The Becker-Posner Blog

Islamist Violence and Immigration Policy--Posner

A long article by Robert S. Leiken, "Europe's Angry Muslims," in the July/August 2005 issue of Foreign Affairs, written before the recent London bombings, when it is read in conjunction with the economist-columnist Paul Krugman's column in the New York Times this past Friday (July 29), entitled "French Family Values," brings into focus important issues of immigration policy, and, more fundamentally, of the different economic and cultural models of the United States and Western Europe. Leiken points out the strong appeal of Islamic extremism to the large Muslim minorities in countries such as France, Spain, the United Kingdom, and the Netherlands (in France, the Muslim population is approaching 10 percent of the total population; in Netherlands, 6 percent), including many second-generation Muslims--Muslims who were born in these countries but have not adopted their political or cultural values. The widespread penetration of these nations by Islamic extremists lies behind political murder in the Netherlands, bombings in the United Kingdom and Spain, and widespread anti-Semitic vandalism in France. The nations of Western Europe appear to be riddled with Islamist terrorist cells that also incubate plots to attack the United States. The non-Muslim populations of Western Europe are increasingly and in some instants lethally hostile to their Muslim minorities. In contrast, although there are several million Muslims in the United States (more than in the U.K., for example, though constituting a smaller percentage--about 1 percent versus almost 3 percent), most of them, like their counterparts in Europe, of Middle Eastern or Central Asian heritage, the American Muslim community is well integrated. It is prosperous (with a median income actually slightly above the national average), so far unthreatening (though security officials believe there are some terrorist cells; and heavy-handed tactics by the FBI since the 9/11 attacks have caused some disaffection among American Muslims), and not objects of significant hostility by non-Muslim Americans. Krugman's column does not mention Europe's Muslims, but in defense of the French (more broadly, the European) model, argues that the French have made a good trade--their average incomes are significantly lower than those of Americans, but they work a good deal less. This is partly because of a much higher unemployment rate than in the United States (Krugman's complacency about high unemployment is notable), but mainly because Western Europeans work fewer hours per week, take much longer vacations, and retire earlier. In effect they trade material goods for leisure, a trade that Krugman regards as a sign of high civilization. Krugman (here relying on a recent working paper by the economists Alberto Alesina, Edward Glaeser, and Bruce Sacerdote) recognizes that the greater leisure of the French and other Europeans is, as it were, forced, because it is the product of laws that restrict labor mobility and hence work opportunities, make it difficult to fire lazy workers, provide a variety of economic benefits uncoupled from work, and even restrict the number of hours a week a person can work. But, further relying on the working paper, Krugman argues that without compulsion, workers could not get the amount of leisure they really want, because leisure is not worth as much if other people don't have it, assuming leisure has a strong social component--that you engage in leisure activities with other people, and therefore suffer a loss if they don't have leisure time to spend with you. Krugman's failure to relate the European model to Europe's Muslim problem is telling. To point to the upside of Europe's social model without mentioning the most serious downside is to provide bad advice to our own policymakers. The assimilation of immigrants by the United States, compared to the inability of the European nations to assimilate them--with potentially catastrophic results for those nations--is not unrelated to the differences between economic regulation in the United States and Europe. Because the U.S. does not have a generous safety net--because it is still a nation in which the risk of economic failure is significant--it tends to attract immigrants who have values conducive to upward economic mobility, including a willingness to conform to the customs and attitudes of their new country. And because the U.S. does not have employment laws that discourage new hiring or restrict labor mobility (geographical or occupational), immigrants can compete for jobs on terms of substantial equality with the existing population. Given the highly competitive character of the U.S. economy, in contrast to the economies of Europe, employers cannot afford to discriminate against able workers merely because they are foreign and perhaps do not yet have a good command of English. By the second generation, most immigrant families are fully assimilated, whatever their religious beliefs or ethnic origins. In contrast, even in a country such as France that has a declared policy of requiring all immigrants to assimilate, immigrants from alien cultures, such as that of the Islamic world, tend to be marginalized and isolated, even in the second and later generations. European unfriendliness to immigrants might be thought a cultural rather than an economic phenomenon, but the paper by Alesina, Glaeser, and Sacerdote on which Krugman relies argues that the European preference for leisure, also supposedly cultural, rests on policy, specifically the employment laws. So too in all likelihood is the difficulty European nations have in assimilating immigrants. The less fluid, less competitive, less market-oriented, and indeed less materialistic (the only color important to businessmen is green) a national economy is, the less opportunity it will provide to alien entrants. Advocates of the European model point to the pockets of poverty in the United States, but may not realize that poverty cannot be abolished without recourse to measures that produce the social pathologies that we observe in Europe. Social mobility implies the opportunity to fail. If society protects jobs, the employment opportunities of ambitious newcomers are reduced and they may end up at the embittered margin of society. Thus, it is not poverty that breeds extremism; it is social policies intended in part to eradicate poverty that do so, by obstructing exit from minority subcultures. If Muslims in European societies do not feel a part of those societies because public policy does not enable them to compete for the jobs held by non-Muslims--if instead, excluded from identifying with the culture of the nation in which they reside they perforce identify with the worldwide Muslim culture--some of them are bound to adopt the extremist views that are common in that culture. The resulting danger to Europe and to the world is not offset by long vacations.

