COMMENTS ON THE JUSTICE
MINISTER’S SAME-SEX DISCUSSION PAPER
I.
Personal Background and
Introduction
I
have worked in the area of family economics since the mid 1980s when I wrote my
Ph.d. thesis on the economics of marriage and divorce. For the most part I have
stayed out of policy debates, and have focused on the effects of divorce laws,
the incentives to cooperate and behave opportunistically in marriage, and the
nature of regulation in marriage. In the course of my work I’ve reached two
personal opinions. First, the economic approach to marriage is extremely
useful. It is able to both explain why the changes in family law over the past
40 years had the effects they did, and is able to make “out of sample”
predictions on marital behavior that continue to stand up to further testing.[1] Second, I have concluded the impacts of past
family reforms were completely
unanticipated by those who advocated the changes to begin with, and that
these outcomes were negative. Past
changes in divorce law were not zero sum games merely transferring wealth from
one party to another. They were negative sum games that altered many aspects of
our lives.
My
comments will be organized as follows.
I will first discuss the unanticipated and unintended consequences of
changes to the institution of marriage and the consequences of implementing
no-fault divorce in Canada and the U.S. I will make the argument we do not
understand the institution of marriage well enough to anticipate what will
happen if we make a fundamental change to the definition of marriage. Second, I
will argue, based on what is known about the institutional value of marriage,
that allowing same-sex couples to marry will have tremendous social costs and
minimal benefits. Throughout my
arguments will be brief. I leave the economic and methodological arguments on
the economics of marriage to an appendix, and I leave the statistical and
theoretical details to references.
My conclusions are these: (1) if proponents of divorce reform were unable to anticipate the negative consequences of changes to divorce law, it is unlikely proponents of same-sex marriages can anticipate changes in the fundamental definition of marriage; (2) the institution of marriage is fragile; (3) lowering the value of the institution of marriage has far reaching negative consequences for large segments of the population; (4) the benefits to changing the definition of marriage are insignificant due to small numbers of homosexuals, the availability of alternatives, and the likely inability of current marriage laws to meet same-sex needs. In light of these conclusions, same-sex couples should not be allowed to marry, but should be provided with a parallel, but different institution for regulating their relationships. Common-law couples should not be given access to the new legal status.
II. The Lesson of No-Fault Divorce
Jacob (1988) refers to no-fault divorce as the “silent
revolution”. Indeed, one is hard pressed to find another example of social
legislation with as little debate before its enactment. And why should there
have been any debate when no-fault divorce was based on principles that were
both noble and well-intended --- namely to minimize suffering, prevent perjury,
to treat marriage partners as equals, to eliminate the adversarial nature of
assigning blame, and maintain the notion of marriage as a social institution.
Why should men and women, especially low income men and women, be forced to
remain in a dead marriage? Why should couples be forced to humiliate and
compromise themselves by fabricating faults to satisfy the legislated
requirements for terminating a marriage? Why should women be treated as
dependents in the awarding of alimony? Why not take blame, hostility, and
animosity out of divorce proceedings? And why should the courts not represent
the interests of society in deciding when to allow a marriage to cease based on
the quality of the marriage and not on the existence of a few arbitrary
faults? It was obvious at the time that no-fault divorce was the right thing to
do.
As early as the 1930s North American reformers argued fault based
law should change. Many felt
that in centering on moral faults and guilt the process encouraged couples to
become spiteful and more antagonistic towards one another.[2]
Others, arguing law should reflect the
world and not be opposed to it, argued the law should be changed to
recognize the rising demand for divorce.[3]
For example, an extremely influential book by a group appointed by the
Archbishop of Canterbury stated:
“When
they call for reform of the law, they are not asking for `easy
divorce',
but that the law should have regard to the empirical state of
affairs,
and that the court should be empowered to declare defunct de
jure what in their
view is already defunct de facto.
[Canterbury, p. 38, 1966]
But the most common argument against fault divorce was the
incentive created for couples to lie and perjure themselves. This is the
position taken by Judge Posner, stating that “confining divorce to grounds ...
[leads to investing] resources in manufacturing them.... At this point internal
goals of the legal system --- the goals of economizing on judicial resources
and of reducing perjury --- become decisive in favor of allowing either
consensual divorce or divorce at will.'' (p. 252, 1992).[4]
Along the same lines Humphrey states:
“To
require an adversary proceeding and fabrication of a statutory excuse to
legally justify the marriage dissolution makes a mockery of matrimonial law.
[p. 111
1972-73]
All arguments for no-fault divorce were well meaning. Nowhere does
one find any hint that no-fault divorce might actually lead to higher divorce
rates, and certainly no one anticipated the more subtle impacts. The Canterbury
report was an extremely well argued document on the problems with fault divorce
and it made a strong case that no-fault divorce was not “easy” divorce. The report appears to have been instrumental in
successfully bringing no-fault to the state of California (the first state to
change its law), and played a role in the few discussions in Canada as
well. Here was a major religious source
of authority, acting independently of North American legislative bodies,
drawing the same conclusions divorce reformers sought. The Canterbury report viewed marriage as a
lifelong commitment that society has a stake in. In order to mitigate
suffering, marriages no longer functional were to be recognized as such and
allowed to dissolve. It is the opinion
of the report that it is a serious job of the court to make this decision. Courts, it is argued, decide on a
careful consideration of all evidence what the outcome of the marriage should
be. It is for this reason the writers
of the report ironically rejected the notion of mutual consent. They state:
The fatal
defect of the consensual principle is ... that it subjects marriage absolutely to the joint will of the parties,
so making it in essence a private contract. Since it gives the court, as
representing the community, no effectual part in divorce, it virtually
repudiates the community's interest in the stability of marriage. ...
Dissolution of marriage ought always to require a real exercise of judgment by
the court, acting on the community's behalf. [p. 34, 1966]
Given that the Anglican church was promoting divorce reform, that
no major churches were actively against it, and that there was no intellectual
opposition, it is not surprising that the laws passed quite uneventfully. The Canadian experience appears typical. From a reading of the Parliamentary debate
on the 1968 Canadian law, there was little opposition. After the introduction of the bill, the
leader of the opposition stated:
Mr.
Chairman, in just a few words I should like to indicated that we on this side
of the chamber approve of reforming the divorce law, and look forward to
receiving the bill.... [Canada, p. 5017, 1968]
In the debate that follows, there is no opposition. Members from both sides simply repeat that
adultery and separation are not the only factors that could terminate a
marriage, and that the time has come for a new way. Jacob (1988), writing mostly on the California experience also
argues no-fault divorce arrived with little resistance. And thus, beginning in
Canada in 1968, most western countries quietly altered their divorce laws.[5]
In
essence the arguments of the time were: a) the current law hurts a group of
people (those in “dead” marriages); b) allowing this group freedom to divorce
will benefit them and not harm anyone
else. Such an argument, when couched in the language of “honesty”, “individual
responsibility”, and “non-adversarial”, becomes almost seductive and certainly
difficult to object with. It is interesting to note the similarity of these
arguments with those advocating same-sex marriage today. Same-sex marriage
would be “fair”, they would satisfy the “equality” conditions of the charter,
and they would have no impact on existing marriages.
The actual outcomes of no-fault divorce could hardly have been
more different than what was expected and intended. The most obvious outcome
was the immediate increase in the divorce rate. In Canada the divorce rate went
from 50 per 100,000 people in 1968, to 150 per 100,000 in 1969, and then 300
per 100,000 in 1970. A six-fold increase in just two years after a century of
rather stable divorce rates. In the U.S., where divorce laws are state
jurisdictions, the transition to no-fault divorce was slower and less dramatic
than in Canada, but the anecdotal evidence of increased divorce rates was also
immediate.
