy that encompassedcontraceptive use (Griswold v. Connecticut; Eisenstadt v. Baird) and abortionchoice (Roe v. Wade, Planned Parenthood v. Casey). In the United States, sincethe abortion cases, most of the forces shaping fertility behavior have beeneconomic, as opposed to legal.

The reasons for having large numbers of children (a high infant mortality ratethat required many births before a single child would survive to adulthood, oran agricultural economy necessitating large families to work the acreage) (Rubinet al., 1972) have been irrelevant for many years. As Becker explains it, what hasreplaced the numbers is an emphasis on the quality of children (Becker andLewis, 1988). In other words, we invest more in the way of time and money in thesmaller number of children we do have, a fact that contributes to the rise ofcontract thinking.

There are still some ways in which law might profoundly influence fertility:no fault divorce, the legislation regulating public assistance for mothers ofdependent children, and, theoretically, more direct policies encouraging singlechildren such as those in place in China (How, 1995). This section will take upthe question of single mothers later, but it is perhaps worthwhile briefly notingthe 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 divorceon the birth rate. Holding time and the number of marriages constant, they foundthat for the period 1965-87, no-fault divorce had a negative and significantrelationship to the birth rate. They explained this result as a decreasedinvestment by couples in their marriages as these became less secure. Anotherway of looking at the same phenomenon is to consider the thinking of a marriedwoman considering or faced with pregnancy who realizes that her marriage isunstable. Thirty years ago, when divorce was quite difficult and was coupledwith substantial stigma, the birth of a child might have seemed a stabilizinginfluence. Faced with the same problem today, the married woman might wellelect not to conceive or bear the child because of the additional costs the childwould bring and be subject to should the couple divorce. (This in addition, ofcourse, to the reluctance of most mothers to bring children into unhappyfamilies.(Heup v. Heup, 1969). Divorced women with minor children remarry lessfrequently than those without them (Becker et al., 1977, p. 1157, 1176). It is alsomore 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 bytechnological progress in the area of infertility, but in any event, many areincreasingly discovering difficulties in conceiving a child. The demand foradopted children has increased dramatically since the mid-1970s. At the sametime, the supply of available babies has decreased.

Probably the most important change in the supply of children for theadoption market is the ready availability of abortion. Another cause is thegreater societal acceptance of unwed or single parents, causing women whomight otherwise give them up to carry children to term and then bring them upthemselves. Further, the modern emphasis on natural parents rights slows thesupply of available children. Because it has become so difficult to provepermanent parental unfitness and the social work caseload has expandedgeometrically, there are fewer and fewer children to adopt. Instead, they remainin foster care, sometimes indefinitely, because parental rights cannot beterminated and the parents maintain a token relationship with them.

The increased demand and decreased supply coincide in a market wherethere cannot be the expected price increase that would equate the number ofparents demanding and supplying children. All American states prohibit explicitbaby selling and in most cases any payments, made directly or throughmiddlemen, that are not directly connected to the well-being of the child. Theresult is analogous to other cases where government imposes a price ceiling: ashortage develops, with a growing queue made up of parents wishing to adopt.(Prichard, 1984). A market with such supply shortages typically sees a blackmarket emerge. The market for adoptable babies is no exception.

Richard Posner suggested that a market in babies would rectify many of theproblems of the adoption system (Landes and Posner, 1978; Posner, 1987).Posner's critics proclaimed that sales of children reduced the children, or theirmothers, to commodities. Further, unscrupulous but wealthy parents mightpurchase children to abuse them. Ultimately baby-selling became code for thefoolish extreme to which its proponents could carry law-and-economics(Donohue and Ayres, 1987).

Posner's articles suggest that legalization of compensation would benefitmost of the players in the adoption market. In the market he describes, thesupply of adoptable babies would increase, given a legal market price. Adoptiveparents would acquire the children they so badly desired. Natural mothers wouldsuffer less because they would be compensated for bearing the children(Prichard, 1984, p. 346). The market would provide incentives for the pregnantwomen to take better care of themselves so the children would be healthier(Landes and Posner, 1978, p. 329-30). Arguably fewer women would terminateunplanned pregnancies by abortion. Finally, the children would go to theparents who valued them most, as evidenced by their willingness to pay thecontract price and the mother's willingness to forego it should she decide tokeep the child.

Although child custody statutes and decisions begin with a "best interestsof the child" standard, most end with choosing the interests of one parent or oneset of parents (Scott, 1992), much as a Posnerian market would. For example,although Posner (1987, p. 152) briefly addresses concerns about abusiveadoptive parents and a potential oversupply of older or handicapped children,he concentrates on the benefits a market price confers on parents. The marketwould remain regulated by the agencies screening adoptive parents in Posner'svision, but primarily to reduce the chance that parents would acquire childrento abuse them (Prichard, 1984, p. 353-54). Agencies could also match birth andadoptive 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 thewelfare losses caused by adoption agency regulation. The current costs are partof what makes the present adoption system so frustrating. Now, agencies ratherthan price act to ration the scarce resource of adoptable children among themany potential parents who want them. In Posner's system, price would be theprimary mechanism for allocating children, and agencies would serve a licensingfunction.

Although agencies do guard against abuse by adoptive parents, they alsoincrease transactions costs for both sets of parents. Agency investigations arenot only expensive and annoying, but they also greatly increase the timerequired for adoption (Brinig, 1993). And because only the final order ofadoption prevents the natural parents from revoking consent, the six monthsminimum waiting period while agencies investigate adds uncertainty to thetransaction. Thus, the transaction costs added by legislatures to protect naturalparents custodial rights and ensure suitability of adoptive couples may hurtmore children than they assist. Virtually all couples trying to adopt children aresuitable (Adoption Factbook, 1989). As Posner was quick to note, we have nocorresponding ex ante checks on parents who do not adopt. Because there is noreal 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 custodiansfor their children. (Holland-Moritz v. Holschuh, 1972), State v. Meyers (1972). Bydefinition, then, others are not as qualified. This emphasis on parental rights tocustody as opposed to childrens rights to the best custodian may lead courtsand legislatures to second-guess the parental consent for adoption.

Birth mothers are almost universally forbidden from giving binding consentuntil after children are born (Ely, 1992-93) because of the tremendous andoverwhelming bonding between parent and child that occurs at and shortly afterchildbirth. But even after arrival of the child and a recovery period, courtsscrutinize assent to adoption ex post more fervently than they examine virtuallyany other transaction.

Looking at this judicial behavior charitably, we see that natural parentsplacing children will feel tremendous regret (Deykin et al., 1984). It is more likely,though, that we allow revocation of this transaction despite unquestionableharm to the promisee adoptive parents, and frequently the child, because of thetremendous primacy we give parental rights. Although revocation does notoccur very often (Adoption Factbook, 1989, p. 170), the possibility introducesvery significant uncertainty into the transaction. Uncertainty creates majoreffects in the adoption market in much the same way that the very small risk ofa catastrophe dominates the insurance market (Friedman and Savage, 1948).There are, of course, other transaction costs to adoption, including the feescharged by social service agencies, the intrusive nature of the investigationsand the waiting period that frequently stretches for several years. As we havenoted already, many of these costs serve to "ration" the short supply ofadoptable children, since price cannot. While fees may be charged on a slidingscale, they are so high that critics of trans-racial adoptions have charged thatadoption has become a middle class phenomenon.

In adoption and termination cases, courts have extended the power of naturalparents. (Schmidt v. DeBoer, 1993) illustrates the expanded power of naturalparents, particularly unwed fathers, to withhold consent for adoption and howuncertainty invades the process. The case was finally decided based onprocedure: which state had the ability to grant an adoption. The direct effects,particularly as portrayed in the popular press, show the human costs ofinterstate custody conflicts. Despite more than two years placement in a suitableadoptive home, Jessica (now Anna) was returned to her natural parents althoughit was her mothers' deception that created the loophole voiding adoption.

Although some children enter the adoption market when their parents arefound unfit, the vast majority begin the process after their parents, like Jessicasmother, voluntarily relinquish parental rights. Because there is no federalregulation or even federal court review of child custody matters, each state hasenacted its own adoption system, and these demonstrate the tremendousvariation typical of family law.