COMMENT ON IMMIGRATION POLICY-BECKER

Krugman’s recent New York Times article on French "family values" cited by Posner is the latest of many attempts during the past decade to justify, high labor taxes, restrictions on the ability of companies to shed employees, a French law that restricts work to no more than 35 hours per week, and various other restrictive labor-market legislation in continental countries. They supposedly lead to more civilized goals than are obtained in the freer Anglo-Saxon markets. That this leads to very high unemployment rates and limited job opportunities, especially for immigrants and young low skilled native-born men and women, and a shortage of part-time work for mothers and others, is the price that apparently has to be paid for these advantages. But are any advantages of this system worth such a high price? Clearly, the European system of employment helps the "insiders" with good jobs, and works against "immigrants" and other newcomers ,or "outsiders" in labor markets. It is claimed that the European system promotes "family values" over individualistic ones. Yet the data do not support this contention since marriage rates are lower in Europe than in America, and not a single European country has birth rates that are high enough to maintain their populations without continued immigration. The French birth rates are somewhat higher than their neighbors only because of massive subsidies to having children. Yet even the French rates are way below replacement levels and those in the United States. Workers in France, Germany and other continental European nations are also said to gain more leisure hours that they want and yet are unable to obtain in freer labor markets of the Anglo-Saxon type since each work decision there is made more individualistically rather than collectively. But there is no evidence that these regulations are the result of a strong demand to consume leisure jointly with other families. As Robert Putnam, the author of "Bowling Alone", and others have pointed out, the trend has been just the opposite: sharply away from joint consumption of leisure in clubs or bars, and more consumption through individualistic activities like television and computer games. Is there pleasure in the traffic jams that develop as virtually all the French, Italians, and German families that can afford it go on their August vacations to the same limited number of beach and mountain resorts? The prospects of declining population and the heavy financial burden from the payments needed to provide generous retirement income and health benefits to older persons would seem to lead European countries to try to attract young immigrants who would pay taxes on their earnings to help finance the cost of these entitlements. The labor market restrictions, however, make it hard for immigrants to obtain jobs in the legal economy, so either they are unemployed, or they work in the flourishing underground economies of Europe, where they avoid paying taxes. Apparently, the French intentionally do not collect data on unemployment rates of their Muslim population, but economists there tell me they believe it is more than double the official overall French rate of over 10 per cent unemployed. Given the poor work prospects of Muslim immigrants, and the fact that the German, French, Dutch, and other European populations do not generally like their Muslim minorities, it is no wonder that Muslims there feel alienated from the general society. As a result, some of them become bitter, and develop hatred of the West and the fanaticism that leads to radicalism and terrorism. That only feeds greater opposition from the general population, which helps explain why the French and Dutch strongly voted against approving the new European Constitution. There is an ongoing debate among economists over whether social mobility is greater in the United States or Europe. The general evidence on this does not offer a definitive answer, but there is little doubt that most immigrants believe opportunities for themselves and their children are greater in the United States. This is why America is the first choice of most immigrants whenever they can choose where to go, and it also explains the different attitudes of immigrants in Europe and America. As Posner emphasizes, most immigrants, non-Muslim as well as Muslim, feel far more accepted in the United States than in Europe, are less segregated here in both their living arrangements and employment, and appear to advance more easily toward higher level jobs. As a result, they are less promising material for radical Islam, although clearly radicals are operating and planning in the United States as well as in Europe. However, the British experience is somewhat disturbing to this thesis, for Great Britain is at least a partial counter example to our analysis. For British labor markets are very much like those in the United States; in fact, Britain has lower unemployment rates than the U.S., has equal labor market flexibility, and provides above ground jobs for Muslims and other immigrants. I believe the main reason for the difference with the United States is that new immigrants are easily accepted in this country since it is a nation of present or past immigrants. Foreigners of all kinds have never been so welcome in Britain, and are even less welcome in continental Europe. So even under the best of economic conditions, immigrants in Europe do not easily integrate into the general society. Still I confess these vicious attacks on London subways and buses are not only awful, but I also find them difficult to understand.

Response on Social Responsibilities of Corporations-BECKER

A large number of mainly interesting comments. I shall try to respond and clarify my position. I believe corporations have as much right to lobby for laws as other interest groups, and should not be under any obligation to ignore the laws that are passed, even those that favor them. To take an example from the non-corporate world, the most powerful interest group in the United States is probably the AARP, the association of older, and mainly retired, men and women. They have managed to pass many laws dealing with social security and medicare that are too generous to richer retirees, and are on balance harmful to the general welfare. But I do not hear many people argue that rich persons should refuse the social security checks that they receive because in a better system that money and perhaps still more resources would go to poorer persons. Some of the comments claim that since stockholders often cannot get rid of their top management, they cannot get their views known other than by selling their stock. I dealt with that case in my comment. The market for top management is indeed not perfect, and that means entrenched management gets greater compensation then they would receive in a more competitive market for managers. Entrenched managers do not have to fully consider stockholder interests in their decisions, and can take higher compensation, and have the corporations they manage engage in various actions. Perhaps they will be “socially responsible”, but surely we do not want to rely on entrenched management to set the standards for corporate behavior? Entrenched and powerful management was the heart of the problem with World Com, Enron, and most other companies that had corrupt leadership. I said several times in my entry that if stockholders of a company are willing to pay for various “socially responsible “ non-profit maximizing actions of the company, then the company should indeed deviate from pure profit maximizing behavior to cater to the stockholder interests. But such a company would still be maximizing stockholder value, including the values of stockholders about pollution behavior, employee compensation, and charitable giving of the corporation. But we know from the relatively small number of funds that claim to invest only in socially responsible companies that the vast majority of owners of stock do not want their companies to deviate much from profit and value maximization. Of course, if corporations can find charities better than stockholders can, then my criteria imply that corporation should do that. I even gave the example of fair trade coffee. But that is hardly the most common situation. Some hard questions were raised about whether corporations should knowingly pollute, encourage use of unhealthy milk formula, and the like. Some of these cases would be consistent with my criteria because corporations might be sued if they knowingly encouraged behavior that would poison water, or stockholders would not hold stock in companies that they knew used slave labor, and so forth. However, I do not believe corporations have the obligation in the pollution case to go beyond their legal and contractual requirements. For example, corporations should not follow the Kyoto Agreement with regard to their production in the United States. I take this position because it is impossible to know where to draw the line. Why stop at the reduction in emissions called for by Kyoto? After all, many environmentalists believe Kyoto is far too limited. Pollution standards should be set by legislation and judicial decisions. Corporations should obey those standards, not lie about what they are doing, and follow the environmental wishes of their stockholders, but not try to be substitutes for voters and legislators. Someone remarked on the death of Jack Hirshleifer. Not directly relevant to our subject, but he was an outstanding and creative economist, and a good friend since my graduate student days. I believe he would have adopted a position on this subject similar to mine; perhaps he has written on corporate goals.

