Ethics and Economic Analysis of a Child Parental Rights Market
In general, the roots of any markets could be traced back to the desires for sellers to supply and buyers to demand. This results in some transaction of goods and services in exchange for an agreed compensation. Hence, following the economic definition given for a market, the conditions for a baby market as described by Judge Richard Posner appears to be quite viable.
However, the Judge’s argument poses some major fallacies that stem from ethical oversight and the misuse of economic models to describe the liberalization of the child market. This paper discusses the proposed child market under a more appropriate monopolistic competition model and its implication on ethical issues surrounding the welfare of the child and society. Particularly, this paper will utilize economic concepts to justify ethical claims that the current adoptive system would be better or equally as good as the proposed child market when children welfare and society costs are taken into account.
Economic Analysis Using Monopolistic Competition Model
When performing a purely economical analysis, it is rather evident that the Judge’s assumption that the liberalization of parental rights trade would result in a free and competitive market is false. His assumption that the price of the “market is determined competitively” (Landes & Posner, 1978, p. 331) is undermined by the fact that babies are not homogenous. In fact, the market for babies could possibly be the most heterogeneous due to the lack of manufacturing standards and inability to effectively predict exact characteristics of children before birth. Some of the child’s heterogeneous characteristics include: body dimensions, intelligence, race, ethnicity, genetic disorders, and other talents.
It would be more appropriate to predict the baby market based on the monopolistic competition model which assumes:
1. Product differentiation - children, as earlier mentioned, are heterogeneous.
2. Many Firms – every parent can be comparable to a producing firm.
3. Free entry and exit – a direct result of deregulation and giving biological parents more rights.
4. Independent decision making – all agents can choose to either adopt or sell parental rights.
5. Agents have control in setting price (some market power).
6. Imperfect Information – biological parents may have knowledge that adoptive parents do not. Both agents do not have perfect information on the opportunities in the market.
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Figure 1: Short-run Monopolistic Competition Model
In a short-run monopolistic competition, the quantity of children supplied to the adoption market would be at point QS while the price is at point PSin Figure 1. It is clearly seen, through the non-clearing market price and quantity that this arrangement is not allocative efficient (price is higher than marginal cost). Compared to a competitive market, there is a net loss of consumer and producer surplus supporting the idea that Judge Posner’s proposed benefits of a liberalization of the parental rights are overstated.
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Figure 2: Long-run Monopolistic Competition Model
Moreover, the prospects of economic gain in the long-run of the biological parent are highly doubtful. In equilibrium, the adoption quantity will be at point QLand prices at PL as shown in Figure 2. The biological parents will not be gaining any economic profit because the price only covers the average cost.
This long-run outcome is not better than the present system where biological parents are only generally compensated for their “direct medical costs of pregnant women plus (some) maintenance expenses during the latter part of the pregnancy” (Landes & Posner, 1978, p. 328).
Economic Implications and Ethics: Child Welfare
When performing an ethical evaluation, the most obvious and pertinent ethical fallacies of the child market arise from the oversight of the child’s welfare in the transaction. Generally, in a welfare analysis, only two parties are considered: the buyer and the seller. For maximum welfare to be achieved, these two will maximize their utility under constraints. If transactions are made, the two have improved their welfare. This analysis will generally work in conditions where the commodities are inanimate, but would raise numerous ethical questions if the traded commodity is a child – a living being.
Before we consider various factors that would affect the child’s welfare in the open market, we must establish that the child’s welfare is, in fact, an important factor that we must consider. Not only is it the “right” thing to do under many ingrained belief systems, but it has economic value as well. The actions of the child, depending on how he or she has been raised, have potential to produce monumental and expansive positive or negative externalities. For example, a recent research by the National Bureau of Economic Research summarized by Picker (2012) found that “child maltreatment roughly doubles the probability that an individual engages in many types of crime. This is true even if we compare twins, one of whom was maltreated when the other one was not”. Hence, we need to analyze various aspects of the child’s lives affected by this transaction.