The conditions for revocation are not always explicit. In states with statutesleaving room for question, the general consent law has been interpreted byjudicial decisions. Some state adoption systems treat consent for adoption muchlike agreement to any other contract. In these states, once a parent has givenvalid consent (after birth), it becomes irrevocable (Brinig, 1993). Another groupof states lists short time periods for revoking consent. These give some time forthe natural parent to have a change of heart, but the time period is short enoughthat neither the child nor the adoptive parents will be greatly injured byrevocation. Other states has very strict revocation requirements, but does notmake consent irrevocable. These statutes provide that there can be norevocation except in cases where consent was obtained by fraud, duress orcoercion, where the consent itself is involuntary. If the states require a standardsimilar to the commercial contracts definition of fraud, the defrauding conductwould have to induce performance, would have to involve a material fact, andwould 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 stateagency, but in direct placement cases it might be the adoptive parentsthemselves. A restrictive definition of the conditions in which revocation ispossible tends to value childrens rights to a rapid and certain placement asopposed to those of the natural parents. In fact, those statutes that provide forno revocation except in cases of fraud and coercion have restrictive definitions.

On the opposite, parents rights, end of the spectrum are states that permitrevocation any time before the final decree (Brinig, 1993). Since the adoptionprocess may take years, and usually must take at least six months, bondsbetween 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 forrevocation of a commercial contract. In commercial cases, the threat must usuallybe of a severe physical sort that would clearly cause a reasonable person toenter into a contract where he would not otherwise, and cannot be merelyordinary economic circumstances. In a natural "parents' rights" revocation state,duress may be the type of hardship most single parents of unplanned childrenexperience.

In between the two extremes are a number of states that allow revocationbefore final placement or within longer time periods following consent (Brinig,1993). Physical or psychological harm to children (and, at the same time, toadoptive parents) occurs when natural parents are permitted to revoke long afterthey have given consent. In addition, there will be other, market-driven, effects.Some parents may be so wary of adoption, particularly if they have gonethrough one unsuccessful placement, that they withdraw altogether. Thisprevents potentially loving, good parents from benefitting children. Adoptiveparents have other substitute sources of children -- these include the blackmarket, where virtual certainty can be purchased at some price. Further, parentsinsecure about the stability of adoptions in their own states can look for childrenfrom other states or foreign countries. Because they are so eager to raisechildren, adoptive parents as a group tend to be exceptionally well informed.They will discover placements initiated in other states, and a quasi-legalintermediary mechanism flourishes.

Alternatively, because of the natural parents' relative market power (Prichard,1984, p.343), she can behave opportunistically, extracting consumer surplus fromthe adoptive parents. These additional payments might range from concessionsby the natural parent to visitation after adoption or listing in an adoptionregistry (Comment, 1986). Where legal, the payments might be more direct, suchas greater reimbursement for prebirth expenses or loss of income.

In an empirical analysis of the effect of adoption revocations on the numberof adoptions, Brinig (1993) tested the effect of consent revocation legislation onthe percapita adoptions in states. Obviously other things beside revocationlegislation affect the number of adoptions. The number of available babieschanges with alternatives to adoption such as abortion or single parenthood.Unmarried women are more inclined to bear children as opposed to abort themif single parenthood becomes socially acceptable and if they receive adequatepublic assistance. The monthly rate for AFDC was therefore included as acontrolling variable, as was the number of abortions in the state for 1987. Factorsinfluencing the desire to adopt include couples income, and fertility rate, bothof which are proxied by the percent of adult women in the labor force. Theresults of regression analysis were that the number of unwed births, therevocation statutes, and the median income were the best predictors of stateadoption rates.

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

The idea that a "Market for Lemons" (Akerlof, 1970), extends to adopted childrensounds 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 ofplacing less desirable children--those who are nonwhite, handicapped, or pastinfancy.

In many ways, the layout of the adoption market closely resembles the morefamiliar "lemons" situation discussed by George Akerlof. A purchaser (anadoptive parent) acquires something (a baby) at considerable cost (in terms ofcash, time, and emotional investment) from a seller (usually an agency). Theseller possesses greater information (health or emotional problems) about thesubject of the transaction than the buyer (Stigler, 1961). In many cases, it isimpossible for the adoptive parent to discover this important quality informationprior to consummating the transaction.

Once the child is placed with the adoptive parents and a major problem isdiscovered, the question becomes one of remedy. The fact that children areinvolved, with their own interests if not their own rights, changes the set ofpossible remedies from those appropriate in the typical commercial fraudsituation. In most cases, returning the children to their birth parents or theagencies placing them (the equivalent of annulment) presents an unacceptablealternative. Children need stability, particularly early in their lives. Disabledchildren may need a stable loving home even more than those without specialneeds. Rescission of the adoption contract therefore loses power as a devicebecause 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, distressedadoptive parents have sued the placing agencies. Courts have allowed recoveryin five of the ten cases reported before mid-1995. In three of these successfulsuits, the child involved had life-threatening diseases. In all, the agenciesdeliberately misinformed the parents that the child was healthy. The parentswere able to recover for past or future medical expenses although the agencieswere not guarantors of the childs health. Although the agencies knew of thegenetic or other problems, the parents could not have discovered the illness ordisability 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 childwas deaf, while another turned out to be unavailable for adoption because hisfather had never given consent. In others, although the agencies might havenegligently failed to discover the problem, plaintiffs could not show fraud.Perhaps the agency was not the "least cost avoider" given the difficulty ofplacing these children.

The special needs of hard-to-place infants creates another barrier torecovery: a heightened burden of proof of fraud. Particularly if the adoptiveparents were willing to accept a special needs child, courts will be reluctant topenalize the agency by finding fraud and concomitant damages even if theagency withheld some important medical or psychological information. If these"wrongful adoption" cases became routine, the government would have evenfewer incentives to attempt permanent placement of disabled children, thusforcing still more to remain in permanent foster care (Cass, 1987).

Finally, as in the "wrongful life" cases brought a generation ago, the courtsin the adoption fraud cases confront situations where the damages are verydifficult to measure. Even if the child possesses some trait that the adoptiveparent wished to avoid, he or she is nonetheless a human being, capable ofgiving and receiving love. The courts typically find that the positive aspects ofhaving a child outweigh the negative. Taken as a whole, the child presents a netbenefit 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 wholeaves infant twin daughters beside the road in despair that she will die and inthe hope that they will be found and raised in a better life. She spends the restof her life looking for them, and it is only after her death that they are found. Ina caselaw parallel, a Vietnamese woman places her children in a Saigonorphanage 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 foradoption in an American home.

Someone who acted in good faith will clearly be unhappy with any adverseoutcome in such a court case. When a family has been disrupted by war, orhardship, 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 theappropriate action at the time (Painter v. Bannister). From the perspective of thechild, 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 easycharacterization, 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 seekthem, except in some clear cases of emergency. This is clearly what adoptiveparents want, as well, for the protection allows them to determine when theirchildren should be told of their adoptive status. But increasingly states areresponding to pressures by both birth parents and adoptive children andenacting statutes permitting parents to leave identifying information withadoption agencies. Although the provisions differ, they usually allow theadopted child, at his or her option, to discover the birth parents identity atmajority.

This may appropriately satisfy the longing felt on both sides of what seemsto be a genetic-based franchise (Millen & Roll, 1985). The other option would beto move toward a more open adoptive process, as some are urging (Holmes,1994; Ames, 1992; Dowd, 1994). In open adoptions, both the birth and adoptiveparents know each others identitities.

7. Contracts for Children: Surrogate Parenting

Legal recognition of surrogate parenting continues to be contentious in theUntied States. Over the past several years, several states have enactedlegislation prohibiting or otherwise regulating surrogacy. Since the landmarkcase of In re Baby M. (1988), there have also been a number of important statecases applying common law principles to this new technological area. InJohnson v. Calvert (1993), the California Supreme Court found that thesurrogacy agreement between the genetic parents and the surrogate implantedwith their fertilized embryo did not offend the state or federal constitution norpublic policy. The surrogate was therefore not the "natural parent" entitled tocustody or visitation with the child. The court suggested that the legislatureresolve the public policy questions. To date, the state legislative responses tothe practice vary from a few that reluctantly acquiesce to a majority that findsuch contracts illegal and therefore unenforceable (Wadlington, 1993). Severalstates enforce the contracts when they are regulated if there is no monetaryconsideration for the surrogate's service.