Social Responsibility: Posner's Response to Comments

These were, as usual, very interesting comments. The most common was that corporate CEOs are overpaid, and this is argued to contradict concerns expressed by Becker and me with corporations' conceiving their role as that of charitable, or "socially responsible," enterprises, rather than as pure profit maximizers--if they are really maximizing profits, why are they overpaying their CEOS? I don't know whether CEOs are in general overpaid, but let's assume they are. This would imply that the shareholders, who are the nominal owners of the corporation, are incapable of controlling management--in other words, that there is a problem of what economists call "agency costs." (The term signifies the costs resulting from the principal's inability to constrain his agents to serve his goals exclusively.) If so, we certainly would not want the management to make gifts to charity, because that would exacerbate the problem of agency costs. Managers who are not controlled by shareholders can't be presumed to make charitable gifts that will promote the shareholders' welfare, rather than the managers' own. So, paradoxically, liberals who believe that CEOs are not honest agents of the shareholders should be more critical of corporate "social responsibility" than conservatives! One comment that I am quite sympathetic to is that the social return to profit-maximizing activities may actually be higher than the social return to corporate philanthropy, when "corporate philanthropy" isn't just a fancy name for public relations. As I argued in an earlier post, philanthropy directed at poor countries may actually reduce the welfare of those countries, and the same is probably true to an extent of purely domestic charity. The general effect of charity is to postpone the making of difficult decisions. For example, philanthropic gifts, private or public, to the arts retard serious efforts by artists and artistic organizations to create work for which there is a genuine interest on the part of the public, and philanthropic gifts to universities help to shield them from competitive pressures. Also, the agency costs problem is particularly acute in the charitable arena, as donors to charitable enterprises have even less control over the enterprises than shareholders do over their corporations. This is not to suggest that the net benefit of charitable giving is negative, but only to raise a question whether the net benefit of the expenditures devoted to charity might be greater if directed to commercial or other private ends instead. Let me respond finally to two comments about the issue of criminal liability of corporations. One comment suggested that as long as individual managers are liable for crimes committed by them on the corporation's behalf, there is no reason to impose liability on the corporation as well, and therefore no need to place a duty of law-abidingness on the corporation. But imposing criminal liability on errant managers is insufficient. If their crimes benefit the corporation (though imposing, as I assumed in my original posting, greater costs on society as a whole), then their salaries will be set by a rational corporation at a level that will compensate them for assuming the risk of criminal punishment. The other comment pointed out correctly that corporate criminal liability is not an either-or thing. Often it will be unclear whether a proposed course of action will violate criminal laws applicable to the corporation. There is no reason the corporation should be thought under a duty to avoid all risk of legal liability; that would be paralyzing, and also would discourage socially worthwhile tests through litigation of the outer bounds of liability. Rather, the duty should be to avoid conduct known to carry a very high probability of being deemed criminal. With respect to many civil as distinct from laws, it is unclear whether they should be thought to impose a duty of compliance, or merely to impose a price (in the form of an expected liability cost) for engaging in particular activity. If the law imposes only damages liability for a particular unlawful act, and the damages are fully compensatory, then a corporation that commits the act is not imposing net social costs; it would not engage in the act unless the expected benefits exceeded the exepected costs to any victim of the act, as measured by the damages that the victim would be entitled to recover.