However, the effects of no-fault divorce were much greater than
just the direct impacts on the divorce rate. The law influenced the rate at
which women entered the workforce, the amount of hours worked in a week, the
incidence of spousal abuse, the feminization of poverty, the age at which
people married, and the value of the marriage in the popular culture. In short, the actual outcomes of no-fault divorce were completely
unanticipated and unintended. I will now briefly touch on the evidence on these
various effects. I leave it to the attachments for the detailed analysis.
Divorce
The
first question asked by lawyers and academics after the switch to no-fault
divorce was: did the law change the number of divorces? The very early papers
published on the subject are incredibly bad. Data in the early 1970s was rare,
computers for analysis even rarer, and no theoretical framework existed to
direct the method of testing. As I mention in Allen (1999) the first serious,
but highly flawed study occurred in 1986.[6] If one was
interested in a scorecard on divorce rate studies, the crude score would be 11
to 6 in favor of the divorce rate increasing as a result of no-fault divorce
laws. If one were to eliminate studies
that contained mistakes in legal classification, mis-coded data, biased visual
techniques, or trivial sample sizes, the score is 9 to 0 --- an absolute
rout. All of the divorce studies done
since 1986 have concluded that the divorce rate increased with the introduction
of no-fault divorce. After almost
thirty years of analysis, there is no question that divorce rates were affected
by the law, and that they increased.
There has only been one study on the effect of no-fault divorce in
Canada (Allen 1998), and there I find the change in the law was quite strong.
So strong one really doesn’t require sophisticated econometrics to understand
what the effect was.
Some have argued the rise in divorce was unimportant because it
simply reflected the number of dead marriages. However, what makes the rise in
divorce so troublesome is that often the divorces are “inefficient” or
“opportunistic”; that is, the benefits of marriage exceed the joint benefits of
living apart. These divorces occur because one party is able to unilaterally
leave and perhaps take a disproportionate share of the marital assets with
them. Brinig and Allen (2000) show that
both men and women behave in this opportunistic fashion. Crudely speaking ,
custody of children is the driving factor behind who files for divorce, second
is access to the financial assets of the marriage. The problem with
opportunistic or inefficient divorces
is that they leave behind partners who are more worse off than the benefits
derived from those leaving. The most common outcome being a father separated
from his children or a wife living in poverty.
Economists
and lawyers have only recently shifted their attention away from the divorce
rate to empirically estimating the effects of divorce on the various parties
involved. The results to date suggest a
rather complicated story. From Brinig and Allen (2000) it is clear both men and women behave opportunistically
at the time of divorce. When these strategic divorces happen, the partner left
behind is worse off, but the partner leaving is better off. On the other hand,
there are divorces which do make both husband and wife better off because they
result from dead marriages. This explains why we hear both men and women
opposing and supporting the current divorce regime: although the nature of the
gains and losses to divorce are different for men and women, there is no gender
bias in favor of men or women in terms
of divorce.
Most
spouses who file for divorce are women. The best explanation for this is child
custody. Of those women who file for divorce, most claim after the divorce that
they do not regret it. On the other hand, women are made poorer by divorce. The
actual amount of poverty caused by no-fault divorce is still disputed. In 1985
Lenore Weitzman made a splash in her book, The
Divorce Revolution, with the claim that women were financially worse off by
as much as 70% after divorce. No one since then has measured an effect nearly
as large, although Brinig (1999) argues that seventy-five percent of low income
female single parents were not poor when they were married.[7] The general consensus is divorce is a
financial hardship for women, but this is most often offset by control over the
children. For men there is little empirical data on the costs of divorce. Some surveys show that
fathers suffer a great deal of emotional stress caused by their separation from
their children, with those fathers most attached to their children during
marriage becoming the most distant after divorce. The recent increase in
father’s rights groups suggests that the numbers of disenfranchised fathers is
not trivial.
If
the effect of divorce on men and women is complicated, the effect on children
is straight forward. There has been a tremendous amount of research conducted
on the effect of divorce on children. Much of this is discussed in Moir (1999).
None of this would appear good news. According to Moir’s assessment of the
literature, if we consider any social pathology (teen pregnancy, criminal
activity, divorce, etc.) and control for the demographic characteristics of the
child, then the probability that a child participates in one of these
activities increases on average by a factor of 2 if they come from a divorced
home. Of the approximately 50000 Canadian children each year that enter single
families through divorce, 1/3 of them become disadvantaged in some way.
Discussions of the effect of divorce on children during the no-fault debate
suggested that at worst the results would be ambiguous if not positive on
children. It was argued children would be better off in single parent homes
rather than in homes with dead marriages.[8]
Nothing could have been further from the truth. The real negative impact of the
no-fault divorce regime was on children, and increasing the divorce rates meant
increasing numbers of disadvantaged children.
Age At Marriage
The
impacts of no-fault divorce law mentioned above are not too surprising with
hindsight. However, there were subtle impacts just as significant in terms of
altering the daily life of the average Canadian. One particular impact I have
recently been examining is the effect no-fault divorce on the age at which an
individual might marry. Again, I will only outline the argument here, for
details and econometrics see Allen, Pendakur, and Suen (2003) in the refereces.
Everyone is different to some extent in terms of the value they
place on marriage, and their aversion to a mismatch in their choice of spouse.[9]
As a result, any movement towards easy divorce will have different individual
effects. In my paper with Pendakur and Suen we assume there are two types of
people: those who highly value marriage
and those who place little value on a marriage. A low value type takes marriage lightly and is very concerned
about a mismatch. For this type of person easy divorce makes marriage more
attractive. On the other hand, a high value type is interested in a
relationship lasting for the entire length of procreation or for life, and is
less concerned about a mismatch. For this type an easy exit option makes
marriage less attractive.[10]
These
differences in marriage preferences manifest in the age at which individuals
marry. Under a fault divorce regime a high value type will marry sooner than a
low value type because he is less worried about mismatches and because the law
makes divorce more difficult. The law reduces the demand for search for high
value types and as a result he marries early. The opposite is the case for low
value types. Under a fault law, low value types search longer because they are
more concerned about mistakes and because they place a lower value on marriage.
With a switch to no-fault divorce, low value types risk being less selective in
the choice of spouse because a bad choice can be offset by an early divorce.
The willingness to be less selective means low value types experience a
reduction in their marriage age after the change in the law. On the other hand,
high value types now search harder and longer to ensure a higher probability of
a more compatible spouse --- search substitutes for the prior legal restrictions
on divorce. Since search takes time, high value types will experience an
increase in their marriage age after the switch to no-fault. Since, under fault
divorce, high value types married younger than low value types, with the
introduction of no-fault there is a shrinkage
in the variance in the distribution of marriage ages. Just looking at the average age at marriage prior and after
the adoption of no-fault divorce might show relatively little effect since the
different types of people will tend to offset each other. The minor average
change, however, masks large offsetting
changes at the individual level.
Professors
Pendakur, Suen, and I have collected individual marriage records for all
marriages for approximately 40 states between 1970 and 1996. Using this massive
data set we are able to control for individual characteristics, estimate fixed
state effects, and control for changes in marriage ages over time. What we find
is a very robust effect: the variance in
marriages does indeed collapse in no-fault states. This is a very strong
and non-obvious result that is difficult to arrive at without the help of
economic theory. What it shows though, is that the divorce law has the subtle,
unintended consequence of altering the marriage ages of everyone, especially those extremes in terms of high or low values
for marriage. The divorce law effected, on this one margin, everyone, not just
those who divorced.
Secondly,
we also find that no-fault divorce increased the average age at which people
get married. This suggests that there are more “high value” types in the
population than “low value” types. This is important for two reasons. First,
for those that look to marriage as an institution to protect specific
investments in procreation, they are now engaged in costly search and this
results in postponed family life. Since there are more of these type of people
in the population, it suggests that this is a significant social cost. Second,
individuals who take marriage lightly are now more likely to marry and to marry
sooner. Given the low values to marriage and concern over mismatches, these
types are also more likely to divorce at a higher rate than the other types.