The first factor that will affect the child’s welfare is the adoptive parent’s willingness to take care of the child in the long-run. In Judge Posner’s paper, it is argued that “the parents who value a child the most are likely to give it the most care, and at the very least the sacrifice of a substantial sum of money to obtain a child attests to the seriousness of the purchaser's desire to have the child” (Landes & Posner, 1978, p. 343). However, despite the child’s nominal value, the Judge should rather be looking at the price of the child as a percentage of the adoptive parents’ income to determine the child’s true value to the parents and their incentives to raise the child. If two men own the same car (e.g. a Toyota Camry) the man with the lower income would most likely “value” the car more because the car is a higher percentage share of his income. When the “value” of the child decreases, the attention and eagerness to attend to the child’s need may diminish. Even though this may not mean that it will result in child abuse, but it could result in negligence or half-hearted care that is difficult to identify as illegal.
To give a more concrete example, using the monopolistic model described earlier, the prices of the child in the long-run would only be covering the average cost from inception to birth of the child which is, according to WebMD.com, approximately two-thousand dollars (Hatfield). Sixty-seven percent of current adoptive parents have household incomes that are above two-hundred percent of the poverty level (Bramlett, 2011). This means that for a two person household, the price of acquiring a child for Sixty-seven percent of the current adoption market is only at a maximum of 6.6 percent of their annual income(“2012 HHS Poverty,” 2012). Even though it is expected that there will be new entrants to the demand-side of the child market from lower-income people, there are no reasons to believe that this group of high-income demanders will shy away from the market. Contrary, because the price of the child will be approximately equal to the average cost of bearing a child, the market will be most attractive for those whose cost of bearing a child is higher than average which would mostly be the wealthy who have high opportunity costs.
Furthermore, unlike the adoptive agency system where often times the adoptive parents must endure long queues, bureaucracy and numerous evaluations that tests the adoptive parents’ perseverance and gives them time to reflect whether or not they really want a child; the simplified free-market process of acquiring a child would rob the parents of those reflective experiences.
If there is a lack of monetary incentive, what other incentives should we give adoptive parents in the long-run if they become unwilling to raise their child? The willingness of adoptive parents to take care of the child to the best of their abilities may vary greatly with the child’s characteristics (which are unpredictable as the child grows older) and the adoptive parents’ self-driven dedication. With the market’s diminishing monetary incentive for the wealthy and minimal testing of parents’ determination, it is more likely than the current system that eventually, these children will have to re-enter the foster system due to negligence when adoptive parents lose interest.
The second factor that will affect the child’s welfare is the adoptive parent’s fitness and ability to take care of the child in the long-run. In Judge Posner’s paper, it is argued that the fitness and intentions of the adoptive parents should be pre-screened “analogous to licensing automobile drivers” (Landes & Posner, 1978, p. 343) as a substitute to the adoptive agency’s screening. However, results of a recent study on the effectiveness of stronger graduated driver licensing (GDL) programs for teenagers in the U.S. by have shown “mixed results”. In fact, “for 18-year-old drivers, the rate of fatal crashes was statistically higher for stronger GDL programs than for programs having none of the key GDL elements”( Masten, Foss, & Marshall, 2011). Meanwhile, a recent study on family relationship quality for all children and adopted children found that 82.0% of adopted children had “affectionate/tender” relationships with their parents; higher than the 79.2% average of all children experiencing the same “affection/tender” relationship (Bramlett, 2011). Hence, we can infer that the Judge’s suggested licensing method would not be as effective as the screening process of adoptive agencies. Exacerbated by the expected increase in child transactions in the market and the hard-to-detect nature of child abuse/neglect/mistreatment crimes, the child’s welfare will suffer from unfit parents if the adoptive agency’s screening methods are abolished in favor of a less restrictive and more expansive screening process such as the one suggested by Judge Posner.
Technically speaking, as shown from the two cases, the willingness to adopt and the ability to adopt are in fact two different things. These two issues are actually related in a welfare analysis. If we want to maximize welfare of adoptive parents, then more emphasis should be placed on the willingness of the parent to adopt and only ensure fundamental needs can be met by those parents. However, if we want to maximize the welfare of the child, then we need to make sure that the parents are both fit and willing to provide at least the minimum resources to ensure that they raise the child to standard. This is rather subjective because we need to determine what parent fitness is based on things that we believe children have the right to (education, freedom, etc) and a prediction of the parent’s actions which is partly a subject of psychology. A suggestion to this problem is to ensure that the child is entitled to things that will produce positive consumption externalities.