Do Corporations Have a Social Responsibility Beyond Stockholder Value? BECKER

Do corporations have any responsibilities beyond trying to maximize stockholder value, adhering to contracts, implicit as well as explicit, and obeying the laws of the different countries where they operate? My answer is "no", although maximizing value, meeting contracts, and obeying laws help achieve many of the goals by those claiming corporations should be "socially responsible" by taking care of the environment, considering the effects of their behavior on other stakeholders, and contributing to good causes. Still, laws and contracts, and individual use of their own resources, rather than corporate behavior, should be the way to implement various social goals. References to the behavior of corporations really mean the behavior of top management who are in essence employed by stockholders through their representatives-boards of directors. In most cases, it is rather obvious that management should try to increase stockholder value through their pricing policies, the products they offer, where they locate plants, and so forth. CEO's who fail to do this are subject to termination either through takeovers or by being fired. In fact, the tenure of corporate heads seems to have become shorter over time. In many other situations, apparent conflicts between maximizing stockholder value and social goals disappear on closer examination. A corporation may give money to local charities, play up its contributions to the environment, and do other things that appear to reduce shareholder value because that sufficiently improves the government regulations that affect their profitability. Or a company may give to various public causes, like Ben and Jerry’s ice cream company did in the past, because this attracts customers who want to support these causes partly by buying the products of companies that make contribute to these causes. Treatment of employees that on the surface appear to reduce profitability often are in fact consistent with the criteria of maximizing stockholder value while respecting laws and contract. For example, a company may raise the value to shareholders by keeping on older workers beyond the age where their productivity is sufficiently high to justify their earnings because that attracts younger workers at lower wages since they expect too that they will not be let go when they get older. Or employees may invest in their on the job training because of an explicit contract or implicit agreement with their employers that their earnings will rise with their tenure as their productivity rises because of their investments. It would be inconsistent with my criteria if a company did not raise wages appropriately of some employees when their tenure and productivity increased because the company realized that these employees did not have good opportunities at other companies. This behavior would violate my recommendation that a company maximize stockholder value, subject to obeying all laws and contracts, implicit as well as explicit. To take an example of what I do not believe companies should do, a global company operating in a poor country should not pay higher wages for either adult or child labor, adjusted for the quality of the labor, than is the prevailing standard in the labor market of this country, as long as higher wages would lower the profits of the company. I am assuming the wages they pay do not violate any laws or contracts of the countries where they operate, and that they are not subject to such bad publicity that their profits actually would increase if they paid more. I should add that pressure to pay much higher wages in labor markets of developing nations reduces the number employed there by international companies, and would tend to worsen, not improve, the plight of the poor populations of these countries. Even in cases where this does not contribute to profitability, top management may want to use company resources to promote environmental ends that are not required by law, give to local symphonies, promote fair trade coffee or other fair trade products, and engage in other acts that increase the managers' utility, prestige and standing in their communities. In a competitive market for managers, management would have to take sufficiently lower earnings, bonuses, and options to in effect pay for the company assets and profits they use to boost their own welfare and community standing. So in such a competitive management market, management essentially engages in "socially responsible" behavior out of their own earnings. This would not lower stockholder value, and is consistent with my criteria. If the management is entrenched, they might be able to give away resources to environmental and other groups without lowering their own earnings, but by lowering instead dividends and other payments to stockholders. Even this, however, would not affect stockholder returns if instead management could have taken higher earnings, bonuses, or stock options for themselves. Depending on what they would have done with their higher earnings, the use of company profits for particular social causes may or may not lead to better overall outcomes. But surely an important goal of any reform in corporate management is to reduce the entrenchment of management, and inject more competition into the market for CEO's and other top corporate leaders. Whatever the degree of competition in the market for top management, the market for stock ownership is highly competitive. Those stockholders that want companies to use potential profits for environmental or other social causes might be willing to buy the stocks of companies that do this, even if that means lower monetary rate of return on their investments. If there are enough of these stockholders, then companies that engage in these practices would be maximizing stockholder values, and their behavior would be consistent with the criteria for corporate behavior that I advocate. But such socially conscious stockholders are a small fraction of all owners of stocks, especially of large institutional funds and investors. These funds would avoid companies that are "socially responsible" until prices of the stock of these companies fell sufficiently to give the same risk-adjusted monetary rate of return provided by companies that do not engage in social behavior. This implies that new companies that are expected to contribute to various social goals beyond making profits, and respecting laws and contracts, will have lower IPO prices if they issue stock than they otherwise would have. In that case, the founders of socially-minded companies will bear the cost of their social responsibility. That is appropriate and is not objectionable. I am bothered only when managers, founders, or others in control of corporations that behave in a "socially responsible" manner try to pass the cost of behaving in this way on to others rather than bearing the costs themselves.