The increase in the marriage rate of “low value” types lowers the total value
of marriage in a society. This in itself feeds back into the divorce rate and
influences the way we view marriage culturally.
Labor
Force Participation of Women
Though there has been a relatively surprising amount of
disagreement over the effect of no-fault divorce on the divorce rate, of the
work done on the effect of divorce laws on the labor force participation of
women (LFPR), there is remarkable agreement. Women have been increasingly
joining the workforce for over a century, with the bulk of the increase coming
after the second World War. Until 1970, the bulk of this increase in
participation could be attributed to the growth in female real wages. However,
a puzzle arose after 1970. Although female participation in the workforce
continued to increase, real wage growth was flat.
Robert Michael (1985) was the first to suggest the rise in the
participation rate was caused by increases in divorce. Because divorced women
are more likely to work, and because the divorce rate was increasing after
1970, he suggested this could explain the anomaly. To test this he observed a
lagged relationship between increases in the divorce rate and the increases in
the female participation rate of married women with young children.
Peters' (1986) was the
first person to link the no-fault divorce law to the LFPR of women. Peters
argued married women make specific family investments when they stay home and
look after the kids. If these marriage specific investments are not accounted
for in the divorce property settlement, then the wife is made worse off at
divorce, and as a result, she tries to protect herself by working during
marriage. Using the same Current
Population Survey (CPS) data that she used for the divorce rate, Peters ran
regressions of the LFPR against a
series of demographic variables and a dummy variable for whether or not the
individual lived in a no-fault state. She found that labor force participation
increased by 2% in no-fault states. Allen Parkman (1992a) also investigated the
effect of no-fault divorce on the LFPR using the same CPS data as Peters. His
main point was not that women would
increase their LFPR as a result to a threat in divorce, but with how this
mechanism worked. Parkman argued it was
not the marriage specific investments
married women worried about, but that by being married and staying home
with the kids, married women decreased their human capital, and this would not
be compensated for at the time of divorce. Parkman shows that the increase in
LFPR was mostly among married women “who could experience larger reductions in
their human capital if they reduced their participation in the labor force.”
These were young white women. Although Parkman disagreed over the mechanism
described by Peters, he found a similar effect for the law.
Parkman (1998) expands on his earlier work and looks at the total
amount of time that women are working. He not only looks at the increased
workforce participation of women, he also considers the increases in the
household work over all. Parkman uses a times series data set that spans
1975-1981 and contains data on household work. He finds that women living in
no-fault states work on average 4 hours more per week than their counter parts
in fault based states. In contrast, the husbands in these states actually
reduce the amount of hours per week by almost two hours. Parkman argues this
refutes the notion that women work simply to increase the family budget, and
argues the increased work load for women is a mechanism for women to use the
labor force as a means of obtaining insurance against the threat of divorce.
One final important study is by Johnson and Skinner (1986). They
use a panel study from Michigan to analyze the effect of divorce on the LFPR.
They find that women increase their participation in the workforce before a
divorce occurs, which begs the question: did the increase occur because the
women were trying to insure against divorce, or was the labor force
participation destabilizing to the marriage. They test these two hypotheses
using a simultaneous model of future divorce probability and current labor
supply on married women, and conclude that working has no real impact on
divorce probabilities, but that an anticipated divorce has a relatively large
impact on working. Their results account for 2.6% of the 15% of the growth
in labor force participation that is not explained by real wages and other
factors.
The results from changes in female LFPR are similar to that one
ages at marriage: the change in the law influenced vast segments of the
population that did not experience divorce. Women entering the workforce
because they want to improve the quality of their life and the lives of their
family members is a good thing. However, women virtually forced to work out of
fear they may be abandoned lowers the welfare of the family. Had there been a
law protecting these women, they would choose not to work. The phrase
“super-mom burnout” has now entered our vocabulary and is just another one of
the many significant costs that resulted from allowing easy divorce. A cost completely
unanticipated by advocates of legal reform.
The Divorce
Culture
Barbara
Dafoe Whitehead, in her book states:
divorce is not simply a legal mechanism for dissolving marriages but a social and cultural force that opportunistically reproduces itself everywhere. A high divorce society is a society marked by growing division and separation in its social arrangements, a society of single mothers and vanished fathers, of divided households and split parenting, of fractured parent-child bonds and fragmented families, of broken links between marriage and parenthood. The shift from a family world governed by the institution of marriage to one ruled by divorce has brought a steady weakening of primary human relationships and bonds. Men’s and women’s relationships are becoming more fleeting and unreliable. Children are losing their ties to their fathers. Even a mother’s love is not forever, as the growing number of throwaway kids suggests. (p. 182)
Perhaps
the most unexpected result of the no-fault divorce revolution was the creation
of a divorce culture, and a lowering of the value of the institution of
marriage in the popular culture. Advocates of same-sex marriages point to the
increase in common law unions, single parenthood, and blended families as evidence
of a “growing acceptance.” Rather, these are the sad consequences of, in part,
legal changes that have contributed to the divorce culture. By inadvertently
allowing for opportunistic divorce the law created a whole new class of inequality as many women and children
entered poverty through divorce. The sheer size of this group over the span of
30 years has influenced everything from greeting cards and daycare centers, to kindergarten classes and
TV shows. Whitehead argues that the divorce culture has led to a society with
more coercion, individualism, and less commitment. Schools now teach “life
skills”, “job counseling”, and “secular ethics”, rolls that at one time were
universally done by families. We have
“deadbeat dads” and “lock key” kids.
Parkman,
in his 1992b book, makes the following conclusion regarding the effects of
no-fault divorce:
It [no-fault divorce] contributed to the deterioration in the financial condition of many divorced women and the children of divorced parents. In response to the deteriorating conditions of divorced women, married women increased their labor market participation and education and unmarried women delayed marriage. It might appear that no-fault divorce only made women worse off, but no-fault also reduced the incentive for married women to specialize in domestic production and thus may have reduced the quality of life for their entire family. (p. 104, 1992).
Within
the past two years a number of “real
life marriage drama” TV shows have become popular. Those watching the pathetic tale of Rick Rockwell and Darva
Conger on “Who Wants to Marry a Multi-Millionaire” might have thought western
civilization had bottomed out. Unfortunately this show was followed by the
“Bachelor” series, and “Married by America.”
What all these shows have in common is a disrespect for the institution
of marriage. Their popularity reflects a fall in the cultural value of marriage
brought about in part by legal changes to the institution. These changes are
not innocent, as the evidence just cited testifies. One must wonder: if these outcomes had been anticipated in 1968,
would there have been the divorce revolution and would it have been so silent a
debate?
II. Why Were The Effects of
No-Fault Divorce Unexpected?
It
is easy to understand why the effect of no-fault divorce was unintended: the
results have been so bad that no one would have wished them on future
generations. However, it is interesting to ask why the results were unexpected,
why was there
no anticipation of the problems that might arise from the no-fault law? A hint
is found in the Canterbury report. That report failed to consider the
incentives that would significantly change with a new divorce law --- a failure
which occurs over and over in the history of no-fault divorce debates, and now
which appears in the debate over same sex unions. Reformers, both legal and sociological have tended towards an
unrealistic view of marriage, the law, and human motivation. Quite often the
picture painted is that men and women are either compatible or not, and
therefore, the marriage is either good or bad, and if bad then a divorce is
inevitable. Individuals are characterized as dichotomous as well: mostly good
and interested in the welfare of others,
some bad and hopeless. Finally, the law is often viewed as completely binding;
that is, whatever the law states in principle, will be the outcome, in
fact. For example, when the law states
there will be an equal split of the marital property --- there will be.