The chief product of all this legal activity is uncertainty. As we saw in theconsent revocation context, uncertainty itself begets more litigation, higherprices to attempt to secure conformity with the contracts, and more opportunismon the part of all involved, particularly intermediaries. More litigation comes tosurrogacy just as it plagues other uncertain areas of the law (Priest and Klein,1984). The higher prices charged by surrogates and attempted closerelationships with them may thus be bonding devices because the contractualremedy is questionable or unenforceable (Kronman, 1985).

On the other hand, the childless couple may become opportunistic, takingadvantage of the surrogate's pregnancy and relative poverty to extractconcessions ranging from more restrictions on her behavior during thepregnancy to letting them film the delivery. It is more likely that the surrogatewill behave opportunistically, however, because the couples demand for theirgenetic child is very inelastic, meaning that they will still want the child even ifthe "price" is raised (Prichard, p. 342-32). She may therefore demand additionalcompensation because "she is thinking about keeping the baby" or ask forcontinued contact once the child is born.

Both what pushes some couples towards surrogacy and what makesobservers nervous can be explained in simple biological terms. As ProfessorEpstein (1991) has noted, we are driven by our genes to reproduce, and, morecontroversially, to behave in ways that will allow each succeeding generationalso to be fruitful and multiply. Infertile couples are tormented in part becauseof this unsatisfied and fundamental need. They choose surrogacy over adoptionbecause they wish to have at least some of their own genetic code replicated inanother human being. Surrogate mothers are also affected by their biology. Theymay desire other genetic children that they cannot afford to keep in their ownfamilies, and so be attracted to surrogacy in the first place. They may simplyenjoy being pregnant and the powerful feeling of creation that comes withgiving birth (Epstein, 1995; Trebilcock and Keshvani, 1991). But the dark side ofthese good feelings is that women are not programmed to have children and thenpart with them. A contract made beforehand, even though it may make therational part of the placing easier, cannot affect these biological drives. Theregret that such a placement causes does not pass away. It is large, probablylarger than the $10,000 that a typical surrogate receives, and it may not beanticipated beforehand.

If the surrogate has other children and therefore more information, aboutwhat giving up the children will cost her, problems for the surrogate's otherchildren surface, too (Brinig, 1995a). How do they know that Mommy will notdecide to give them away if she needs money or if she decides that anothercouple needs them more than she?

Some object to surrogacy because, like real estate agents who get paid bycommission whether or not the closing ever takes place, placing agencies getcompensated by the infertile couple upon signing the surrogacy contract(Areen, 1988). They may not insure that the surrogates are adequatelyinvestigated or counseled. They may not do extensive checking about theinfertile couple, either. From a practical viewpoint, they are dealing with veryvulnerable people on both ends of the contract they are making, and that mayencourage "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 placingagencies. In economic terms, the problems are incomplete information,substantial negative externalities, and rent- seeking.

Surrogacy contracts may be suboptimal because the surrogate cannot exante have perfect, or even minimally adequate, information. It is not her ex postregret that drives the analysis. It is that she cannot have predicted accuratelywhat the situation will be at closing time. She cannot have gauged precisely thelong-term effects of what she promised before conception. Even in the case ofthe marriage contract, which society positively favors, specific performance ofnon-financial terms will never be ordered (Cohen,1987, p. 300). In surrogacy,knowing during pregnancy that specific enforcement was possible could makethe pregnancy a nightmare (Schneider, 1990, p. 128), because the woman whochanges 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 guaranteethat she will not engage in conduct that will harm "their" child--engaging inreckless activities such as sky diving, drinking excessive amounts of alcohol orcaffeine, dieting, or injecting drugs to numb the pain of her three monthpredicament after a statutory "turnback point."

The information problem at least justifies some intervention into a freesurrogacy market. The state might require counseling or provision of mentalhealth follow-up services. It might allow the customary ten-day period after birthbefore consent is finally--specifically enforceably -- given. It might simplychange the contract from a "fully enforceable" agreement to one where theremedy is the more typical one of money damages (Epstein, 1995, p. 41).

Contracts may become less than fully enforceable where there are substantialnegative third party effects. Although most contracts affect third parties at leastindirectly, sometimes the contracting parties must buy-off the affected outsiders.So long as the compensation takes place, the contract remains efficient andenforceable. When the external costs are too high, the contract may beprohibited criminally, enjoined, or just not enforced (Goetz, 1984, p. 15-17).

Although any negatives flowing to the contracted-for child are probablyoutweighed by the benefits of existence, the benefits of the contracted-forchild'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 adultsinvolved in surrogacy arrangements, these children are forgotten. Whether weought to compensate them directly, offer them family therapy, or just questionwhether surrogacy is a good idea, remains a policy question (Posner, 1992b,p.103-105).

Middlemen, or finders, because they can reduce the transaction costsassociated with search, are highly desirable in many contexts (Posner, 1992, p.427). Where there are easy ways of obtaining the information and making theefficient trades, one would expect that the market would eliminate brokersbecause they were not eliminating costs in the system. However, there areseveral features about this particular market that make this assumptionproblematic. Two of these create incentives for brokers to enter the market. First,there is an extremely inelastic demand for the "good" in question. Themiddleman may therefore extract the "consumer surplus" from one or bothparties to the transaction For example, in the debate on the British surrogacylegislation, which ultimately prohibited commercial surrogate contracts, onespeaker noted that "the distress . . . of infertile couples who are anxious to havea child should not be exploited for financial gain." (Parliament, 1985) To extractthe surplus, the middleman may engage in substantial and wasteful rent-seeking.

The second unusual feature is the legal uncertainty that has surroundedsurrogacy. 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 legislaturesreact to the surrogacy question, so this apparent (and illusory) insurancefunction will disappear. The third feature is that any "mistakes" will reveal therelevant information to prospective contracting parties only at the expense ofexisting children. That is, once the brokered contract fails, the parties' litigationitself 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 familyencounters significant publicity. Because of their incentive structure, as notedpreviously, these agencies may also act to reduce the beneficial flow ofinformation between contracting parties, causing some inefficient contracting.While state legislatures may be moved by reasons that do not include economicefficiency, it is surprising that commercial "baby brokering" is almost universallyillegal (Atwell, 1988, p. 29-39). In our jurisdictional market, if these middlemenwere 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 stillpeople 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 takento prevent detection. Illicit organizations that specialize in the black marketactivity are likely to flourish, and these will extract their price, whether forinformation or protection, from the participants. Finally, the black market wouldpreclude any legitimate information gathering and transmittal between the partiesthat legitimate state or private agencies would otherwise provide.

However, just because surrogacy should not be precluded does not meanthat the state needs to encourage baby brokerage. In surrogacy, the finder(broker) is frequently paid as much as the surrogate. It would be preferable eitherfor the surrogate to reap this consumer surplus or for the intended parents tohave to pay less. The brokers should not extract this surplus. Lawyers may beneeded to handle the adoptions by the intended mothers, but should onlycharge their--much lower--customary fee for this service.

Surrogacy may in fact be a kind of "demerit good," viewed instinctively asharmful regardless of what the individuals participating in the transaction decide(Sunstein, 1994, p. 850). Society need not prohibit these goods, but may merelytax or otherwise regulate them to make them less attractive, while not forcingparticipants into the black market.

8. Foster Care and Agency

Many children do not live under their parents' care and protection, but that ofstate agencies. In the not-too-distant past, children whose parents could notcare for them would have remained in their families, living with uncles, aunts orgrandparents until they could fend for themselves (Hacsi, 1995). In some partsof the country, boys would have been apprenticed at a fairly early age to learna useful trade. Only in cases of the very last resort would the family have reliedon public help, and that would have come in the form of foundling homes ororphanages. These institutions were grim enough to inspire a wave ofnineteenth-century reform as well as immortalization in the tales of Dickens.

The foster care idea that ensued is that adults with experience as parents willtake children from families unable to cope with them, tend the children for awhilein a loving and stable situation, and prepare them for their return to their ownfamilies who have meanwhile been provided with community assistance(Mnookin, 1973). In extreme cases, where parents are unwilling or unable toresume relationships with their offspring, new (adoptive) homes will take theparents' place. The foster relationship begins with a contract assuring all partiesthat the arrangement is temporary, that the agency will pay some compensationto the foster parents, that the agency will inspect the foster home, and that theagency may remove the child for return to the natural parent or to another fosterhome in the agency's discretion.