The Social Responsibility of Corporations--Posner’s Comment

I agree with almost everything that Becker says, but will suggest a few qualifications. I can think of one situation in which "pure" charitable donations by corporations, i.e., donations that do not increase profitability, could benefit shareholders. Assuming that most shareholders make some charitable donations, they might want the corporations they invest in to make modest charitable donations on the theory that a corporation will have more information about what are worthwhile charitable enterprises than an individual does. For example, charities differ greatly in the amount of money that they spend on their own administration, including salaries and perquisites for the employees of the charity, relative to the amount they give to the actual objects of charity. Presumably corporations are in a better position to determine which charities are efficient than individuals are; if so, then shareholders may impliedly consent to some amount of charitable giving by their corporations. But not much. The reason is that one person's charity is another person's deviltry: a shareholder who is opposed to abortion on religious grounds would be offended if his corporation contributed to Planned Parenthood. The practical significance of this point is that corporations avoid controversial charities, so that the issue of implied consent becomes whether the shareholder would like his corporation to make a modest contribution to some set of uncontroversial charities. For the reason suggested above, the answer may be "yes"--and for the additional reason that there is a tax angle. If the shareholder receives a dividend, the corporation will have paid corporate income tax on the income from which the dividend is paid. Suppose the corporation and the shareholder are both in the 20 percent bracket. The corporation earns $10, pays $2 in tax, and gives the shareholder $8. The shareholder gives the $8 to charity, which costs him $6.40, since he gets a 20 percent tax deduction. If the shareholder wants the charity to have $10, it has to dig into his pockets for another $2, which costs him $1.60 (because of the 20 percent deduction), and so the total cost to him of giving the charity $10 is $8. Now suppose that, instead, the corporation gives the $10 to charity, a deductible expense, at a cost to it therefore of $8. Then the charity receives $10 rather than, as before, only $8. The shareholder loses his $2 deduction, which means that the total cost to him of the transfer is, as before, $8. But the corporation is better off to the tune of $2, since it avoids the corporate income tax on the $10 in income that it gave the charity. And anything that benefits the corporation benefits the shareholder. Given product market as well as capital market competitive pressures, charitable spending that is not profit-maximizing because the cost exceeds the private benefits that Becker lists (public relations, advertising, government relations, and so forth) is unlikely to be significant. Even if corporate managers are not effectively constrained to profit maximization by their shareholders, expenditures that do not reduce the cost or increase the quality of the corporation's products will place it a competitive disadvantage with firms that do not make such expenditures. A more difficult question has to do with a corporation's policy on obeying laws. From a strict shareholder standpoint, it might seem that corporate managers should obey the law only when the expected costs of violating it would exceed the expected benefits, so that managers would have a duty to their shareholders to disobey the law, perhaps especially in countries in which law enforcement is very weak, a country for example which had a law against child labor but was unable to enforce the law. This would be a case of a pure clash between ethical and profit-maximization duties. My view is that, given external (i.e., social as distinct from private) benefits of compliance with law, the ethical argument should prevail, so that a shareholder would be precluded from complaining that corporate management, by failing to violate the law even when it could get away with it, was violating its fiduciary duty to shareholders. Another argument based on an externality, an argument that lies behind the law that forbids U.S. firms to engage in bribery abroad, even in countries where bribery is extremely common, is that reducing the amount of bribery in those countries will benefit U.S. firms in the long run by making the markets in these countries more open, to the advantage of efficient firms. The fact that it will sometimes be in the shareholder interest for management to violate the law provides, moreover, a ground for punishing corporate managers sufficiently severely for corporate crimes that the punishment is not offset by shareholder gains for which the managers could be expected to be rewarded.

Response on Same Sex Marriage-BECKER

Some really fine comments. I neither have the time nor knowledge to answer all of them, but let me respond to some that I consider more important. The evidence is increasing that being raised by a single parent has negative effects on children, although there is debate over how big these effects are. Being raised in an orphanage is obviously not helpful either. I do not know if being raised by same sex parents would be worse than being raised by a single parent, but I believe that it will usually be worse. But one of my main points was that since we allow gays to have children one way or another-increasingly not through adoption- then whether they can call themselves “married” seems like a minor consideration. More than one study shows that breakups among homosexual couples is much greater than among heterosexual couples. Some limited data was included in the first edition of my book A Treatise on the Family, and other studies have been published since then. Allowing homosexual marriage will discourage some gays or lesbians from entering heterosexual marriages that they later dissolve. But that effect is likely to be very small. If allowing same sex marriage reduced the number of partners among homosexuals, that is likely to reduce the incidence of Aids. That would certainly count as a plus, although I doubt if allowing same sex marriage would reduce turnover of gay relations much more than giving them full and complete access to civil contracts that are fully enforceable in courts. It is true that informal unions tend to dissolve in very high number, including those among heterosexuals, and in Scandinavia as well as Anglo-Saxon countries. So allowing official “marriage of gays might greatly reduce their turnover rates, but that is still unknown and I believe unlikely. Some have criticized my claim that children raised by gay couples will tend to be at a disadvantage, partly because they have same sex parents, and partly because they would differ so much from their peers. One person asserts that evidence indicates that diversity is beneficial in schools and other organizations. I believe there is no credible evidence showing that for schools. African-American children, for example, do well in school when they have good teachers, and principals who enforce high and tough standards-just read Thomas Sowell on this subject. I do not believe it would be difficult to have a civil contract in place of legal and legislative control of marriage and divorce. Most couples would start with a standard form, and only add to that form clauses that deal with special aspects of their relation. I would make such contracts compulsory, partly to remove the bad “signal” about lack of commitment when a person asks for a contract.