This fails to account for the economic realities of marriage and
the law. Economists view the world in terms of the rights people actually possess and their ability to
make decisions based on this possession, not just under the law. Furthermore,
economists view marriage as a long term exchange shaped in an effort to police
the self-interested motives of the
husband and wife. One implication of the economic approach is that individuals
change their behavior when they face different sets of incentives.[11]
One of the key mistakes that no-fault divorce advocates made in
arguing for the law, and which must have biased the interpretations of the
early evaluations, was the assumption that there are either good marriages or
bad marriages and their number is independent
of the law. Whitehead (p. 19, 1997)
quotes an early century advice writer as saying “no good purpose is achieved by
keeping people together who have come to hate each other.” As if “hatred” were
exogenously imposed on the couple by the gods. Sheppard, in defending the
no-fault system states:
The idea,
embraced by the no-fault separation ground, that unhappy marriages
are not
worth retaining .... It seems to me
self-evident that an unwanted marriage ... can be a source of enormous family
harm.... Surely the state has no principled interest in refusing to recognize
this...[pp. 148-149, 1990][12]
Or we have the following:
there are
relationships which cannot easily be altered to make the marriage smoother.
Divorce provides a quick and unequivocal termination of such marriages.
[Zuckman and Fox . p. 536]
Sentiments like these are commonplace in the pro-no-fault
literature.
It is more useful to think of a spectrum of marriages; some
healthy, generating large positive amounts of surplus utility to each spouse,
others unhealthy, generating large negative amounts of utility, and a continuum
of marriages in between. Critical is the notion of a “marginal” marriage. This
is a marriage where the couple is, jointly speaking, indifferent to staying
together or apart. Marginal marriages,
however, depend on the costs and benefits of staying together, and changes in
these costs and benefits can lead good marriages into marginal ones and
marginal ones into bad ones.[13]
There is no exogenously given number of good marriages. Most divorce law
reformers advocated a change in divorce law because they simply thought that
they were freeing a fixed number of
bad marriages that were bad independent of the law. They ignored the fact that
for any given law many marriages are marginal,
just barely in the parties' interests in keeping together. For these marriages a relaxing of the law
tips the scale in favor of divorce.[14]
What is less clear among the reformers was their implicit theory
of marriage. To the economist, a man
and woman enter into a marriage because there are gains from joint production.[15]
Marital production, especially children, requires a long time and involves the
investment of resources that are specific to the family. Often the wife is required to invest early
in the marriage, and as a result puts herself at risk of breach of
contract. To the economist, marital law
is designed to prevent inefficient breaches, or to put another way, to prevent
one spouse from taking advantage of the other's weaker bargaining position due
to the specific investments in the marriage. Too often, the reformer does not
have a theory of what marriage is, but rather simply articulates what they
think marriage ought to be. However, policy recommendations made before
understanding simply gets the cart before the horse and is about as effective.
This
same form of argument is found today in the debate over same-sex marriage.
Arguments are based on normative models of the way families should be, not based on the way families
actually are. Consider the “social responsibility model of the family”
supported by Professor Eichler. In this model a family should, for example,
“minimize stratification on the basis of sex.” One wonders what this would mean
in practice? Differences in the sexes abound and couples exploit these
differences to their joint advantage by specializing in those activities in
which they have a comparative advantage. Furthermore, couples often find it in
their joint interests to enhance their differences through human capital
investments that increase their comparative advantages and increase the value
of their marriage. To prevent this or to engage in public policy that
discourages it, only makes couples worse off. More surprising is Eichler’s statement that “spousehood is not
automatically identified with parenthood.” One of the key ideas in economics,
and one that is almost common sense, is that those who make decisions bear the
costs of those decisions. Separating the role of spouse and parent creates all
sorts of incentive problems.[16]
As a normative tool to guide policy this, and the other characteristics,
completely ignore the incentives that individuals within a family have.[17]
As a result, policy based on a model like this will have bad outcomes.
III. Why Marriage?
Advocates
of same-sex marriages often divert the debate way from the issue of marriage by
discussing only changes in family
structure.[18] Over the
span of recorded history the role men and women in the household has changed
with the ebb and flow of the various constraints faced by families. Changes in
commerce and industry, life span, birth control, social customs, religious
participation, the law, and a host of other innumerable factors effect such
things as the age of marriage, common law unions, work force participation,
living arrangements, the gains from household and market place specialization,
and the divorce rate. However, “the family” in its many forms must not be
mistaken with “marriage”. It is remarkable, indeed, that despite the changes in
family structure that have taken place, the central characteristic of the
family --- marriage between one man and one woman --- has remained essentially
unchanged. In the appendix I discuss a key idea in the economics of
institutions, namely that only efficient institutions survive. If so, then
marriage must have some strong efficiency characteristics to have lasted so
long.
Marriage,
as an institution, is not about love --- many people love one another in both
sacrificial and sexual ways, but are not married. Marriage is not about
“familial interactions”, which again are not unique to heterosexuals. Marriage
is an institution society uses to regulate a specific type of union. Marriage
is an institution that maximizes the gains from exchange between a man and a
woman, net of the tremendous transaction costs that arise in such an exchange.
(Again, I defer the detailed argument to the appendix). Failure to recognize this can only lead to
faulty public policy decisions.
In
Allen (1990) I made a case for why the state was involved in making marriage
contracts “special”; that is, why has a third party over history always regulated marriage? I argued that given that
the vast majority of people are heterosexual and are interested in a one man,
one woman “contract”, the benefits of allowing other types of relationships to
be regulated under the same law would be small and that the potential costs
enormous. Extending the definition of marriage to other groups (homosexuals,
incestuous marriage, marriage to minors, “room-mate” marriage, marriage with no
sexual content) cannot be done without incurring social costs.
In
attempting to get a handle on these costs it is a useful first step to consider
how many individuals we are worried about. Advocates for same-sex unions who
suggest that 10%
of
the population is homosexual based on the 1948 work of Kinsey are either being
misleading or ignorant. As early as
1954, the American Statistical Association published a volume of over 300 pages
dealing with faulty sampling and other methodological problems conducted by
Kinsey.[19]
Kinsey came up with several estimates of the number of homosexual males that
ranged from 4 to 37 percent of the population depending on the definition
used. Using the Kinsey numbers and
factoring in that there are fewer lesbians than gay men, the best estimate is
that 4% of the population is homosexual. However, most scientific studies have
found much fewer homosexuals than did Kinsey. In my opinion, the best
scientific study on this matter is Laumann et al. They estimate that the number
of homosexuals is between 1-3 percent of the total population. To the extent
that homosexuals would receive the benefits of marriage and heterosexuals would
bear the costs, it would appear on the basis of the numbers that the
cost/benefit ratio would be huge.[20]
It
is difficult to anticipate all of the
costs of homosexual marriage. However, I would speculate on some of the
following impacts:
1. Same-sex marriages fundamentally are not based on procreation,
and therefore they will naturally demand
different forms of regulation than heterosexual marriages. Given that many
aspects of marriage are based around the problems that arise when one party
must make idiosyncratic investments in the marriage and the other has not,
these demands for different regulations will only hurt heterosexual marriages,
women in particular. To the extent these demands are not met, then married
homosexual couples will exist in an regulatory environment not well suited to
their needs.
2. Fidelity is of less concern in same-sex relationships given the
risk of illegitimate children is eliminated. To the extent homosexuals had the
identical marriage contract as heterosexuals they would demand fewer regulations
regarding adultery. There would be pressure to make adultery more acceptable.
3. Given same-sex relationships
are often made up of two financially independent individuals, there will be
pressure for even easier divorce since the problem of financial dependency will
be reduced.
4. There will be constant pressure to allow other types of marriage and to have custom
marriages. Why stop at same-sex marriages? If we are only interested in
“familial interactions” then virtually any long time caring relationship would
want the added “social acceptance of marriage”. All of which means enforcement
costs by the courts will increase dramatically. Courts, who were in theory
intended to “protect” the institution of marriage during the no-fault era, have
proven quite unable to handle domestic disputes adequately. What will happen
when the issues become much more complex in custom marriages where the very
issues of dispute will be idiosyncratic.