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

From an economic standpoint, foster care presents a classic principal andagent problem, with the unhappy result exactly what the analyst predicts whereagents do not have correct incentives (Ross, 1973; Stiglitz, 1987). The theoreticalsolution to foster care problems is to correct the incentive incompatibility. Butthis is difficult because the agent's duties involve vulnerable human beings withtheir 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 ormore parties when one, the agent, "acts for, on behalf of, or as representative forthe other, designated the principal, in a particular domain of decision problems"The concepts of principal and agent, with the theoretical solutions to theproblem, have been extended to law primarily in the business context (Holmströmand Tirole, 1987; Hart, 1989). Reduced to its simplest terms, combining more thanone worker will take advantage of economies of specialization and scale and willreduce transaction costs (Coase, 1937). However, when the amount of efforteach worker contributes to the joint production of a unit of output cannot bemeasured, the rational worker will shirk, free-riding on the others because theloss in his or her compensation will be less than the reduction in contribution(Alchian and Demsetz, 1972). In order to reduce this shirking, managers monitoreach employee's performance. If salaries are sufficiently higher thanunemployment compensation, the employees will work harder to avoid losingtheir jobs. The theory is that the residual, or profit, should go to those whoemploy the monitor--the owner. In the noncorporate context, this is the sameactor.

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 andthe beneficiary the principal, and that fiduciary law has developed to discouragemisfeasance (the duty of loyalty) as well as nonfeasance (through the duty ofcare). Cooter and Freedman suggest that compensation through a variable ratefor observable effort and a fixed rate for unobserved effort will furtherdiscourage these problems.

In foster care, the foster parent serves as the agent of the birth parent (or thestate, if the parent is permanently unfit) and also the child, who is something likea third party beneficiary of the adults promises. Like the agents in business, thefoster 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 potentialnext foster placement), and, most important, the affection they develop for thechild in question.

On looking more closely at the foster question, we see two separate fiduciaryproblems. The first is the tie between the foster parents and the state. Althoughboth have an interest in seeing the child cared for, their incentives may not bethe same. The custodial (foster) parent has day-to-day responsibility for thechild, 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, oragent, for the children's custody and the allocation of any money paid by thestate. The other perspective for the same problem, and the one that is mostapplicable for the foster parent rights cases, is that of the foster parent. From thisvantage point, the state acts as an agent to provide guidance and support andto 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 statefor support and resolution of the ultimate custody question.

Usually caselaw and academic literature approach foster care from the birthparent's perspective (Smith v. Offer, 1977; DeShaney v. Winnebago Co., 1989;Kurtz, 1994). The emphasis, then, is on parental rights, not upon any harm tochildren that might result from removal, or even their feelings about which setof parents would be better for them (Doe v. Kirchner). Occasionally, individualcourts have changed their perspective to the states, valuing what wouldadvance 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 setup here, is that the children who are subject to foster care in many cases do nothave the same interests as any of the adults involved: the foster parents whonow care for them, their natural parents who may have abused or abandonedthem, or who may not have been "real" to the children for many years, or "TheState" which may have removed them from the only home they knew and isthreatening to remove them again.

As long as the family remains intact, birth parents view the upbringing oftheir children as a joint enterprise, or "collective good." (Zelder, 1993; Weiss andWillis, 1985, p. 270) They see how children thrive when they are appropriatelycared for; they are rewarded by their smiles, hugs, and imitation of themselves,as valued adults. However, when the family breaks up and the children areplaced elsewhere, the interests diverge. Although the parent probably still lovesthe child, and is usually required by law to support him or her, they no longerreside together, and visitation may be infrequent. The parent may be quitepreeoccupied with attempting to meet the conditions set before the child canreturn: securing employment, dealing with substance abuse problems, settlingadult emotional relationships. There are economic strains as well, because thefamily now in part maintains two households, eliminating economies of scalethat were present before foster care placement (Weiss and Willis, 1985, p. 269).But more important, the natural or birth parents are now unable to haveday-to-day contact with their offspring. They cannot know exactly what thefoster parents are doing to care for the child (Weiss and Willis,1985, p. 270), andcannot watch him or her grow from "close up."

Finally, because the natural parent lives away from the children and seesthem less frequently, he or she may lose interest in the child or becomepreoccupied with other things (Weiss and Willis, 1985, p. 288). The naturalparent would like to see the child happy in the new situation, but not so happythat the real home will be forgotten.

The state as agent has monitoring problems as well, although monitoring isusually required by the foster care contract. Too frequent visitation upon fostercare parents, even if practical from a staffing viewpoint, would only disrupt thetemporary family foster care is designed to create. The agencies are concernedwith "rehabilitating" the natural parents, and may also be overwhelmed by othertruly horrible home situations in their caseload that require immediateintervention. Like the natural parents, the government agents are concerned thata good, but not great, relationship develop between foster child and fosterparent. Thus the agency may be apt to remove children who have been with aparticular 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, thecaring 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 noncustodialbirth parent is a complicated mixture of the source of the child (who may be easyor very difficult to care for, depending upon whether the natural parent wasabusive 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 placedin the difficult position of being at once an agent for the natural parent and anadvocate (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 somestability in life (Watson v. Shepard, 1976). If the child is older, he or she maymanipulate most if not all of the adults involved (Ross, 1993). Because findingthe residual claimants and even the monitors is problematic, it is difficult to seehow any contract could be written to give all these parties appropriateincentives.

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 ownwell being, while the parents think both about their own consumption and thewelfare of their children (Bernheim et al., 1985, p. 1049; Becker, 1974). In theextreme, because giving up the child or having the child forcibly removed mayhave been very painful, the natural parent may want emotional distance from thechild, 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 thestate. They do not invest emotionally in the children in their care, a failure thathurts the child. "Successful" foster parents are often at odds with state agenciesbecause they do invest and become attached. Removal will be costly for themand the child; long-term placement will make adoption tempting.

To resolve the problems inherent in foster care because of its principal-agentproblem, the law must make the players' incentives compatible. For the naturalparent, there must be no "parental right" that will trump what is clearly best forthe child. To prevent discretion and uncertainty from running amok, time limitsmust be set after which "rehabilitation" comes too late. Making the agency'sincentives compatible with either, let alone both, sets of parents (and possiblya third set if adoption is a possibility) is probably impossible. But they could bemade compatible with the child's interests in stability and safety (Bartlett, 1984).This would require rethinking the goals of the foster care system. If mostchildren do not return successfully to their parents' care, and a time limitationcan be set, certainty could return to the system. Such a move obviously requiressome new empirical work, for there are many questions without answers here. Asystem with set time limits and emphasis placed on the child's choice and bestinterests might drastically curtail the number of voluntary placements.

Because children are not material goods, the particular type ofprincipal-agent relationship foster parents enjoy is fiduciary rather thanmarket-like (Scott and Scott, 1995). That is, the duties required of foster parentsmore closely resemble family duties than commercial ones: the foster parent, likethe natural parent, must put the child's welfare before his or her own.

This hybrid relationship makes foster parent cases difficult for courts. Clearlyfoster parents differ from teachers or nannies or babysitters. Yet because therelationship is designed to be temporary, is incomplete ("title" remaining in thenatural parent or state), begins most often with contract, and carries with it somefinancial reward, foster parents do not have precisely the same rights andobligations as do natural parents.

9. Single Mothers

Men and women are complementary factors in childrearing. Women may be morelikely to perform their role without prodding (or channeling) than men, for asSeltzer (1994) puts it, men, as opposed to women, feel responsible to the childrenof women to whom they are married. Thus, men are likely to contribute in cashor kind when they are certain of fatherhood, and when they can interact with thechild. They are more likely to invest when they have the ability to monitor, eitherthrough 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 nothave new families to distract them or drain financial resources. All of thesereasons suggest why marriage, as opposed to some alternative familyarrangement, is necessary for "first best" childrearing. Children aren't just factorsto be ignored or non-actors whose preferences should be lumped in with theirparents (Anderson and Tollison, 1991).

This argument accepts some of the premises advanced by such writers asLupu (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. Butafter these agreements, our roads diverge. Lupu sees the two parents ascontesting 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 thismediating function. They may also be viewed as complements working togetherand taking advantage of each others differences: specializing, if you will.

Despite the desirability of dual parenting, the number of children born tounmarried women (as a percent of all births) has increased substantially in thelast twenty years, with the unwed white rate nearly tripling (Brinig and Buckley,1996b). During that time, many social commentators argued that such trendswere benign. Some touted the benefits of single motherhood (Fineman, 1994),while others argued that cultural conservatives should not impose their viewsof morality on indigent women who are responding rationally to their ownenvironment (Sugarman, 1995).