Gay Marriage--Posner's Response to Comments

These were fascinating comments, to which I cannot do full justice. One issue that a number of comments raise is whether honosexuality is truly genetic or otherwise innate, or is a choice. Some distinctions will help to focus the issue. First, there is a fundamental difference between homosexual behavior and homosexual orientation. Many heterosexuals engage in homosexual behavior when there is no heterosexual alternative open to them--e.g., men in prisons or on naval vessels (before they were integrated), teenage boys in all-male boarding schools, and young men in Mediterranean cultures where marriage is late and women are largely unavailable for sex outside of marriage. I discuss this "opportunistic" homosexuality at length in my 1995 book Sex and Reason. There is also opportunistic heterosexuality--notably, men and women who enter heterosexual marriages to have children and/or conceal their homosexuality. I can't see a good reason for encouraging either kind of behavior. Concerning homosexual orientation as distinct from behavior, there is an important distinction between genetic and innate determinants. One could be born possessing a particular trait because of one's genes, or because of some accident during pregnancy. In either case, the trait would not be "chosen." In the case of homosexual orientation, there is a fair amount of evidence that it is genetic; I discuss this in my book; also, a recent study reported in the New York Times actually found a gene that causes homosexual behavior in fruit flies. The evidence that homosexual orientation is, if not genetic, certainly innate is more diffuse but cumulatively persuasive, and includes the fact that homosexuality seems to crop up in all human cultures, including ones that reprobate it, and the almost complete failure of efforts to "cure" homosexuality despite the strong incentives of those who submit to such treatments. The "cure" when successful consists not of acquiring heterosexual orientation but of suppressing homosexual behavior. If homosexual orientation were simply a "bad habit," it could be broken more easily than cigarette smoking, an addiction that has a physical as well as a psychological dimension; no one thinks it can be. Once the innate character of homosexual orientation is accepted, the way is paved for analogizing, as a number of the comments do, the claim of equality for homosexuals to the claim of equality for members of racial minorities--the latter a claim almost universally accepted in this society. I accept the analogy, and of course also accept that the Supreme Court in Loving v. Virginia held that it is unconstitutonal for government to forbid interracial marriage. My reasons for nevertheless opposing courts' ruling that it is unconstitutional to forbid gay marriage are twofold. First, the courts would benefit from a period in which experience with gay marriage in one or more states and several foreign nations, together with growing experience with civil unions, would lay a solider empirical basis than exists now for assessing the consequences of gay marriage. There is value in social experiments, and hence in not terminating them prematurely. (Compare the bad practice of terminating clinical drug trials as soon as there is some, but often incomplete and inconclusive, evidence that the drug being tested does have some therapeutic value, which the placebo administered to the control group does not.) Second, and at the risk of seeming to take a Realpolitik approach to constitutional law, I don't think it's the business of the courts to buck public opinion that is as strong as the current tide of public opinion running against gay marriage. That is the lesson of the response to Roe v. Wade, even though there is far more public support for abortion rights than for gay marriage. Because the basis in conventional legal materials for creating a constitutional right either to abortion or to gay marriage is extremely thin, opponents cannot be persuaded that the creation of these rights by courts is anything other than a political act by a tiny, unelected, unrepresentative, elite committee of lawyers. It is true of course, as one of the comments pointed out, that Brown v. Board of Education, in declaring racial segregation in public schools illegal, outraged many Southerners, but this was understood to be the reaction of a national minority (Southern whites) selfishly motivated by a desire to maintain black people in a politically and economically subordinate, dependent position. Brown would have been unthinkable--and in my pragmatic view unsound--had the case arisen in 1900 rather than the 1950s, because in 1900 the vast majority of the American population would have considered compelled racial integration of public schools improper. Moreover, I do not think the opposition to gay marriage is primarily motivated by a desire, even an unconscious one, to subordinate homosexuals to heterosexuals, or by a fear of homosexual recruitment--though that is a factor, as I mentioned in my original posting. I think the main basis for the opposition is religious and (responding to another comment) that such opposition is different from opposition based on a scientific error. Religion is not scientific, but there is a difference between a belief that is demonstrably based on error and a belief based on a system of thought that science neither supports nor refutes. (Science cannot refute the existence of the soul, for example, because there is no scientific test that could refute it. Sophisticated religions are careful to place their key claims beyond the possibility of scientific falsification.) In a democratic society, one has to respect religious beliefs; and no reasonable theory of the meaning of the religion clauses of the First Amendment permits one to argue that religious belief cannot be permitted to influence secular law. No one supposes that punishing murder is an establishment of religion just because the Ten Commandments--a religious code--states "Thou shalt not kill." Although I don't think that courts should force gay marriage on the society, the arguments against gay marriage do not strike me as compelling. For example, it is true that the institution of marriage is oriented toward the production and rearing of children, but there are so many childless marriages, including second or third marriages of divorcees or widows or widowers, that it would be arbitrary to forbid gay marriage on the ground that, on average, such marriages produce fewer children. And indeed, if it is correct that most gay marriages will be between lesbians, the average number of children in gay marriages may not be significantly below the norm, since most lesbians, like other women, I imagine want to have children. Nor am I aware of evidence that children raised in homosexual households are on average more maladjusted, unhappy, antisocial, etc. than the rest of us; the evidence I reviewed in Sex and Reasondid not support such a hypothesis, though the book was published a decade ago and perhaps there is now some evidence to support it. Finally, it is unclear to me that marriage is any longer heavily subsidized--there is after all the "marriage tax" to consider. One last point. One of the comments points out correctly that civil unions do not give homosexuals the full equivalent of marriage because the federal government refuses to recognize them as marriage equivalents for purposes of social security and other federal benefits. But that is equally true of gay marriages contracted in Massachusetts: the federal government does not recognize these as "marriage" for federal-law purposes. I believe that the prospects for federal recognition of civil unions would be greater if the homosexual-rights movement dropped gay marriage and focused entirely on civil unions. Gay marriage is the red flag before the bull.

