Sample - D - No Fault Divorce - Accounting for Love

Sample - D - No Fault Divorce - Accounting for Love - N 0...

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Unformatted text preview: N 0 Fault Divorce: Effectively Accounting for Love Introduction: The Economics of the Family An economic analysis of family life provides an effective method for analyzing behavior. Like the competitive market, families Operate under a scarcity of resources, and individuals endeavor to maximize benefits and minimize costs. Marriage is a contractual union that facilitates specialization, allowing gains from trade, and producing an important commodity: children. Matrimony also increases the utility of a couple by providing intangible goods such as security and love. 1 Examining marriage through an economic perspective provides insight into how legal changes can create incentives and outcomes that increase individual utility and social welfare.2 However, a market analysis often relies on stereotypes and presumptions to facilitate clarity and draw predictable conclusions. In analyzing marital life, economists often use the stereotypical depictions of the wife as a homemaker and the husband as a breadwinner. "While these roles are becomingly increasingly inaccurate, they are quite helpful in analyzing divorce because it this traditional situations often results in the most inefficiencies. Thus, the primary goal of divorce and marriage legislation should be the efficient allocation of resources, burdens, and welfare. in the last thirty years, the number of divorces has increased relative to the number of marriages. The increased market value of women, the reduction in household work because of modern appliances, and the lower economic value of children have decreased the benefits of marriage relative to its costs. At the same time, divorce laws have gradually evolved from fault— based, requiring specific grounds for termination of the marriage contract, to a no~fault system, or unilateral divorce. 3 Because of the difficulties inherent in an economic analysis of divorce, both types of laws have some inefficient outcomes; however, no fault divorce laws more accurately reflect modern values and thus are more economically efficient. 3 Cohen, p. 1346 Z Posner, Economic Analysis of Law, p. 145 The Efficiency of Preventing Divorce Making all divorce illegal would eliminate inefficient divorce and create incentives for. efficient marriage. A rational, utility maximizing individual weighing the costs and benefits of marriage would see the infinite cost of divorce as an incentive to increase investment in searching for an agreeable spouse. He would marry when older and presumably more apt to judge future preferences, and after such an exhaustive search the couple would be less likely to have marital problems. Having no alternative to marriage, the couple would have infinite incentives to work out their problems rather than resulting to divorce.4 All resources would be focused on compromise, rather than searching for a replacement spouse.5 The complete sanctity of the marriage contract would facilitate lon g~term investment by protecting against quasi—rents, which occur when one spouse abandons the marriage contract having received benefits but not repaid them. investment and specialization would maximize the couple’s and correspondingly society’s total welfare. The stability of marriage and the emphasis on compromise would benefit children, whose welfare is somewhat ignored in the decision to divorce. Eliminating the possibility of divorce would reduce judicial costs and allow better allocation of resources.6 Forbidding divorce would provide some incentives for efficient and moral behavior, an important element of social welfare. While always enforcing the marriage contract has benefits, the law should allow divorce if the gains from breach exceed the cost of remaining married. Situations involving nnsinformation or changes in preferences with age reflect occasions where breach is more efficient. Moreover, the unavailability of divorce would dissuade marginal couples from marrying, forcing them to forgo the economic benefits of marriage. legislation would not necessarily prevent breach of the marital agreement, which defeats the purpose of outlawing divorce and undermines the concept 3 Posner, Economic Analysis if the Law, p. 148— 149 4 Cohen, p. 29-30, Scott p. 36 of marriage.7 The sanctity of a contract is important insofar as it creates an efficient outcome, and the extreme unhappiness in a failed marriage would outweigh the benefits from perpetually preserving this contract.8 The law should permit an efficient level of divorce. Fault Based, or Mutual Consent Divorce By specifying conditions for efficient breach, fauit based divorce preserves the marital contract as much as possible while still allowing divorce. These grounds include among others, criminality, cruelty, insanity, and sexual dysfunction: extreme factors that indicate that the benefits of divorce exceed the costs of remaining