5. To the extent that any
“familial interaction” can become “married”, the meaning of marriage becomes
diluted. This further perpetuates the divorce culture. As argued above, the
culture of divorce has negative impacts on everyone’s daily lives.
6. In the same-sex marriage
debate, little attention has been given to the differences between lesbian and
gay couples. Research has shown these couples differ in terms of their expected
lengths of surviorship, rates of sexual interaction, fidelity, and other couple
characteristics. Allowing for same-sex unions to marry is not about adding one
other type of relationship, but adding two. This would generally compound the
arguments made.
7. In the same-sex debate,
common-law couples are often lumped in with same-sex couples, and some policy
recommendations suggest the two be given some type of civil recognition. This
would be a mistake. Common law relationships are a second best institutional
choice to marriage (for example, there has been found to be less relationship
investment and commitment in these couples). Every effort should be made to
encourage these couples to marry and act as married couples. To create a
parallel heterosexual civil relationship would only further reduce the value of
marriage and exacerbate current social problems.
The
impact of all of these events will be a further destabilizing effect on
marriage. All of the above will lead to further divorce. To the extent that
divorce is damaging the law obviously should not change.
VI. Conclusion
The words “equality” and “fairness” are often used to simply get what we want. Laws, if they are to have value, must necessarily come down on one side or another. As Coase pointed out 40 years ago, the question is not how to eliminate harm, but rather whom should be allowed to hurt whom? If same-sex couples are allowed to marry they hurt heterosexuals. If they are denied this right, then they are hurt.[21] I have argued the potential anticipated costs of same sex marriage would be huge, and many other costs are simply too difficult to even anticipate. I’ve made this argument based on the small number of homosexuals in the population, the impact widening the definition would have on divorce, and on the impact divorce has on the rest of the population. I have used the example of the switch to no-fault divorce to make the case that marriage is efficient and that messing with it will result in unintended negative outcomes. The same arguments used to bring in no-fault divorce are, at a fundamental level, now being used to alter the definition of marriage. At both times the advocates are ignoring the fact that institutions are designed to police the private individual incentives that may be incompatible with the objectives of the institution. Lastly I would suggest that the court respect one of the oldest institutions known to man, since changing it could mean incredible suffering on a large scale.
References
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____ “No-Fault Divorce and the Divorce Rate: Its History, Effect,
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____ “Marriage and Divorce: Comment,” American Economic Review June 1992a.
____ “What Does She See In Him: The Effect of Sharing on the
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____ “Transaction Costs” Encyclopedia
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Appendix
Much
of my argument above is based on the “economics of marriage” and other basic
economic principles. In this appendix I provide a brief methodological review
of what it means to have unintended and unanticipated consequences, along with
a summary of the economics of marriage and divorce. The arguments here back up
my statements made in my brief.
A.I. Unintended and
Unanticipated Consequences
It
is clear from the above discussion that the move to no-fault divorce caused
outcomes that were unanticipated and unintended. That is, many of the outcomes
were surprises in that no one expected them to happen, and these surprise outcomes were often negative.
The question is: why was this so? What is the fundamental reason for why such a
policy could have outcomes so different from what was intended. The answer is
that unintended/unanticipated outcomes are the result of false theories of human behavior. When legal or public policy
decisions are made on the basis of false theories of human behavior the results
will be unanticipated. To the extent the status quo was efficient, and to the
extent that the public policy was based on intentions to improve welfare, the
results will be unintended. It is important to understand this point because
the same arguments made during the no-fault revolution are now being made in
the context of expanding the definition of
marriage.
All
human actions are based on theory. When an individual drives down the road he
has a number of theories in mind. The driver believes that other drivers will
obey the rules of the road, the driver believes he knows the rules of the road,
that the car will obey the laws of physics, etceteras. An unobservant Canadian driver in New Zealand, quickly
discovers that his standard theories of driving are wrong through a series of
unintended consequences. For example, driving on the right-hand side of the
road in Auckland leads to a head on collision. The driver did not intend to
have an accident, but his theory of driving was incorrect. When a driver
decides to take a sharp corner at 100 km/h and flies off the road, again, his
theories of the motion of the car are proven false.
An
unanticipated consequence is simply another way of saying that one’s theory of
the world has been refuted. The agents making the decision, simply have the
wrong theory. This holds for physical predictions like the driver and the car,
and it holds for models of social science as well. In the 15th century, most of the sailor’s on Columbus’
ship believed that the world was flat. Although Columbus believed that the
world was round, he did think that the world was much smaller than its actual
size. It was a surprise to the sailors that they did not sail off the face of
the earth, and it was an incorrect understanding of the local geography that
lead Columbus to believe he had reached India. False theories, if they are testable, eventually lead to unanticipated
consequences.
An
unintended consequence is slightly different than an unanticipated one.
Unintended consequences may be good or bad. Some one who drills for oil, but
discovers gold receives an unintended good outcome. A policy that intends to
reduce illegal drug use, but ends up increasing it results in an unintended bad
outcome. One might think that most laws and public policy are driven by good
intentions. We have laws that attempt to reduce crime, encourage competition,
prevent poverty, and the like. To the extent negative outcomes happen from
policies that had positive intentions, we can say the results were unintended.
I will argue below that negative unintended outcomes result from altering efficient institutions.[22]
In
the social sciences, where the quantity of theory often exceeds the quantity of
testing, there are many examples of policies based on false theories that have
often led to tragic outcomes. In economics failed policies litter the historic
record like dead sea birds after an oil
spill. Keynsian economic policies that encouraged government spending under the
assumption that there was a trade-off between unemployment and inflation, led
to the stagflation of the 1970s where both unemployment and inflation were
high. More recently, economists have flooded Eastern Europe after the fall of
communism, preaching the merits of a capitalist market system. More than ten
years after the reforms, many of these countries remain in poverty and
economists are generally unable to explain the different patterns of growth
rates. Anyone who has ever heard a
Keynsian preach while Keynsianism was in fashion, or heard the private property
gurus during the early 90s, knows that there was no humility in their policies,
no acknowledgment that these models of the world might be false, and no
anticipation of the failures to come.
A.II. The New Institutional
Economics (NIE).
In
the context of marriage I believe there are two reasons why the outcomes of
past reforms have been so poorly anticipated. First, many reforms are based on
models that ignore basic economic principles. Second most of these models are
inconsistent with institutional
economics --- the field of economics that has had considerable success in
explaining the evolution and structure of various institutions.
Basic Economic
Principles
As
an economist I am convinced that theories of human behavior that ignore basic
economic principles are bound to fail. Economic principles are a core set of
principles in economics that have stood the test of time, and which have been
robust in explaining human behavior. Later, when I discuss possible outcomes to
changes in the definition of marriage, I will refer to these basic principles
which are:
1. Every person desires many
goods and goals, and acts in a self-interested manner to achieve those desires.
2. Every person is willing to
forsake one good they value for some amount of another good they value.
3. The more one has of
anything, the larger is their total value of the good, but the lower is their
marginal value of that good.
4. Not all people have the same
preferences.
5. Information is not free and
knowledge is not perfect.
As
stated these five principles hardly seem worth writing down they are so
innocuous. However, I will argue that most common views of marriage ignore most
of them or their implications, and as a result, are doomed to experience
unintended and unanticipated
consequences.
New
Institutional Economics
“Marriage
is an economic institution”. Many people are often surprised to hear that
economists have anything to say about institutions, let alone marriage. The
everyday perception of economics is biased by the business section of the
newspaper, not, unfortunately, by the Journal
of Law and Economics. If we
consider the basic economic principles above, we see that there is no reason
why marriage should be beyond the scope of economic inquiry. Marriage is
something that people value and is often a goal for most individuals. Marriage
is an example of a set of rules or “property rights” (to be defined later) that
encourage various types of household production. In this respect marriage is
like other institutions (firms, non-profit groups, the law, clubs, markets,
etc.) that encourage productive activity in other endeavors.