The Law and Economics of Gay Marriage—Posner

The surprising decision of Spain, once the most Catholic country in Europe (except for Ireland), to recognize gay marriage—a decision that comes in the wake of a similar decision by Canada and, of course, by the Supreme Judicial Court of Massachusetts—presents an appropriate occasion on which to consider what light economic analysis might shed on the issue. Economics focuses on the consequences of social action. One clear negative consequence is the outrage felt by opponents of gay marriage and of homosexual rights in general. Philosophers like John Stuart Mill would not consider that such outrage should figure in the social-welfare calculus; Mill famously argued in On Liberty that an individual has no valid interest in the activities of other people that don't affect him except psychologically. (Mill had in mind the indignation felt by English people at Mormon polygamy occurring thousands of miles away in Utah.) But that is not a good economic argument because there is no difference from an economic standpoint between physical and emotional harm; either one lowers the utility of the harmed person. The issue is more complicated to the extent that some of the outrage is based on fear that making homosexual relationships respectable by permitting homosexual marriage will encourage homosexuality. Most people don't want their children to become homosexuals, and this aversion is a factor in the utility calculus. However, they are probably mistaken in thinking that homosexuality is chosen; there is compelling evidence that sexual orientation is an innate (probably genetic) rather than acquired characteristic. It is not clear what weight, if any, society should give to opinions formed on the basis of scientific error. Obviously there are benefits to homosexual couples from marriage—otherwise there would be no pressure to extend marriage rights to them. (Whether, given the alternative of civil unions, there are incremental benefits to marriage is a separate question that I discuss later.) Some of these benefits appear to impose no significant costs on others and thus are clear social gains: an example is that a married person does not have to have a will in order to bequeath his property at death to his spouse. Unless "outrage" costs are high, such benefits would, in an economic analysis, warrant recognizing gay marriage. However, other benefits to married couples impose costs on third parties; an example is social security spousal and survivor benefits, to the extent they are not (and usually they are not) fully financed by the social security taxes paid by the person bestowing or obtaining the benefits. But such redistributive effects are equally imposed by heterosexual marriage, so they don't make a strong argument against homosexual marriage, especially since homosexual marriages are unlikely to be a significant fraction of all marriages. Only 2 to 3 percent of the population is homosexual and, judging from experience thus far, lesbians, who are far outnumbered by male homosexuals, seem much more interested in homosexual marriage than men are. Although I am not able to verify this figure, I believe that about two-thirds of gay marriages are lesbian, even though only about a third of homosexuals are lesbian. If this pattern persists, the total number of gay marriages will probably be very small relative to the number of heterosexual marriages. The more fundamental economic question is why marriage is a legal status. One can imagine an approach whereby marriage would be a purely religious or ceremonial status having no legal consequences at all, so that couples, married or not, who wanted their relationship legally defined would make contracts on whatever terms they preferred. There could be five-year marriages, "open" marriages, marriages that could be dissolved at will (like employment at will), marriages that couldn't be dissolved at all, and so forth, and alimony and property settlement would be freely negotiable as well. The analogy would be to partnership law, which allows the partners to define the terms of their relationship, including the terms of dissolution. As with all contracts, the law would impose limits to protect third-party interests, notably those of children. If outrage costs are set to one side, a purely contractual approach to (or replacement for) marriage makes sense from an economic standpoint because it would permit people to define their legal relationships in accordance with their particular preferences and needs. For those who did not want to bother to negotiate a "marriage" contract, the law could provide a default, one-size-fits-all solution—the conventional marital status embodied in state marriage statutes. That would reduce transaction costs for those people content with the standard "form contract." The law would, however, have to decide what contractual relationships qualified for social security and other public benefits to which spouses are entitled under current law. The contract approach to marriage may seem radical, but that is because of a lack of historical perspective. Marriage has changed enormously over the course of history. In many cultures, it has signified the purchase of a woman by a man's family. In other cultures, instead of brideprice, there is dowry (an approximation to the purchase price for a husband, paid by the wife's family.). Arranged marriages, often of children, have been common. Divorce at will by the man only has been common; likewise, of course, polygamous marriage (including in the Old Testament). Trial marriages, defeasible if the wife fails to become pregnant, were a Scandinavian institution. Shia law recognizes temporary marriages. "Companionate" marriage, in which husband and wife are expected to be best friends, is a modern institution. In short, marriage has changed greatly in history, and it would be foolish to think that the current marriage conventions will remain fixed for all time. With the rise of no-fault divorce, the enforcement of prenuptial agreements, and the decline of alimony, marriage is evolving in the direction of contract. That evolution has contributed to the movement for gay marriage. For, as marriage becomes more like a contract, it becomes harder to see why homosexuals—who as I say are free to form other contracts—should be excluded from its benefits. Under a contractual approach, gay marriage as an issue would disappear, because the state would not be being asked to "recognize" gay marriage and by doing so offend people who are distressed by homosexuality. No one thinks that homosexuals should be forbidden to make contracts, and marriage would be just a contract so far as any legal consequences were concerned. It would be left to individual religious sects to decide whether to permit church marriages of homosexuals. The most remarkable aspect of the current controversy is that it is mainly about a word—"marriage." The reason is that although most Americans still oppose civil unions (among American states, only Vermont and Connecticut authorize civil unions, though New Jersey authorizes a related arrangement called domestic partnership; a number of foreign nations now authorize civil unions, some under the name "registered partnership"), I imagine that if the homosexual-rights lobby dropped marriage from its agenda and put all its effort into lobbying for civil unions, many states would soon recognize them, and eventually the federal government would follow suit and grant parties to such unions the legal status of spouses for purposes of social security and other federal laws; when that happened, there would be no practical difference between civil unions and marriage. Why so much passion is expended over the word "marriage" baffles me. After all, even today, and even more so if civil unions were officially recognized, homosexual couples can call themselves "married" if they want to. And this brings to the fore the disadvantage of treating marriage as a legal status. Were it just a contract, government would have no role in deciding what word the parties could use to describe the relationship created by it. Although personally I would not be upset if Illinois (where I live) or any other state decided to recognize homosexual marriage, I disagree with contentions that the Constitution should be interpreted to require state recognition of homosexual marriage on the ground that it is a violation of equal protection of the laws to discriminate against homosexuals by denying them that right. Given civil unions, and contractual substitutes for marriage even short of civil unions, the discrimination involved in denying the right of homosexual marriage seems to me too slight (though I would not call it trivial) to warrant the courts in bucking strong public opinion; and here it should be noted that although the margin in the polls by which homosexual marriage is opposed is not great, the opponents tend to feel more strongly than the supporters. Most supporters of homosexual marriage, apart from homosexuals themselves (not all of whom favor homosexual marriage, however), and some (not all) of their parents, support it out of a belief in tolerance rather than because of a strong personal stake, whereas many of the opponents are passionately opposed, some because they fear homosexual recruitment, contagion, etc., but more I think because they believe that official recognition of homosexual marriage would disvalue their own, heterosexual marriages. Of course it is often the duty of courts to buck public opinion; many constitutional rights are designed for the protection of minorities. But when, as in this case, there is no strong basis in the text or accepted meaning of the Constitution for the recognition of a new right, and that recognition would cause a powerful public backlash against the courts, the counsel of prudence is to withhold recognition. Doing so would have the additional advantage of allowing a period of social experimentation from which we might learn more about the consequences of homosexual marriage. One state, Massachusetts, already recognizes homosexual marriage, as do a small but growing number of foreign nations (Spain, Canada, Belgium, and the Netherlands). Perhaps without judicial intervention gay marriage will in the relatively near future sweep the world—and if not it may be for reasons that reveal unexpected wisdom in the passionate public opposition to the measure.