Recent studies offer more detailed support for the conservative critique ofincreased unwed birth rates (Whitehead, 1993). The absence of a father is seenas the single most important cause of poverty (Wojtkiewicz et al., 1990).Involved natural fathers provide strong role models, discipline, and adependable source of income. Without these benefits, children do much lesswell than those from married families (Moffit, 1992; McClanahan and Garfinkel,1989; Gottshalk, 1990).

The focus of attention has therefore shifted from the consequences to thecauses of illegitimacy, particularly to welfare subsidies for illegitimacy. The mostdirect subsidy to illegitimacy in the United States is the Aid to Families withDependent Children (AFDC) Program, now the Personal Responsibility andWork Opportunity Act (1996) which offers a cash subsidy to mothers of childrenwhose cannot or do not fully support them. Illegitimate births under the AFDCprogram are on the rise, and at present constitute about one-third of all AFDCchildren. Support for single parents goes beyond AFDC to include FoodStamps, Medicaid, and WIC, which are all regulated by the new legislation.

From an economic perspective, it is uncontroversial to suggest that theAFDC program results in increased unwed births. Subsidize something, andtheoretically you will always get more of it. However, critics of welfare reformargue that public assistance cuts will not reduce unwed birth rates because theyhave not done so in the past. If this is so, the proposed cuts in welfare payoutswould harm children without benefitting society.

Welfare supporters also argue that illegitimacy rates are more closelycorrelated with exogenous (external) social norms than with welfare subsidies.What has happened, they say, is that the social stigma of illegitimacy, alwaysweaker for blacks, has declined for whites, and this has made all the difference.However, this does not exclude the possibility that welfare subsidies may affectillegitimacy rates.

Social norms might not be exogenous, and might instead be shaped in partby welfare subsidies (Brinig and Buckley, 1996b). Welfare subsidies toillegitimacy, 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 associal norms weaken. This might explain why illegitimacy rates increased whilereal AFDC payouts declined from 1975-90.

To date, most empirical studies have failed to detect a significant positivewelfare coefficient (Ellwood and Bane, 1985; McLanahan and Garfinkel, 1988;Kimenyi and Mbaku, 1995). Some studies report ambiguous results, such as asignificant positive AFDC coefficient for some but not other measures of welfareavailability (Plotnick, 1990). A longitudinal work based upon survey datareported that the fact that the mother received welfare prior to conception wassignificant in predicting the childs legitimacy status, but that the amount of thewelfare payment was not (Duncan et al., 1988). Shelly Lundberg and RobertPlotnick (1995) reported a significant positive welfare coefficient for white unwedbirths, but not black unwed births. Duncan and Hoffman (1990) reported apositive but insignificant welfare predictor of black teenage illegitimacy. Areview of these studies comments that "[t]he failure to find strong benefit effectsis the most notable characteristic of this literature." (Moffit, 1992).

Brinig and Buckley (1996b) estimated unwed birth rates for whites and blacksin each state for each year from 1975 to 1990, using economic, welfare and socialpredictors of illegitimacy and found that the AFDC coefficient was significantlyassociated with increased unwed births for both blacks and whites. Of the socialpredictors, those suggesting weak community support systems (or socialcapital) were associated with higher unwed birth ratios. There were significantlymore unwed births in cities, and the percent Black coefficient was uniformlypositive and significant. Cities are apparently more likely to lack the socialnetworks which promote marriage and sanction deviancy while becauseillegitimacy is associated with an urban underclass. High divorce rates were alsorelated to illegitimacy both because of a breakdown in social structures andbecause 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 familiestogether. While the contractual terms used to be far more widely recognized thanthey are at present, they have never been legally, as opposed to morally,enforceable. The current trends toward thinking of the family in contract termsand recognizing more and more childrens rights tempt some to question thewisdom of the assumptions made by any implicit family agreements. In anyevent, the family contract will likely remain illusory and unenforceable becausemore than contract binds the members of a family together.

Eroticism aside, the relationship between parents and young children is notthe same as the bond between their parents, and for good reason. Children arenot merely "little adults." Although the vast majority of them possess thepotential for meaningful adult contributions, their needs during childhood andeven adolescence are quite different from their parents or even otheremancipated peoples. Children do not make decisions like adults. They requirea special kind of legal protection to accompany satisfaction of their primaryneeds. In order to be free to just be children, they need to rely on adults, usuallytheir parents, to make adult decisions. The parents thus act as fiduciaries:trustees or stewards of their offspring (Scott and Scott, 1995). Treating childrenas independent legal actors in any but the narrowest range of circumstanceslimits not only their ability to be children but also their parents ability to be goodparents. This is not to say that children shouldnt be considered independentlyof the adults who act in their names, when the interests of parents and childconflict.

An implicit contract between parent and child was detailed by WilliamBlackstone, writing between 1765 and 1769. In this premodern time, the languageof contract was not out of place, for Western families have not had their currentstructure for very long (Glendon, 1980). In Blackstone's time, the contractinvolved the parent having the duty to provide support, protection, education,discipline and religious instruction in return for the childs providing wagesduring minority and support and protection in the the parents old age, honorand reverence, subjection, and obedience (Brinig, 1994a, 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 oftheir ancestors (Rawls, 1971, p. 284-94). There will also be a "passing down" ofattitudes about parenting. For example, one researcher claims that insingle-earner families, the father's attitude toward the fathering he received as ayoungster will be the most consistent predictor of the time spent with hischildren (Barnett and Baruch, 1987, p. 37). Finally, economists write that altruismwithin the family occurs in part because of the expectation of future inheritancefrom a parent (Epstein, 1992, p. 89; Buchanan, 1983).

Scholars have concluded that many of the current perceptions of childhoodpostdate the change from an agricultural to an industrial economy (Zainaldin,1979; Glendon, 1980). In an agrarian economy, children over the age of five wereassets, since they could work around the farm or household. As cottageindustry and then factory production developed, the feeding, clothing, andeducating of children became more of a consumption activity than a financialinvestment (Becker, 1993). The only positive input children could provide for thetotal family financial picture was their income (Stern et al., 1975), whichtheoretically belonged to their parents. And when child labor laws andcompulsory education statutes were enacted, even the relatively small incomethat most children could provide evaporated.

Whatever power a contract analogy might have held in Blackstone's time, itsusefulness becomes questionable when we analyze the contemporary family asan economic unit. This problem is particularly evident when we consider theincentive structure within the family. Currently the incentive provided forinvestment in children is almost entirely subjective. Parents may "spend" timeor money on their children because they are altruistic (McGarry and Schoeni,1994; Woodhouse, 1993). They may invest in their children because they feelsome sort of duty to do so (Becker, 1993). They may act because they take pridein their children's achievements, either because these enhance the familyreputation or their own immortality (Buchanan, 1983). They may be thinking interms of some eventual reciprocity, at least in terms of a meaningful relationshipwith their children as adults (Brinig, 1994a; Cox and Stark, 1993). They do not actbecause they expect any sort of reward, especially not in a monetary sense.

The law still presumes that some sort of a formal relationship exists in thefamily setting. Clearly parents enjoy enormous discretion and privacy as theyraise their children (Scott and Scott, 1995), although Blackstones contractualfamily seems to have eroded from both sides. The state now plays a far greaterrole in family life, and children have been given independent rights. But there arelimits upon what they can do legally, in part because they cannot make adultdecisions. Becker and Murphy (1988) suggest that the limitations on childrensability to contract suggest a role for the state in creating Pareto efficientinvestments both in them and the elderly.

Recently, children have been given some autonomy in areas of personalprivacy, such as contraception and abortion (Planned Parenthood v. Danforth,1976; Bellotti v. Baird, 1979) though the Supreme Court has upheld statutesgiving parents of immature pregnant minors the right to be informed in mostcases of their daughter's pregnancy (Planned Parenthood v. Casey, 1992). Asthe child approaches majority, he or she may also acquire decision-making powerin terms of elective medical care, and child custody placement with divorcingparents. Children over age seven are able to testify in most cases, and wherecriminal behavior directed at them is involved, even younger children may bewitnesses if they understand the difference between right and wrong (Scott,1992; Sanger and Willemsen, 1992).