married.9 From an economic perspective, as both spouses must acknowledge a ground, fault based divorce is equivaient to requiring mutual consent. ‘0 Marital status becomes a sort of property right as it can only be transferred with a consensual transaction;1 Couples often evaded having specific causes by reaching agreements to falsify grounds or move to a state with more favorable laws to obtain a divorce.12 However, for the most part, the difficulty of obtaining a divorce maintains incentives to invest in the marriage.13 Fault based divorce is an effective system for creating efficient levels of divorce in a traditional family. Efficiency in 3 Fault Based System Requiring grounds promotes only efficient divorce by increasing the cost of divorce and encouraging investment in marriage. The fault bases system exhibits a Pareto efficiency standard for divorce: no action is taken unless it makes one party better off with out making another party worse off, placing the premium on remaining marriedm'l’hough to a lesser degree than if there 5 Posner, Sex 8: Reason, p. 150 6 Posncr, Economic Analysis of the Law, p. 149-150 7 Cohen, p. 363} 8 Posner, Economic Analysis of Law, p. 150 9 Allen, p. 193495 1° Parkman, p. HS 111205., n (no mo Jun)l.::l’ 14. 4“,» may 12 Cohen, p. 10—11. :3 Brining & Grafton, p. 876-877 14 Estin, p. 531—535 were no divorce, people invest effort and time into the search for a partner. Better informed parties make more efficient exchanges, or in the case of marriage, “efficient commitments”.15 Moreover, the social stigma from allowing relatively few divorces increases incentives for compromise and concessions. Tough divorce laws force parents to internalize the cost of divorce for their children. Permitting divorce in situations that directly harm children such as abuse effectively gives them a voice in family welfare.16 Fault grounds provide an effective mechanism for determining when a divorce would be efficient. However, the Coase Theorem implies efficient divorces will occur regardless of these tough legal restrictions. If transactions costs are low, spouses will negotiate the ideal outcome, and divorce will only occur if the benefits exceed the costs. This assertion is substantiated by the numerous occasions of people Who obtained a divorce on false grounds when the fault based system prevailed. Often, the husband. paid the wife a sum in the form of alimony that was less than the value he placed on getting a divorce and more than the she placed on remaining married.” As individuals are best able to determine their own utility, the fault—based system fosters bargaining between spouses that create efficient outcomes.18 Allocating Resources Effectively Divorce grounds provide a financial safety net for the dependant spouse, commonly the wife. While marriage often begins on a levei playing field, significant economic and social differences eventually separate the spouses. Women invest substantial time and resources in raising children. Taking time off or forgoing work to raise children and run household, decreases the already lower market wage women receive. Moreover, divorced women, especially those with children, are generally less valued in the marriage market compared to men, so they will ‘5 Posner, Sex & Reason, 1;). 249 1“ Posner, Sex & Reason, p. 2.50 ‘7 Parkman, llR~.120 ‘8 Posner, Economic Analysis of Law, p. 153 have more difficulty finding a replacement spouse.19 Requiring mutual consent assures that the spouse least desiring the divorce (presumably the wife due to her lower market value) gives her a method of determining the financial equivalent of her utility in the marriage. She can choose to withhold the right of divorce until she has compensation that neutralizes her loss from being divorced. Effectively creating a property right in her spouse’s marital status, the law encourages her to invest fully in the marriage, rather than maintaining labor market value to insure against divorce. As women have a competitive advantage in raising children, allowing them this advantage will result in gains from specialization.20 The fault—based system gives a minor, but needed advantage to the disadvantaged spouse. Morality in Fault Based Divorce Requiring fault grounds for divorce promotes socially efficient outcomes by penalizing inefficient behavior. Spouses would be less inclined to commit adultery, which is inefficient as it takes time and resources away from the family.21 If a spouse breached, he would have to compensate his partner for the harm he caused, resulting in an economically efficient outcome because it discourages and punishes inefficiency and immorality. Fault grounds also have the effect of encouraging parents to stay married, which benefits children. Simply stipulating that deviant behavior is a ground for divorce should discourage that behavior Without requiring many resources devoted to spying on each spouse. Fault based laws provide incentives for moral as well as efficient actions. At the same time, requiring fault grounds for divorce creates incentives for fabricating fault. While it may be efficient to allow the spouses to decide whether to divorce with a sort of market transaction, the prohibitive grounds create an incentive for perjury. Falsifying grounds for divorce with perjury or migration to a state with more favorable divorce laws undermines the law ’9 Posner, Economic Analysis of law, p. 150453 2“ Biondi, p. 621-623 and wastes resources. If the spouses can not agree on grounds (legal or otherwise) there is also the possibility of coercion, as the husband could physically force his wife to accept his terms. 