On Gay Marriage-BECKER

When I have discussed gay marriage with some conservatives, they strongly opposed using the word marriage for gays. Yet many of them accepted that gay partners should have the right to sign contracts that determine the inheritance of their property, provide various stipulations about living arrangement, the disposition of assets in case they breakup, and many other conditions. Most of these persons might accept, I believe, that a gay partner can qualify for the social security benefits that spouses get, can be covered under employment medical plans of their partner, and so forth. But to call these contracts "marriage" makes them see red. It is not that they believe (and I agree with them) that allowing the word marriage will significantly increase the extent of homosexuality. Whether homosexuality is due to genes or environment, allowing the term gay marriage to be used is likely to be a very small factor in determining the number of men and women who become gay. The objections to gay marriage seem even stranger when one recognizes that gay couples have been allowed for a while to engage in much more significant behavior that has been associated throughout history with heterosexual couples. I am referring to the rights that gay couples already possess to adopt children, or to have one lesbian partner use sperm from a male to become pregnant, bring a fetus to term, and have a baby that the lesbian partners raise together, or the right of one gay male partner to impregnate a woman who bears a child that is raised by the two gay partners. No one knows yet what is the effect on children of being raised by a gay couple. Yet it is a far more important departure from how children have been raised throughout history, with potentially much greater consequences, than using the word marriage to describe a gay union. I believe, although there is little evidence yet, that the effects on children raised by gay couples will usually be quite negative, in part because fathers and mothers have distinct but important roles, in part because their family structures will differ so greatly from that of their classmates and other peers. Another reason is that gay couples tend to have much less stable relations than heterosexual couples, although the data that demonstrate this is mainly from gay couples without children. To the extent the greater turnover extends to gay couples with children, which I believe it will, then greater turnover adds a further complication and difficulty for the children raised by gay couples. So given this radical change when children are conceived and raised by gay couples, I find the furor stemming from the desire to use the term "marriage" to describe a union between two gays to be quaint and incomprehensible. But as Posner says there is commotion and anger about gay marriage, both pro and con. and whether justified or not. Given the strength of these convictions, it is better to have the issue of gay marriage resolved by the legislative process of different states rather than by largely arbitrary judicial decisions that may support or oppose the use of the word marriage to describe unions of homosexuals. Whatever the outcome of such legislation, gay couples should have the right to contracts that specify their desired asset allocation, conditions, if any, under which they can break-up, visitation rights if they have children and break-up, and any other aspects of their relation that they consider relevant. With the enforcement of these contracts, they would have practically all the rights that married heterosexual couples have, even when they cannot call their relation marriage. Indeed, I have long argued (see, for example, my 1985 Business Week column reprinted in G. S. Becker and G. N. Becker, The Economics of Life) that heterosexual unions should be based on contract rather than judicial decisions or legislative actions. Contracts are more flexible instruments than laws since they allow the terms of a marriage to fit the special needs of particular couples. The courts would become involved only in seeing that the contract is being enforced when one party believes it is not, and in insuring that adequate provision is made for any children if a marriage dissolves. If married heterosexual couples also had to base their relations mainly on contract, as I continue to advocate, gay couples may not feel strongly that they suffer from discrimination if they cannot be considered legally "married". I agree with Posner that the contractual approach is not likely to be adopted in the foreseeable future. However, it does suggest that gay couples might actually be in a better position than heterosexual couples if gay couples could use contracts to define their rights and obligations, while heterosexual couples were mainly subject to less flexible judicial and legislative law. In fact, courts frequently override the provisions of marital contracts among heterosexuals, which they may be less likely to do when dealing with contracts between gays.