Despite this growing independence, children are usually incapable ofenforcing their parents' contracts. The first reason this is so, and that courts willnot interfere in most families, involves an unwillingness to disturb familyprivacy. 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 toeducate the children in parochial school. The court declined to become involved,fearing that otherwise courts would have to deal with a flood of "intimate familydisputes." Second, the court did not wish to "interpose its judgment" aboutproper child rearing. Taking an extreme position even for a legal academic,Wendy Fitzgerald (1994, p. 40) recently argued that if children could enforce theirparents' obligation to support them, children might evolve legally from thestatus of chattel to some form of personhood. She states that "children willremain excluded" from personhood because "[t]heir experiences andperspectives of dependency find no recognition in any legal model positing anexchange 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 agreementor divorce decree, although courts may permit suit based upon promises madesolely for the child's benefit. Nor will courts entertain the childs action if herefuses 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 restsupon parents' reciprocal obligations of custody and support. There is also animportant relationship between the duty of support and the ability of the parentto exercise control over the child. For example, in Oehler v. Gross, (1991) a17-year-old girl refused to live with her father, who was willing to have her residewith him. She sought reimbursement for apartment rent, and the court deniedthat he had an obligation. "It is quite clear from reviewing this record that thefather is not refusing to support his daughter. Rather, he is refusing to allow hisdaughter to dictate the proper allocation of support monies." She somehow wasnot living up to her part in the family scheme.

Even the parents may not be able to enforce the implicit family contracts. AsKilgrow shows, courts are reluctant to invade the privacy of the intact familyeven when basic parental decisionmaking is involved. If one spouse goes so faras to abuse the child, the other has the duty to protect the child, but there is noway to compel affirmatively good behavior. The only remedy seems to bebreaking up the family by filing for divorce. If the spouses divorce, there are stilllimits to enforcement. Decades of federal intervention have not ameliorated achild support enforcement problem: only 63% of the amount ordered is collected(Chambers, 1995; Brinig and Buckley, 1996b). Visitation cannot be tied to childsupport. Nor may the noncustodial parent force the other to spend the childsupport money for the childs benefit rather than her own. For children, then, theright to enforce contracts becomes illusory. They must rely on other institutionsto assure parental cooperation in their upbringing. Because they cannot enforcecontracts, the rationale for something like a fiduciary status becomes clear.

Finally, analysis of many of the third party enforcement cases under theprincipal-agent framework of Cooter and Freedman, 1991, p. 1065-69) reveals aratification problem. The presumption is that the child constructively ratifies thecontract by providing what might be called "childhood services," pursuant tothe implied contract described earlier. Although many of these functions havebeen attenuated today by state involvement with the family (Becker andMurphy, 1988), parent and child still operate on a reciprocal basis, and the child'sfunction at a minimum involves accepting parental support and advice.Rescission of ratification occurs when the child refuses to abide by the parent'swishes. The child may refuse to go to the college of the parent's choice, or to liveon the college campus. In the extreme, the parent may be "abandoned" by thechild. 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 inother fields. This division occurred partly for historical reasons--the rulesgoverning marital separations and parental obligations developed before moderncontract and tort theories, and they developed in a separate (ecclesiastical)system of courts--and partly because, under the influence of formalism, theoriesof civil obligation focused on the prerequisites for liability. Modern theory,influenced by the insights of law and economics, has shifted its focus fromliability's prerequisites to its consequences (Posner, 1992a); Goetz and Scott,1983). Traditional contract analysis, for example, may have asked whetherparental obligations are sufficiently definite or sufficiently voluntary toconstitute enforceable agreements. Under the influence of law and economics,scholars now are apt to examine the incentives that might be supplied by variouscontract remedies (Ellman, 1990). The result is to focus attention on the policiesthat family laws are designed to promote.

In analyzing parenthood as a form of civil obligation, and in identifying thepolicies that are served by modern divorce law, the most striking observation isthe identification of the interests that are not protected. Parenthood, likemarriage, historically involved the exchange of support for services, though thistime it was the trading of the father's obligation for support in return for thechild's services during minority, and the lifelong exchange of affectionreciprocated by what Blackstone called "honour." Termination of parental rightshistorically occurred only where the parent egregiously violated theseobligations, so that the child deserved to be rescued and released from theduties of a relationship that had effectively ceased to exist. As children becomemore emancipated, and acquire their own "rights," the idea of parental fault, orunfitness, becomes problematic. However, the parents still have a duty toperform as good parents while the relationship exists, a duty that they cannotvary (Hogge v. Hogge, 1993; Huckaby v. Huckaby, 1979). And breach of theparental contract could still give rise to liability. Presumably, to the extent tort--or contract-- reward is prohibited by the law, decisionmakers in the legislativeor judicial branch must have determined that the costs of allowing recovery,whether in restitution (tort) reliance or expectation, exceed the benefits (Brinigand 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 hasnever been undertaken with any rigor. While, for example, the costs of a faultdetermination for divorce are deemed self-evident by anyone familiar with theolder system, the costs of a parental non-enforcement system have not beenweighed against the possible benefits of a more expansive system of awards tochildren whose parents have behaved egregiously. The benefits are thosetraditionally identified with civil obligation--deterring breach and encouragingreliance over the life of the relationship. Within the family, deterring breachtranslates 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 whodecide to stay married "for the sake of the children." (Scott, 1990).

Encouraging such reliance primarily means encouraging both parents andchildren to think in terms of lifelong reciprocal obligations. A decision topreclude consideration of parental misconduct (except by terminating parentalrights) could be justified, therefore, either on the ground that the cost of thedetermination is too high (because of over-zealous enforcement and consequentinvasions of privacy and parental prerogatives, or the bitterness any lawsuit cancause) or because of a conclusion that the interests to be served by such adetermination (primarily the interests associated with perpetuating traditionalparental roles) are not very important. Either way, the interests sacrificed mustbe considered along with the costs. The difficulty of determining the degree offault on the parent's or child's part should not be used to cloak important societaldecisions about what makes the best family.

12. Human Capital Investments in Children

One observable manifestation of the change in family functions over time is thatas recently as when our parents were children, elderly people frequently livedwith their childrens families. Children provided the security when parents couldno longer work (Brinig, 1993). Granted, there were fewer octogenarians ornonagenarians and there were more children in most families to share theexpense of housing and caring for an aged parent. But the change in functionsaffects more than children. In some industrialized nations, even though childrenare "useless" during childhood, aged parents, who have stopped most laborforce 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 alwayspresumed a lack of anything approaching formal contract between them and theirparents. Because of the presumption that parents will act in their childrens bestinterests (Parham v. J.R., 1979), parents are given almost all legaldecision-making power when it comes to interactions with the outside world.Thus, children cannot sue their parents for simply being bad parents (Burnettev. Wahl, 1978), nor for failure to provide the education or other amenities that thechildren feel appropriate. In divorce cases, this is described as a problem ofstanding. The child doesn't have the ability to enforce court-ordered supportnor to ask for increased support to meet additional expenses (Yarborough v.Yarborough, 1933; Kelleher v. Kelleher, 1974). In other words, they cannotenforce the implicit agreement by which their payments may be bound.

Even though there is no legal enforcement of the contract, there may be someother mechanism in place to motivate parents to invest in children. Becker andMurphy (1988) suggest that state provision for education encourages optimalinvestment in children, if bequests are taken into account. In some Westerncountries, because adult children will be expected to support their now infirmparents, such investments have a financial as well as a psychic reward. In NorthAmerica and Western Europe, elderly parents are expected to supportthemselves out of some combination of accumulated earnings, pension plans,and social security (Kline, 1992, p. 200). Unlike the elderly in non-Westernindustrialized 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 positiveinvestments in children will depend in part upon the parent's expectation ofreciprocal care in advanced age (Posner, 1996) Since families tend to mirrorpatterns of care through the generations (Kolko, 1992, p. 244-76), the parent'scurrent involvement with his or her own parents reflects these expectations. Ofcourse, 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 ofchildren in the family (Becker and Lewis, 1973; Becker and Tomes, 1988).Economists have related the number of children to such factors as parentalincome, years of education, and the divorce rate. Another way of measuringinvestment in children is to calculate the time spent on their care. Studies havealready 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 obviousadditional measure of parental investment is the parents' financial outlays(Zelder, 1993). A data source measuring this outlay is the payment ofagreed-upon or court-ordered child support by noncustodial parents (Weiss andWillis, 1985). Another data source measuring successful parenting is the child'sperformance on standardized tests given to all children in school systems.Unfortunately, as well as these positive contributions, families also experiencenegative "investments," akin to dissipation or wasting of assets (Whitehead,1993). The data source measure that relates directly to children is parental childabuse.

