12:24 pm
Tue June 8, 2004

No Fault

30 years after the creation of No-Fault divorce, Dennis considers it as a matter of economics.

Wilmington NC – [Click the Listen button to hear Dennis' commentary.]

I have long been struck by the statistic that, in the United States, about 50 percent of all marriages end in divorce. To my economist?s eye, this seems inefficient. Aren?t we wasting scarce resources by starting new families only to have their lives cut short? Then, often starting over with new marriages, new divorces, ad infinitum.

One use of theoretical economics is to examine decisions made in society in terms of their impact on efficiency. That is, does a given action result in the greatest possible benefit from the use of society?s scarce resources? Efficient decisions are those that create the highest possible level of social good. Any other decision would be inefficient because some of society?s scarce resources would be wasted.

Economic theory can thus be used to analyze a wide range of social choices. Granted, efficiency is not the only criterion by which decisions should be judged. But it is important. If society uses its resources inefficiently, our level of well-being will be less than it could be.

Here, I use economic theory to assess a societal decision taken in the 1970s, that of allowing no-fault divorces. My thesis is straight-forward. No-fault divorces are inefficient because they result in under-investment in the development of children, thus reducing their future productive ability.

A bit of history. Until 1970, in order to get divorced, one spouse had to demonstrate that the other spouse had committed some fault of marriage, such as adultery or abuse. That year, California enacted a no-fault divorce law. Every state now has some no-fault divorce provision. What is necessary for divorce is just that it is desired by one party. This has lowered the cost of obtaining a divorce, and certainly has had the effect of increasing the number.

From an economic perspective, marriage should only be terminated if the joint family gains of divorce are greater than those of being married. Joint gains are the combined benefits realized by all family members, including both spouses and any children. However, with no-fault, the marriage ends if just one spouse gains from divorce, even if the combined benefits of all family members decrease.

One of society?s principle gains from marriage is children. Children represent our productive future. Therefore, investment in the development of children ? the creation of human capital ? is acutely important to our future prosperity.

Two factors affecting child development are formal education and home environment. Divorce directly affects the latter. Within the home environment, parents must weigh the benefits of investing in their children against the cost of doing so. That is, decreases in personal consumption, and investment in themselves. A no-fault divorcing spouse may value personal consumption more highly than investment in child development ? this may be part of the gain perceived from divorce. A no-fault divorced spouse may have incentive to invest more in self development ? to gain skills for a higher paying job, for example ? and thus invest less in children.

Thus, from society?s standpoint, no-fault divorce is economically inefficient. It results in lower investment in the development of human capital than would otherwise be expected. Obviously, it also increases the burden for the development of our children on an already over-taxed system of public education.

No-fault divorces came about in the 1970s. Sometimes it takes decades to realize the implications of a major change in social policy. Now, with the benefit of 30 or so years of experience, perhaps it is time to consider the economic implications of what we have done. Perhaps it is also time to reconsider society?s norm for deciding when marriage ends.