22 Requiring mutual consent permits breach Without paying damages. A spouse could enjoy the benefits of marriage while breaching, although his partner may want divorce. The value of marriage to his spouse would decrease, making their marriage inefficient. Moreover, the common knowledge that breach while remaining married is possible would reduce the overall value of marriage to each spouse and society in general. ”Thus, though the bargaining aspects of fault based divorce may be efficient, limiting grounds provides incentives for illegal and immoral behavior. Love and Specific Performance Fault based laws value efficient divorce over inefficient marriage, which no longer reflects societal values. Simply because spouses must bargain to divorce does not mean that the outcome is efficient. Indeed, the value of the marriage is fundamentally diminished if one spouse would much prefer to be divorced. Marriage encompasses a “spirit” of performance that is implied, but can not be enforced by law. However under a mutual consent system, one partner could legitimately require this sort of “specific performance” from her spouse. 2“ Thus, the Coase theorem is not necessarily valid in the marital sphere because simply breaching the subject of divorce may reduce the value of the marriage. The laws can. neither verbally nor practically determine the quality of marriage services; thus, many marriages under the fault—based system may be inefficient. Mutual consent divorce ignores the crucial importance of love. Marriage is no longer just an economic bargain; it is a commitment of companionship. If fault grounds expand to encompass the emotional component of marriage, then “the absence of love” should constitute 2‘ Posner, Sex & Reason, p. 251—252 22 Biondi, p. 613-614 23 Cohen, p. 30—3.] 2“ Cohen, p. iO-ll a breach. However, as love is imprecise and unique for each couple, this would quickly eliminate fault—based divorce because of the subjectivity of the grounds. A final inefficiency with fault based divorce is the litigation costs which would increase if the grounds became more ambiguous. The total social cost of divorce, including legal fees, is an important part of the efficiency equation.25 The fault~based system was an effective method for assuring that society only allowed efficient divorce and thus protected the contractual sanctity of marriage, which was more important for the traditional family. 26 While this system has numerous positive effects, they are primarily for an outdated conception of marriage, and these laws do not reflect modern values. No Fault Divorce: the Modern Model in the late 1960’s, states began replacing fault based divorce laws with those of no fault or unilateral divorce. Most new laws still require grounds such as “irretrievable breakdown” or “incompatibility”, but these ambiguous terms meant that almost any issue justifies divorce.27 The progression of no fault divorce corresponds with the increasing importance of companionship as the defining characteristic of marriage; economic considerations such as finances and children have become less dependent on the marriage contract? The nature of this companionate relationship is as vague as the phrase “irreconcilable differences”, altering the meaning of efficiency in the marital sphere.29 No fault divorce effectively transfers the choice to divorce to the spouse who most desires it, facilitating the divorce process and reflecting a contemporary preference for personal freedom over marriage cornrnitmemt.30 The no fault system treats marriage as a contract, giving each party the ability to end the marriage and pay damages. The contract model is not exact, as preferences may change, and the emotional aspect introduces 25 Posner Sex & Reason, p. 248—249 2" Gordon, p. 1438 27 Parkman. 120-12] 2“ Posner, Sex & Reason, p. 245 2" Gordon, p. 1438 ambiguous and unique elements into each marriage.” No fault divorce involves the more lenient {Calder—Hicks standards of economic efficiency: a divorce is efficient if it does not decrease total social welfare, though it may result in a loss for one spouse.32 This concept of efficiency reflects the lower value of marriage in society as it promotes stricter (Pareto Efficiency} standards for efficient marriages. Fault based divorce prevents inefficient divorce by forcing spouses to express their individual utility with bargaining, assuming that they will not agree to divorce if it makes one party worse off than before. However, unilateral divorce prevents inefficient marriage, which is benefits a society that values personal freedom, and no longer requires marriage for raising children or financial success.33 The lower demand for marriage increases the demand for divorce, so permitting unilateral divorce eliminates incentives f or circumventing the law, and wasting resources to obtain a divorce illegally, as was prevalent under the fault based system.