Slightly
over 40 years ago a group of economists at the law school of the University of
Chicago began to study the law through economic lenses. This group established
the field of law and economics. As the number and types of institutions under
examination grew an offshoot of this field was created in the mid 1990s which
examines all types of organizations, not just the law. This sub discipline is
called the New Institutional Economics.[23]
The
NIE is best viewed as a modification of
neoclassical economics and fully accepts the principles above.[24]
For the purposes here, NIE has two relevant characteristics. First, it views
long lived institutions as efficient and therefore proper subjects of economic
inquiry. Second, it adds to the neoclassical analysis the assumption that
“transaction costs” are positive. The understanding of transaction costs is
critical to the study of institutions because economists believe that
institutions are chosen (either explicitly through a conscious act or
implicitly through trial and error) to maximize the gains from trade net of
transaction costs. As I will briefly argue below, and have argued in detail
elsewhere, when transaction costs are zero, then the institutional rules do not
matter. When transaction costs are positive (which they always are), then
institutions have significant consequences for the allocation of resources. [25]
Efficient
Institutions Survive
In
a famous paper Alchian (1950) argued that the process of natural selection
works on firms over time. In a
competitive environment firms that survive are those that can offer the
best deal to their customers while still maintaining revenues above cost. Firms
that do not meet these requirements simply go out of business. Alchian pointed
out that since firms were adopted by an environment that selected profit
maximizing strategies, the actual or perceived motivation of the owners of the
firm were irrelevant. One might accomplish the profit maximizing strategy while
being completely unaware of the reasons for success. Likewise, one might ponder
a strategy for a long time and conduct the most sophisticated survey’s of
consumer preferences, but if in the end prices and quantities are set
incorrectly, then the environment rejects the firm with no consideration for
the research effort. Motivation may help for the survivability of firms, but it
is not necessary. The market for firms
is one of self-selection, and only those firms that are efficient and maximize
profits survive.
The
argument runs for all types of behavior and institutions beyond firms. Any
institution that exists in a competitive environment must satisfy the condition
of maximizing wealth if it is to survive. Consider the case of the family. The
basic family structure centered around one man and one woman acting as the
residual claimants to their union has existed as long as written records have
existed. Families have proven to be a very efficient method of raising children
and passing human capital from one generation to another. There have been
attempts to raise children outside of families since the time of the ancient
Greeks, yet each case has not survived. At the same time, if we look closely we
see that in minor ways family structures change over time and across locations.
In some cultures entire extended families live under one roof, in others not. Some cultures have bride
prices, dowries, and polygamy. At one time a marriage required the blessing of
a church and then a state. Despite the relatively minor variations, several
features of marriage have always been common, and the most common of all is
that marriage is a union between one man and one woman. The NIE approach to a
long lasting institution such as marriage is one of respect. One is hard
pressed to find any institution that is as long lasting as the covenant
relationship between one man and one woman that we call marriage. From the
economic point of view, this form of organization must have some powerful
characteristics that allow it to be so robust across time, location, and
cultures.
Institutions
Are Functions of Transaction Costs
In
discussing institutions as if they matter,
we are implicitly assuming that transaction costs are positive. The statement
that institutions are irrelevant when transaction costs are zero is called the Coase Theorem, after the economist
Ronald Coase who won the Nobel prize for articulating the main idea.[26]
Transaction costs are critical for understanding the NIE, the Coase Theorem,
and marriage.
The Coase Theorem and No-Fault Divorce
The Coase Theorem states
that “the allocation of resources is
independent of the distribution of property rights when transaction costs are
zero.” That is a compact statement if ever there was one, and it requires
significant elaboration. For the moment we will simply interpret the Coase
Theorem to mean that “rules do not matter when individuals can bargain
costlessly.” In the context of changing divorce laws, the Coase Theorem says
that the divorce law changes should have had no impact on the divorce rate. I will now go through a detailed
example to help establish the main ideas.
Our personal experience
tells us that the Coase Theorem is wrong. When I was in primary school, divorce
was relatively unheard of. There may have been the odd child that came from a
divorced family, but it was rare. Now divorce is common place, and for certain
cohorts of marriages, the probability that a divorce will occur over the life
of the marriage approaches 0.5. There are many factors that influence the rate
of divorce, and one of them is the
actual divorce law. In Canada, prior to 1968, the divorce law in most provinces
was a “fault” based law. This meant that in order for a divorce to take place
an actual fault (like adultery, desertion, or cruelty) had to be committed and
proved in a court. In 1968 the federal
government passed the Canada Divorce Act, which introduced a type of “no-fault” divorce by allowing unilateral
separation as a ground for divorce. As
the name suggests, with this type of law, no actual fault has to be committed.
It was enough for one of the parties to the marriage to be dissatisfied with
the marriage and initiate divorce proceedings.[27]
In practice, fault divorce
often amounted to a mutual divorce,
which meant that both parties had to agree to the divorce before it could
occur. This was because it was generally too costly to prove that a fault had
taken place. Those committing adultery are usually secret about it, and evidence
for cruelty may be only circumstantial. As a result, couples would often work
out a property settlement on their own and then go to court and possibly
perjure themselves by admitting to a fault that may or may not have occurred.
In Canada, the fault of choice was “mental cruelty”. Under such circumstances
the property right over who gets to decide on whether or not there is a divorce
is the spouse that least wants the
marriage to end, because it was critical that both spouses agreed to the
divorce.
With no-fault divorce we
have the exact opposite situation. Since either spouse can leave the marriage
and start divorce proceedings, in effect the law becomes unilateral. With no-fault divorce, agreement to the divorce is not
necessary. This means the property right to divorce is now in the hands of the
spouse that most wants the
divorce.
The switch from fault
(mutual) to no-fault (unilateral) divorce provides an interesting test of the Coase Theorem. Those marriages that
should end in divorce because they are inefficient should still end in divorce,
while those that are efficient should stay married, regardless of the law. Let
us consider a simple numerical example. Table 1 shows the values of being married and divorced for a particular
couple.[28]
TABLE 1
Husband Wife
Total
Married $50 000 $50 000 $100 000
Divorced $60 000 $30 000
$90 000
In this example, the total
value of being married is $100 000, while the total value of being divorced is
only $90 000. This is what economists would call an “efficient” marriage.[29]
Of course, if the numbers that represent total value were reversed, this would
be an inefficient marriage. However, it is also the case that the husband
prefers being divorced to be being married, while the wife prefers being
married to being divorced. What will happen under the two different legal
regimes?
If the couple is married in
a fault jurisdiction, then the husband must get his wife’s consent to divorce.
In effect he will have to pay her for the divorce. The husband, though, is only
willing to pay $10 000 to his wife, while the wife will not accept anything
below $20 000. Since the husband is unwilling to compensate his wife for the
damage divorce will cause her, she does not consent to the divorce and the
divorce does not happen, which is the efficient outcome.
If the couple is married in
a no-fault jurisdiction, then the husband can just leave the marriage. In this
case the wife must pay him to stay. Since she is willing to pay him up to $20
000 in this example, and since he is willing to accept any payment greater than
$10 000, a deal is reached, and again there is no divorce. The actual legal
rules do not matter for the allocation of resources (in this case whether or
not a divorce happens) when the couples can freely and completely bargain.
Since the divorce rate in
Canada tripled after the introduction of no-fault divorce legislation, it is
obvious that the Coase theorem did not apply. I now turn to a brief discussion
of property rights and transaction costs in order to understand the Coase
Theorem and its role in explaining institutions.