If it is correct that there at least used to be an intergenerational pact forsupport at the time of dependency, investment in children should be highestwhere more elderly people are cared for by their adult children. Conversely,where many elderly people live alone, their children should not be investing asmuch in minor children. Brinig (1993) looked at both United States andinternational evidence of both positive and negative contributions by parents,examining whether provision for the elderly was an important contributing factorto the investment. The independent variables included general demographicinformation as well as the elderly living alone that alternatively might explain theinvestment. The percentage of elderly living alone was statistically significant,and was in the direction expected: more positive investment (reflected in testperformance) occurred where a lower percentage of elderly lived alone; morenegative investment (abuse or nonsupport) where there were more elderly ontheir own.

This does not rule out the possibility that, if the culture supports reverencefor 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 supportedby his adult children. A deeper regard for all family members will increasebenefits for both the children and the elderly (Becker, 1993). One would expectthe investment in children that is reflected in the analysis above (Epstein, 1989,p.1466).

There are therefore two recommendations, besides the suggestion for furtherstudy, that might be made. One assumes that the economic motivation isdominant: if public provision for the elderly results in less investment inchildren, some thought might be given to discontinuing or limiting publicsupport. The other assumes that the cultural motivation dominates, although theeconomic effect might follow. Under this alternative view, the Western nations,which are the ones with the least significant connection between adults and theirparents, might try to strengthen these ties. The beginning of a process ofstrengthening these ties could be made by heavy investments of time andmoney in our own children, perhaps induced through a "well-chosencombination of taxes on adult consumption and subsidies of childrens goodsand services," (Fuchs and Reklis, 1992, p. 44) or by providing the example inoffering 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 byinvisible, illusory contracts to do so. But what enterprise engages us, then? Aswith the married couple, this chapter argues that there is an analogy for parentand child relations that holds more promise than the contract. The human partiesto a covenant may enjoy horizontal equality, although parents and children aretypically in a more vertical relationship.

The implicit contracts discussed so far may be better described as default oroff-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 notwant these obligations, even beforehand, default provisions dont completelyanswer the objection. Some parts of family life are invariable because they arenecessary for the family to meet its historical and present-day societalobligations, the externalities of the parental exchange. They make the family whatit is.

These obligations translate from the boundless and undeserved love thatflows in families. Covenantal love is quite different from economist Gary Becker'sdefinition of altruism (Becker, 1991, ch. 8), which he derives from a single familymember's caring. In addition to requiring only one active party rather than thetwo or more needed for covenant, Beckers definition of altruism also implies thatthe 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 adultsdo, for important economic reasons. To get their physical wants satisfied, theyneed to be selfish [loudly so], their wants-suppliers altruistic (Anderson andTollison, 1991). They need to be careful of what they have, at least until theyreach adulthood. Since they have (meaning actually possess) very little, andeven have limited human capital as yet, losing what they do have becomesenormously important. Hence they are more risk averse. (Brinig, 1995a) Theyalso, despite feelings of "immortality" in their teen years, have nearly infinitediscount rates. When very young, they cannot understand that an object thatrolls under a table is still there where they can't see it (or that covering one'seyes doesn't make you invisible). Their sense of time, as Goldstein, Freud, andSolnit (1973) note, is different from the adults' around them. A month to aneighteen-month-old is forever. Delaying gratification, putting offtelevision-watching until after homework is finished, requires parentalintervention. Planning for any extended period is impossible even more thanwith many adults.

Children need parents to supply these deficits. In a first-best world they needmale 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 makethem productive in the future. Men and women are complementary factors inchildrearing.

14. Conflicts between Parental and Childrens Interests

Because of the limitations of childhood, we have noted that parents arepresumed 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 theylove them. They may so act because to do otherwise is to invite tremendoussocial disapproval (Scott and Scott, 1995). Their childs' best interest maycoincide with the parents--having a nice home to live in benefits both parent andchild (Weiss and Willis, 1985). Teaching a child to be helpful and neat willbenefit the parent who then does not need to live in a chaotic pigsty. They maybe acting "properly" because they are making the type of investment discussedearlier: anticipating an eventual reward of cash or kind.

Courts approach the problem of parent's and child's conflicting interests ina number of ways, although usually repeating the axiom that parents arepresumed to act in the child's best interests. In some more recent cases, childrenare given independent rights that carve away at the parental domain. Theparental role as fiduciary is lost in the facts of these families with problems. Theparent or child becomes the winner; not both. In the process, parenting becomessomething 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 homesand possessions (In re Scott K., 1979). Statutes give them the right toindependently seek medical care where they might wish to keep the informationprivate. They can sue their parents in tort for unintentional wrongs or those so"extreme and outrageous" as to violate the essential bonds between parent andchild (Mahnke v. Moore, 1951; Akenbrandt v. Richards, 1992).

The question of Kaldor-Hicks efficiency comes up in families becauseparents often make decisions that may be optimal for themselves, but perhapsharmful for the children (Becker and Murphy, 1988). For a mother and father toboth work outside the home may not be the best situation for the children. It maybe necessary for financial survival of the family, and it may provide theadditional funds needed to purchase items such as private schooling orsleep-away camp. Entering the labor force may be necessary for thepsychological well-being of the parent who had stayed home to care for thechildren when they were very young (Brinig, 1993, p. 466-67). He or she may bebetter equipped to deal with the children's needs after a day spent in some sortof meaningful activity with adults. In any even, the well-being of the entirefamily is considered in making this type of decision, which will be Kaldor-Hicksefficient.

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

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

15. Deadbeat Parents

Family deadbeats seek to avoid legal obligations, abandoning their spouses andchildren to public welfare or private charity (Brinig and Buckley, 1996b). Theyare the stuff of Dickensian novels and of Grimm's fairy tales. They were theimmigrants who never sent back for their wives, and the pioneers who cast offtheir families to move West. They were Theseus at Naxos and Leatherstockingon the prairie. They lived lives without second acts, and, because they havealways been with us, we have the laws of support, alimony and divorce. Forthem, the West offered freedom from family responsibilities as well as politicalfreedom.

Deserted wives historically could assert a variety of remedies against theirspouses. Desertion was a ground for divorce, and states mandated child supportobligations. Children were also protected through child abuse and compulsoryeducation legislation. There is, however, a wide variance among states in familysupport obligations, and deadbeat spouses have an incentive to move tolow-payout and low-collection states (Brinig and Buckley, 1996b).

Nearly a quarter of the more than four million family support cases involvedeadbeat dads who have crossed a state line. Deadbeat migrants are apparentlyattracted to jurisdictions that permit them to scale back family obligations, suchas Florida, which did not collect 85% of the child support due in 1992. The recentexample of Virginia shows how sensitive collection rates are to state collectionefforts. In the early 1980s, Virginia ranked thirteenth in the child supportcollection. But after state funding for collection was cut in 1986, the state fell toforty-ninth place. After this decline became a political issue in 1989, Virginiascollection rates improved dramatically.

Brinig and Buckley (1996b) conducted an empirical examination of migrationtrends within the United States for the period 1985-90, looking among otherthings for the indices of a nonpayment of child support. They found fewsurprises among predictors of the noncustodial parents who did not pay childsupport. The Unwed Births and Divorce coefficients were both significant andpositive. A state with a climate supporting unwed births would appear to be onein which divorce bears less stigma as well. The coefficient for women in the laborforce was also significant and negative. Husbands whose wives are workingspend more time with their children and are apparently likely to have a closerattachment to them after divorce (Brinig and Alexeev, 1993). Similarly, the jointcustody dummy was also negative and significant. Parents appear more likelyto support their children when they maintain close contact with them through

joint custody orders (Weiss and Willis, 1985).The AFDC coefficient was positiveand significant, suggesting that fathers might be more likely to abandon theirfamilies 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, somethingremains (Brinig, 1996). Just what that something is may change. Some of thebond between parent and adult child undoubtedly is primordial and emotional,and therefore unlikely to change with years and fortunes. Whether the siblingsmaintain that sort of relationship with each other and, together, vis à vis theirparent, depends to some extent upon whether the parent is viewed as a netgood, 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 "stateof nature" governs (Kronman, 1985). Law makes a critical difference in what ischosen -- the franchise or the largely unenforceable agreements of the state ofnature. And law will certainly be involved where family governance fails: theremay be elder abuse, estate problems, suits to enforce statutory duties ofsupport, quarrels over competency, and the increasingly popular disputes overgrandparent visitation.