“ Though the efficiency standards for unilateral divorce are more lenient, they are more appropriate to modern society. Accounting for Companionship and Social Welfare No fault divorce suits the emotional nature of contemporary marriage. The decreased value of children, reduced need for housework, and increased wages for women have raised the opportunity cost of staying at home and decreased the value of marriage. Thus, there is less need for the enforcement of the marriage contract because the benefits of divorce often exceed the costs of remaining married.35 Companionship as an essential factor in marriage makes it impossible to forbid divorce, but allowing too much divorce undermines the permanence of the W 3" Allen, p. 193-194 3‘ Boning & Grafton p. 873—875 32 Estin, 3). 5245243 33 Posner, Economic Analysis of law, p. 151 3“ Posner, Sex & Reason, p. 246—248 35 Posner, Sex & Reason, p. 252 marriage vows, and reduces investment in compromise to obtain marital success.36 When marriage is more emotional than economic, a no fault system is more efficient. No-fault divorce has considerable social costs. Lenore Weitzman was the first among many social scientists to prove that women suffer a decline in standard of living in the years immediately after their divorce, where as divorced men experienced the opposite.37 This difference reflects the preeminent flaw in the no fault system: efficiency is predicated on an equitable distribution of assets. Despite their relative financial decline, women often retained custody of the children, augmenting their financial troubles. Moreover, because society values older women, especially those with children, less than it values men, women also have a more difficult time finding a new husband.38 No fault divorce does benefit abused women, as it does not require consent of both parties and minimizes coercion.” The implementation of a no fault system did cause some economic difficulties for women and led to inefficient divorces. However, while these negative effects should not be discounted, they reflect the changing values of modern society. The women who have suffered most under no fault divorce laws are those who married under the fault based system. These wives never expected unilateral divorce and so they did not “insure” their marriage by maintaining their value on the labor market. Moreover, initial divorce settlements under the no fault system ignored the economic contributions of the homemaker, so not only did they suffer from lower wages, but also their alimony did not compensate them for their investment in the rriarriagefl0 Judges have begun to realize that even if she has no income, a wife contributes to the value of the marriage and thus deserves fair compensation. Contemporary couples are aware of the increased risk of divorce and 3" Posner, Sex 8:. Reason, p. 247—.A8 37 Brining & Grafton, p. 877-879 38 Allen, p. 196-197 39 Brining & Grafton p. 878-880 4” Posner, Sex & Reason, 5}. 248—M9 some couples invest less in the marriage and work more Outside the home.“ While this system may now allow for inefficient divorces, it assures that there are few inefficient marriages. Simply because the divorce rate has increased does not mean that societal welfare has decreased, indeed given the decreasing value of marriage, society is probably better off under this system.42 Unilateral divorce may have caused some initial difficulties, but it accounts for contemporary values such as freedom of choice and the emotional nature of marriage. Just settlements are crucial to efficiency in no fault divorce. This assertion is deceptively simple, as marital assets are often difficult or impossible to divide.43 However, if the settlement reflects each spouse’s effective contribution, including the opportunity cost of not working as well as income, then the divorce is efficient according to Kaldor—Hicks standards.44 Alimony serves as a sort of severance pay to compensate the homemaker for her reduced earning capacity and the present value of the expected returns of her husbands income that results in part from her contributions to the household.45 Fair allocation in no fault divorce reflects that of a business partnership, an apt analogy to modern marriage. A partnership model of marriage ties compensation to the investment in marriage, motivating spouses to invest in the marriage until the costs of investment exceed the expected returns.‘16 At that point, each maximizes investment in the marriage and minimizes risk the...
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