Property Rights and Transaction Costs
When Coase first articulated
the idea that became known as the Coase
Theorem, he claimed that his result held when “transaction costs were zero.”[30] To begin understanding transaction costs we
must be explicit about the meaning of
“economic” property rights.
Economic property rights are one’s ability to freely exercise a
choice.
Choices over goods can be
boiled down to excluding others, deriving income, and transferring goods. The
extent of an individual’s property rights depends on the extent to which he or
she is able to make these choices. As
a result, we should seldom think of economic property rights as all-or-nothing
rights, since our ability to make choices is often circumscribed. For example,
we often say things like “My home is my castle, I’m free to do what I want.”
But at closer inspection this is not true. You cannot mine for gold in your
back yard, you may not be allowed to build a ten foot fence, or park six cars
on your front lawn. You do not own the air space above your house, nor can you
stop the neighbor’s music or BBQ smells from coming into your yard. Just as
importantly, you seldom can prevent with certainty a burglar invading your home
and making off with “your” property. When you think about it, most of the
things you “own”, are owned incompletely; that is, your economic property rights
are incomplete.
Property rights are often
limited because someone else holds the rights. All laws and regulations are
assignments of legal property rights to different people. Hence, I may not own
the mineral rights to a parcel of land, but someone else might. At other times,
property rights are incomplete simply because it is too costly to enforce them.
To “trespass” is to use someone else’s legal property without their permission.
If children take a short cut across my lawn on their way to school, my property
rights over the lawn are limited by my reluctance to enforce them. This points
to an important distinction. To the lawyer, property rights are always “legal”
rights; that is, one’s rights to use property under the law. Hence a trespasser has no legal right to the
property. But if the trespasser is unhindered, the economist would say he has
an “economic” property right. Most of the time the two definitions overlap, but
there are many instances when they do not. The distinction is important because
behavior depends on economic rights, not legal rights.
The distinction between
legal and economic property rights raises an important point. When economic
property rights are reduced, then wealth is lower, and when economic property
rights are eliminated or absent, then wealth is zero. This is true at an individual
level and a social one. Consider a slave. A slave, by definition has no legal
rights, and in practice very few economic ones as well. A slave has no wealth,
has no incentive to increase his human capital, and no ability to trade with
others. The absence of property rights makes the slave the poorest of all
people.
Most often legal property
rights are tied closely to economic property rights. If I am the legal owner of
my computer, then I am usually the one that knows the password, has access to
the room where it is stored, and gets to play the games. However, if my computer gets stolen, I am
still the legal owner, but my economic property rights are eliminated. The
value of the computer to the thief, however, is lower than for me because the
ability to use the computer may be restricted (he may not know the password),
and the ability to sell the computer is also reduced. For these reasons, stolen
property sells for vastly reduced prices on the black market. Once again we see
that a reduction in property rights reduces wealth.
A second point, already
mentioned indirectly, is that when property rights are perfect, wealth is
maximized — this is the Coase Theorem. Hence we can conceive of a spectrum of
property rights varying from completely absent to perfect, with the level of
wealth ranging from zero to some maximum level along this spectrum. Of course, we live in neither extreme. Our
property rights are never perfect, but neither are they completely missing.
Even in times of slavery, as in the American South, slaves had some economic
rights, including (sometimes) the right to purchase their freedom
(manumission). Other things equal, maximizing individuals will always prefer
better defined property rights because in this case wealth is higher. These
better defined rights, however, are costly to achieve, and in equilibrium we
would expect the optimal level of rights would equate the marginal value of
rights with their marginal costs. The costs of establishing and maintaining
property rights are what we call transaction
costs.
Transaction costs are the
costs of establishing and maintaining property rights.
Hence we see that property
rights are fundamentally linked to transaction costs. If transaction costs are
zero, then economic property rights are complete, wealth is maximized and the
Coase Theorem holds. If transaction costs are positive in a nontrivial way,
then property rights will be incomplete, and the Coase Theorem will not hold.
If transaction costs are so large that property rights are absent, then we have
a world of anarchy.
Now
we come to the most important point. Since institutions (distributions of
property rights) are irrelevant when transaction costs are zero, and since
institutions clearly matter, in order
to understand them we must understand transaction costs. The grand hypothesis
of NIE is that institutions are chosen to maximize the gains from trade net of
transaction costs.[31]
To understand marriage requires an understanding of the transaction costs
involved. As I will show later, the divorce rate did increase with the
introduction of no-fault divorce. This happened because the spouses were
prevented, by transaction costs, from bargaining around their difficulties. I
now turn to a brief discussion of some of the day-to-day problems that arise in
a marriage that might prevent such bargaining from taking place. I do not
intend to be exhaustive here, I only wish to point out how transaction costs
violate the Coase Theorem.
Transaction Costs in Marriage
Marriage is one exchange where the transaction costs are quite
high. As a result it is often possible that divorces happen in no-fault
situations that are inefficient. The
number and types of transaction costs that may result in inefficient divorces
under no-fault divorce laws would seem to be quite large.
First, quirks in property laws at the time of divorce can easily
create situations
whereby efficient marriages dissolve. In the past, for example, if
a wife contributed to the education of her husband, but the courts did not
consider a degree as property, then that contribution was not considered in the
marital property settlement. Likewise pension funds, insurance policies, and
lost workforce opportunities may or may not be considered property in a given
jurisdiction. In some U.S. states there is an automatic split of marital
property 50--50 --- despite contribution.
In other states the courts make an effort to establish each spouse's
contribution to the marriage. In every case imperfect rules are made that allow
one spouse to take advantage of the other. The history of divorce legislation
since the enactment of no-fault divorce has been the adoption of one band-aid
remedy after another. No sooner is one type of asset ruled on as marital property
than another example emerges. As long as it is costly to write laws, no law
will ever define
property accurately enough, and the possibility of inefficient
divorces arises. This was not a problem under fault based laws where the mutual
nature of the law forced individuals to negotiate over all the economic assets
of the marriage, whether they were legally recognized as marital property or
not.
Second, government failures to enforce support payments for
children and spouse allow the instigating party to avoid some of the costs of
their actions. Hence the private values
of the party leaving the marriage can be out of line with the joint value of
the marriage.
This phenomenon of the ``deadbeat dad'' imposes costs not only on
the mother and children, but also on the state which is often required to
assist the family through welfare.[32]
To the extent welfare creates its own set of disincentives the wife and
children are further made worse off.
Third, many family assets may be indivisible or may be public goods,
making them difficult and costly to bargain over at the time of divorce. Zelder (1993) makes the case that children
are always quasi-public goods, and as a result their presence almost always
makes the divorce inefficient. “Public good” is an economic term that
essentially means one's consumption of a good does not hinder the consumption
by another. With children, the fact
that a father gets utility from a child does not mean the mother cannot also
gain utility from a child. This affects
divorce because a father can leave a marriage and still get utility from being
a father. The mother in using the child
as an enticement to stay is limited by the fact that the child is partly a
public good. To the extent that utility from children is tied to access, this
reduces the public good nature of children. Unfortunately, for many fathers
this does not appear to be the case.
Fourth, violent reactions by a spouse may make renegotiating the
terms of the marriage too costly, and an inefficient divorce or marriage may
occur. Inefficient bargains are always
the result of a failure to respect the property rights of others. Given the physical difference between
husbands and wives, and given the privacy in which they interact, violence is
often a possibility. Either party is
capable of threats of violence in order to forcibly dissolve a marriage and
enforce a property settlement that does not reflect the true contributions of
the parties. Likewise, both parties can force a divorce by destroying the
marital capital if they stay together by being abusive, irresponsible, and
dissipating financial assets. Similarly, one party may be able to maintain a
marriage through threats of force. When violence or threats of violence are
involved, inefficient divorces and marriages are likely.