From the point of view of the older person, when their child becomes an adultthere may still be hope of enforcing the implicit contract made when the childwas young -- I will take care of you, love you, invest in you, and in return becared for you when I am enfeebled (Brinig, 1994a; Posner, 1996). But the youngerperson, at least one without the expectation of inheritance, has the opportunityfor gaining quasi-rents, for the big parental investment was all made in theadult's youth, and without his or her explicit concurrence (Epstein, 1989). "Inever agreed to have you live with me, and I have a life of my own" may be thechild's response to the parent's incapacity. The adult child may therefore thinkof self and siblings as individuals in isolation from each other and from theirparents.

There are two possible models for describing the behavior of what might bedescribed as mature families (or related adults): one is the state of nature; theother is the franchise. The appropriate model depends in part upon the parents'health, cheerfulness, and mental youthfulness. It will also hinge on whether theparents' estate is seen as large, small, or negative. Thus there may be a shiftbetween paradigms as the parent ages or his or her fortune changes. Siblingsmay act as franchisees during their forties and their parents late sixties, and withthe independence of sovereign nations during their own late fifties and theirparents' eighties, as the parents become less pleasant to deal with or the bondmarket crashes. On the other hand, the siblings may begin as "independentnations" and end up as franchisees if their parent wins the lottery. Both modelsare therefore worth considering, and, to repeat, we can influence which onedominates by our choice of law.

Students of human nature have seen the obvious parallels between theassociations of adult children and their elderly parents and those of unrelatedcitizens and communities. Locke ([1776] 1976), in his Second Treatise onGovernment, describes extended families residing together under the father'sguidance or "rule" through their own consent, that is, through their new andvoluntary contract. Without such an agreement, the former infants are at libertyto govern themselves, or to unite at will with other societies or communities. Therelationship with their extended family is in many ways similar to the relationshipbetween sovereign nations.

However, if an elderly parent has property the younger generation wants, theestate then acts like collateral to induce the young to do what pleases the olderpeople (Posner, 1996; Buchanan, 1983; Rubin et al. 1979). Perhaps the absenceof any such bond between adult siblings is the reason these relationships tendto be weaker, becoming intensely competitive as the elderly parents near death(Klein and Leffler, 1981). At the same time the competition for the scarce parentalresource is growing, other things that would bind the siblings together arefading. The siblings may now see in each other the traits they most disliked intheir parents: indecisiveness, greed, and intolerance, especially if they arereminded 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 personis 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 theaged parent or to avoid uncomfortable decisions like the question of moving theparent to a nursing home. On the other extreme, the hands-tying behavior maybe building the apartment-addition that will only be useful for the in-law tooccupy.

Alternatively, at least some elements of these extended families are likefranchise arrangements: the older person is the franchisor, with reputationalstakes 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 investmentin 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 specificinvestment 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 becredible. However, the parent may well prefer, or even insist on, frequentmonitoring. This serves two functions. First, the parent may actually desire thecontact with the child. In addition to maternal or paternal affection, she or hemay genuinely value the child as a friend. The parent may also be lonely, andone's children may be better company than are other old people, especially whenfriends begin to die off. Posner (1996, p. 63-64) suggests that the elderly haverelatively few relationships with non-family members of different age cohorts,and fewer total as they become very old. Finally, the parent may be monitoringthe child's activities, to make sure that the family tradition, whatever it is, is beingcarried on. Of course, keeping in touch with one's children was simple in the erawhen many parents did not live long, and those who did were likely to own thefarm their children worked or even the home the children lived in. As we havemoved away from our ancestral homes and off to faraway parts of the countryor world, we of course distance ourselves from our parents and make monitoringmore difficult. We are also less likely to support them, given Social Security,Medicare, and pensions (Brinig, 1994a; Ben-Porath, 1980, p.6).

For the children who are franchisees, the relationships are complex. Childrensometimes vie not to support their parents. They compete in rivalries aboutwhich grandchildren are most successful, about whose job is the best,sometimes about who has best been able to keep up the family traditions. Yetthey still care about brother or sister (Kronman, 1985, p. 22). And they have acommon interest in maintaining the family name, and perhaps in keeping thefamily property, or genetic endowment, intact (Bergström, 1995). This interest ismore apparent in rural communities, as it was in Continental feudalism. Whatmay be more important now, as John Langbein argues, is human capital.(Langbein, 1988) The parents' investments in our human capital occurred whenwe 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 partupon non-financial considerations: love, guilt, and generalized emotionalintermeshings (Becker, 1993). It will depend also on state requirements, such asfor support of the elderly, or legislation against elder abuse, both of whichinvolve a coercive type of state intervention. Finally, it will depend uponwhether the unpleasant short-term burdens of caring for the older personoutweigh the longer term benefits, either in memory or inheritance.

The child may be concerned that, like the commerical franchisor, the elderlyparent may "up the ante" by requiring increasingly more onerous performance.Such opportunism could take the form of whining, complaints about physicalailments, demands for attention that point up the competition among siblings.To some extent, the escalation is inevitable given the deteriorating health of theparent. The franchisee-child has the problem, like the parent of an infant facedwith a onslaught of crying, of differentiating the selfish behavior from thegenuine concerns.

One of the immediate puzzles is the question of why the elderly parents aremore concerned with the long-range benefit of the family's reputation than aretheir 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, lifetimeconsumption and preserving "trademark capital" for the future, the first goal willpredominate during most of life. As there is less and less time to enjoy presentconsumption, however, the second goal will ascend, until, shortly beforeexpected death, it will occupy a preeminent position in the elderly person's utilityfunction. As the parents approach old age, the competition motive frequentlyprevails. Those who have read Kenneth Arrow know about the phenomenon ofcycling. As with Kronman's contracts and the state of nature (1985), the answerto the cycling problem is to require unanimity: the building of consensus as tothe appropriate division.

Buchanan (1983, p. 78) has proposed a rigidly defined succession rule suchas primogeniture to prevent rent-seeking, or strategic behavior. If all are certainfrom 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 ofyears of English history in which younger sons killed off their older siblings orsent 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 parentpasses away and the estate, or even the personal property, has to be dividedamong the siblings. Not only have we abolished primogeniture and prohibitedproperty gains through murder, but we have also done much as a society toinsure 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 themselvesthrough some combination of social assistance and Medicaid, pension plans andprivate savings. The elderly live long enough at this turn of the century to useup most of the resources they have saved, and perhaps more, leaving debts tonursing facilities and hospitals. We have accomplished enough in medicaltechnology to prolong the physical body past the point where mental activityhas reached a point of diminishing returns: a point, in fact, where the old personmay actively dislike his or her existence (Posner, 1996, p. 16).

The relationship between elderly parents and their children depends uponwhether the elderly person has, or is expected to have, property left to devise atthe 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 manyelderly women who have outlived their husbands and any resources put asidefor old age), a different kind of competition prevails. The siblings may engagein a "hot potato" avoidance game, which may hurt the elderly person directly(particularly the woman, since most victims of elder abuse are women), orindirectly as she sees that she is no longer valued, or even wanted, by thechildren for whom she sacrificed so much. If the commercial franchise has novalue, the franchisees may well breach the franchise agreement and start out ontheir own, abandoning the franchise (Land O'Lakes v. Fredjos, 1992). Thefranchisor will go out of business (Malcomson, 1984, p. 486-87). With people,adjustment for the failing franchise is not so simple. Rejection of elderly peoplehas always been a concern, but not a common law concern. Some jurisdictionshave fairly recently enacted requirements that adult children provide for their"aged and necessitous" parents (Branes and Frolick, 1993), and still morerecently have drafted legislation to deal with the increasingly visiblephenomenon of elder abuse.

The fact that elder abuse is on the rise suggests that this application of thefranchise model may also be testable. Positive contacts with one's parents maybe signals to your own children of how you wish to be treated some day (Coxand Stark, 1993). They may also evidence Buchanan's (1983) rent-seeking, anangling for parental affection in expectation of a larger testamentary gift. On theother hand, all other things being equal, more adults should abuse their parentswhen 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 abusewould be needed. On an individual level, other things held constant wouldinclude whether the parent lived with the child, the size of the parent's estate, thenumber of siblings in the child's family, the income of the child's family, and thelife expectancy of the involved parent.

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© Copyright 1997 Margaret F. Brinig