Economic Implications and Ethics: Social Welfare
In addition to the child’s welfare, to comprehensively analyze viability of the child-market, we must consider the costs that society must bear as a result of the child market. If the cost on the society is high, then it is ethically unjustifiable for society to suffer massive negative externalities unless a mechanism exists to suppress these costs.
First, even though there is a free market for children, it should be noted that some aspects of the foster and adoption systems cannot be abolished due to ethical reasons. For instance, even though it is true that a considerable amount of the children that ended up in the adoption system as a result of illegitimate birth and abusive parents will be sold in the free market, there will continue to be children that are victims of unfit parents and family deaths that will have to be placed in adoption agencies or the foster system. Not only does it make ethical sense that these children should be put into the adoption/foster care system, the negative externalities that are prevented by placing the child in the system rather than letting the child endure abuses make sound economical sense as well (Picker, 2012).
However, because the market will be aware that the children in these systems are “problematic” children (having experiences losses or abused), it is highly likely that the adoptive parents would only come to this market as a last resort. The competitiveness in the market is already fierce with prices at the average cost (long-run) so it would be hard for the agencies to make profits. Meanwhile the “stock” of children will continue to grow as the system is obligated to continue to take in children as part of the public service. The cost of funding this non-profit system would likely come from taxes from the public which will be a cost to society’s welfare. Is it fair that citizens who are not engaged in the child market must bear this cost?
Second, in an attempt to capture the short-term economic profits predicted in the monopolistic model, couples will have an incentive to try to produce babies as fast and as much as they can. Examples of mass children production in third-world countries for economic reasons (farming, labor, etc) supports the realistic prediction that economic incentives are capable of inducing couples to produce babies as fast and as much as they can. Meanwhile, couples who used to choose abortions as a substitute would be inclined to give birth and sell their child.
As a result, there would be a rapid population growth in nations with a child market. The effect of a rapid population growth will be lower standard of living (unless the productivity and output of the nation can keep up with the rate of population growth). This is because it takes some time for this generation of newborns to grow into productive adults. Meanwhile, the costs of public goods to support these children increases as the adoptive/biological parents’ productivity takes a toll during pregnancy and the child’s early stages. The loss of productivity and hampered output will affect the livelihood of society which includes those who are not participants in the child market and making it ethically unjustifiable.
As shown from the two examples, the cost that society will have to bear as a whole is rather high. How do we make it fair for those outside the child market that have to bear the cost? A simple solution is to tax those in the child market to internalize all the economic costs. However, ethically, the tax will be unfair to the adopted child’s welfare because it will reduce the adoptive parent’s disposable income that they could spend on the child. It will also bar low–income people from entering the market as demanders. In short, the market simply creates a magnitude of unnecessary complications.
Conclusion
The child market model proposed by Judge Posner is both economically and ethically unjustified because it will hamper children welfare and place a heavy cost on society based on an analysis using the monopolistic model.
Reference
2012 HHS Poverty Guidelines. (2012). Retrieved October 10, 2012, from U.S. Department of Health &
Human Services website: http://aspe.hhs.gov/poverty/12poverty.shtml
Bramlett, M. D. (2011, June). The National Survey of Adoptive Parents. Retrieved October 10, 2012,
from U.S. Department of Health & Human Services website:
http://aspe.hhs.gov/hsp/09/nsap/Brief3/rb.shtml
Hatfield, H. (n.d.). What It Costs to Have a Baby (L. J. Martin, Ed.). Retrieved October 10, 2012,
from WebMD website: http://www.webmd.com/baby/features/cost-of-having-a-baby
Landes, E. M., & Posner, R. A. (1978). The Economics of the Baby Shortage. The Journal of Legal
Studies, 7(2), 323-348.
Picker, L. (2012, October 9). Does Child Abuse Cause Crime? Retrieved October 10, 2012, from the
National Bureau of Economic Research website: http://www.nber.org/digest/jan07/w12171.html
S. V. Masten, R. D. Foss, S. W. Marshall. Graduated Driver Licensing and Fatal Crashes Involving 16-
to 19-Year-Old Drivers. JAMA: The Journal of the American Medical Association, 2011; 306 (10):
1098 DOI: 10.1001/jama.2011.1277
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