Finally, contracts based on a promise not to leave are essentially
unenforceable in court, so this restricts the ability to bargain for the person
least wanting to leave and can result in an inefficient divorce.[33]
Marriage is such a complicated contract that the list of transaction costs that
could lead to breach is probably very long. This is particularly a problem for
women. Though wives make many
contributions to a marriage, a major one is pregnancy and the rearing of
children. Though a mother may also work, the presence of more than one child
causes major disruptions in workforce participation, and hence a reduction in
her financial contribution to the household.
Because this contribution takes
place early in a marriage, the wife makes a sunk investment in the
marriage and places herself in considerable jeopardy. The husband, on the other
hand, makes no such investment. In
fact, typical male incomes increase throughout his working life. Middle-aged husbands, then, can
realistically expect a new spouse after divorce, while the same is not true for
middle-aged wives.[34]
Under these conditions it is easy to see why the inability to enter a binding
contract with the husband is detrimental to wives. Thus the question, what
happens to the divorce rate when the law changes from fault to no-fault, is
ultimately an empirical one that hinges on the level of transaction costs. If transaction costs are high, for example because marital
property is difficult to define or child payments are hard to enforce, then the
divorce rate should increase with the introduction of no-fault.
[1] By out of sample predictions I mean that economists are able to develop models that predict certain behavior before they actually look at the data. Two examples that are dealt with later are the effects of no-fault divorce on the age of marriage and on female labor force participation. Economics is not simply about rationalizing past events.
[2] For example, according to Weitzman one of the goals of the
no-fault laws was to “recognize the inevitability of divorce for some couples
and to try to make the legal process less destructive for them and their
children.” (p. 17, 1985). In fact, in the early years of no-fault divorce,
advocates and researchers often called it “non-adversary divorce”'. The
California Family Law Act of 1969 went so far as to alter the entire divorce
lexicon to reflect the anticipated non-adversarial nature. “Divorce” was replaced by “dissolution”,
“plaintiff” with “petitioner”, to name two examples. In practice the law simply transfers the hostility from proving
fault to establishing claims over property and children. It is no longer considered non-adversarial.
[3] “The entire fault divorce system creates strains on our legal system. But perhaps more important, fault divorce fails to reflect sociological and psychological realities.” (Zuckman and Fox p. 528).
[4] Allen (1998), provides an alternative hypothesis. He argues that the change in law was the result of changes in female workforce participation rates. As more women entered the workforce, it became more difficult to estimate the marital contributions of women and this increased the number of inefficient marriages. These marriages created a demand for divorce reform.
[5] The list of no-fault countries include: Australia, Bermuda, Canada, China, Denmark, England, Finland, France, West Germany, Greece, Hungary, Israel, Netherlands, New Zealand, Northern Ireland, Scotland, South Africa, Sweden, Switzerland, and the United States.
[6] This was Peters (1986). See Allen (1992a) for a critique.
[7] One final effect on wives was found by Brinig and Crafton (1994) who found that wives in no-fault states experienced more spouse abuse. They argued that since fault was not considered for grounds or property settlement in these states, that it lowered the cost of abuse and encouraged its use at the margin.
[8] Research on this particular point, in my opinion, is still incomplete. However, every indication is that both fathers and mothers are critical in child rearing. If true, the implications for same-sex families is clear: we can expect a larger fraction of them to be disadvantaged.
[9] By “value” I do not mean “dollar value” but rather how much of other things one is willing to sacrifice for the marriage.
[10] In Allen, Pendakur, and Suen (2003) we assume there is an entire spectrum of types, here I use only two types to keep the argument simple.
[11] See the Appendix for a more complete discussion of the economic approach to marriage.
[12] Compare this to statemtents made in support of same-sex couples: “most Canadians continue to live in families, and all Canadians deserve the benefits of legal recognition and protection, social acceptance, and support. This includes the freedom to choose marriage.” (Arnup, p. 11). Disagreeing with statements like these is like disagreeing with motherhood. However, note that there is no mention of the costs of extending the benefits of marriage.
[13] Or the costs and benefits could change such that the number of good marriages increases.
[14] One might think that if the marriages are marginal, then
there is no social loss when they end. However, there are also intra-marginal
marriages, and the losses here may
be considerable.
[15] The economist does not deny any role of love. Love, however, plays a role in the choice of the partner, not in the design of the contract.
[16] As a soccer coach of a 15 year old girls team, I recently witnessed a fight between a step-father and an ex-husband/biological father over the logistics of who would pick the girl up after practice. The scene was extremely hurtful to the young girl, but demonstrates the naiveté of thinking these roles can be separated easily or without cost.
[17] For example, a father/husband has an incentive and the opportunity to teach his daughters the difference between male affection and sex. When a teenage girl seeks affection from other males, the probability of receiving sex instead of affection increases.
[18] For example, in her affidavit Professor Eichler states: “It is widely recognized among researchers and policy makers that a monolithic definition of the family is no longer adequate to reflect the complex realities of today’s families.” This ignores the fact that families are still organized around marriage, and that marriage is monolithic.
[19] See Cochran et al. (1954).
[20] Some argue that even though there are very few homosexuals they suffer tremendous utility loses, and that these loses are greater than the costs to heterosexuals. As I state below, the costs to heterosexuals are likely to be large, but this argument fails for two other reasons. First, homosexuals can enter private contracts that mimic marriage and so the losses must be small. Second, at the other end of the spectrum, there are fundamental Christians (perhaps 10% of the population?) who consider marriage a God sanctioned union and who would claim to suffer considerable utility loss if non-heterosexuals were allowed to marry. The problem with making arguments based on unobservable utility costs is that other groups can just as easily claim large utility losses as well.
[21] This is what Coase called “the reciprocal nature of the problem” and it always amazes me that such a simple idea is so often ignored in policy debates over marriage. Fore example, consider the following statement which considers it harmful to pressure “for policies that will privilege this one family type over other types of families to the detriment of families not thereby privileged.” (Eichler, p. 5). This is the cost. The reciprocal nature of the problem states that we must also look at the benefits!
[22] This term is defined later.
[23] There is virtually no theoretical distinction between law and economics and the NIE. The difference is in terms of the subject matter.
[24] See Eggerston for an introduction to NIE.
[25] For a detailed account of transaction costs, including the history and abuse of the term, see Allen (2000) attached.
[26] See Coase (1960).
[27] In the United States, where divorce is a state jurisdiction, California was the first state to introduce a no-fault law in 1969, and South Dakota was the last in 1985. Although I will use the term “no-fault” to essentially mean “easy” divorce, I fully recognize that the various no-fault laws are seldom identical. This is mostly an empirical issue. See Allen and Pendakur (2001) for an example of how to empirically deal with the different definitions of no-fault law.
[28] The use of dollars to measure the value of a marriage is only done for convenience.
[29] Some object to the use of the words “inefficient” and “efficient” in the context of marriage, probably because the layman’s use of the words usually revolves an engineering notion of efficiency. For example, we speak of “a gas powered motor as more efficient than a steam engine”. The economist uses these terms in the context of values and costs. To say a marriage is efficient only means that the value married (however measured) is greater than the joint value of being apart.
[30] Coase first discussed this point in the context of legal liability in tort law. Cheung (1968) was the first to apply it to the context of contracts. Becker et. al. (1977) were the first to apply it to marriage.
[31] See Allen(2000) for a detailed discussion and list of empirical literature on this point.
[32] Moir (1999), makes the case that failure to make payments may reflect more the fact that one man cannot support two households, than a lack of responsibility on the part of the husband. Hence the problem is not one of enforcement, but rather one of a lack of resources.
[33] This last point is made by Brinig and Buckley (1998). Allen and Brinig (1997) provide another reason for bargaining failures based on biological difference between the life-cycle demands for sex for men and women.
[34] After 40 the male/female sex ratio also begins to turn against women, and the increased competition hurts the bargaining position of wives.