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Economics of Adoption: A Libertarian Approach

Mises Daily: Wednesday, February 24, 2010 by

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[The following is the second of a three-part series about the orphan crisis in Haiti.]

Having previously established the ethical underpinnings of the rights of Haitian children and their biological and adoptive parents, we may now use praxeological deduction to analyze the manner in which the market for adoption and child transfer would proceed in a free society.

We can also analyze the effects of the libertarian society's constraints on the market for adoption as described in Murray Rothbard's The Ethics of Liberty. This analysis will greatly assuage the fears of libertarians who may worry that a free market for adoption would devolve to a disorganized and dangerous hunt for lost, lonely orphans wandering the streets of Haiti.

Formation of the Market

In the libertarian market, a free trade in consenting orphans must be allowed to occur. Whether or not such trade will in reality take place depends on the unique circumstances of demand at different times and places.

It is clear that, with perhaps more than a half million children suffering so near to a country as rich as the United States, the trade in orphan guardianship would be quite robust in the near future. How, then, would this trade take place?

The most primitive option is for prospective adoptive parents to travel to Port-au-Prince and wander the streets looking for willing orphans. This arrangement, it is obvious, would prove cumbersome and ineffective, for both prospective parents and the orphans, who would be left to wander around alone looking for types of people they'd scarcely know how to identify. Very few adoptive parents would be supportive of a market that encourages young orphans to wander the streets.

Therefore, to overcome these severe transaction costs, a coordinated and sophisticated network for distribution would form, as occurs in every free market.

The network for the distribution of orphans can be expected to take a shape similar to most distribution networks. Smaller, neighborhood-based orphanages would gather wandering orphans and would serve as drop-off points to parents wishing to buy their guardianship rights. These local orphanages would likely form networks across Haiti and form larger associations for the protection and feeding of the orphans.

That the currently existing stock of orphans is likely to severely overwhelm Haiti's ability to provide safe local structures does not impede the progress of this market. Rather, Haiti's deficiency in this regard is the very root of the demand for Haitian orphans; the psychic profit an adoptive parent derives from loving and caring for a formerly destitute orphan is inversely proportional to the child's former standard of living.

Therefore, Haiti's low stock of safe housing will increase the integration of American adopters in the market. In concrete terms, this means that income will flow up from "consumers" of orphans into the rental of existing safe structures and the construction of new orphanages, which of course could be sold for other purposes after the market for orphans has cleared the existing glut. This will actually aid in the timely reconstruction of Haiti.

"A freely developed market for orphans is likely to be much more transparent than a statist monopoly system."

These local orphanages are likely to associate regionally to economize on management, yet they would still lack the resources or expertise to deliver the children or to allocate them according to the desires of parents and children alike. (Remember that the orphans will retain their full rights of self-ownership and may refuse any family.)

Noting this shortcoming of the orphanages, international firms will step in to coordinate the distribution and allocation of orphans. These firms are likely to hail from the richest markets in the world, whose people have the highest demand for orphans, and therefore will bring with them experience in the prompt and nimble coordination of efficient, global systems of distribution.

These firms would be responsible for the collection and delivery of orphans. This entails entering into professional relationships with local orphanages or regional orphanage networks, transportation firms within Haiti, airlines, orphan-distribution firms, and other firms such as medical providers to ensure that orphans are delivered in good health.

Once gathered by these collection firms, orphans may be distributed around the world by the collection firm itself or by separate distribution firms, the prevailing arrangement being determined by market forces. Whichever firm undertook the distribution of the orphans would need to enter into relationships with collection agencies, transportation networks in rich countries, advertizing firms, foreign orphanages or shelters, and still other firms to attract adoptive parents and deliver their new orphans to them safely and quickly.

This global network simply can't be effectively coordinated by a statist bureaucracy. The organizational knowledge required to guide such an ambitious project can only be acquired through the private collection and distribution of information. And consistently rational action on such information can only be expected from leaders of firms that are open to competition and therefore must act according to consumers' demands.

The Supervision of the Market

The immediate reaction of some individuals to the above arguments will doubtlessly be that, while charities can be trusted to treat orphans with dignity, profit-driven corporations would mistreat orphans to cut their costs and increase profits.

Such behaviors would be punished by the libertarian society. Upon learning of such maltreatment, many parents would file lawsuits against abusive firms, thus releasing very useful information to other prospective parents. Other firms doing business with these negligent firms would also quickly move to escape their contracts in order to protect their own brand names. Facing global lawsuits and market scorn, such firms would fold quickly.

However, there exists no such process of redress against abusive government authorities. A state authority backed by the immensely powerful United States Army is kept in check only by other agencies within the same state apparatus. While government makes its own rules, the market clearly dictates the behavior of firms.

It is also clear that a freely developed market for orphans is likely to be much more transparent than a statist monopoly system. This is because, in the transaction of a good as deeply important as the guardianship rights of orphans, secondary concerns such as safety, reliability, and health of the orphan are profoundly important to the consumers, parents.

On the free market, this preference by parents for the safe care of their new child would likely require firms to submit to levels of quality control and inspection absolutely unprecedented in exchange as we know it today. Indeed, private inspection agencies have already begun to inspect charities distributing aid within Haiti, and it is safe to assume that parents would demand that private firms submit themselves to similar inspections.

Further, commitment to thorough and independent inspection also signals credibility to other firms in the market; their brand names will not be harmed if they engage in business with the firm. No such inspections of government agencies are allowed; they can merely threaten business partners with force.

Once again, it is apparent that goods carry with them secondary goods, such as quality, safety, quickness, and other concerns, and that the provision of these secondary goods would be guided by consumer action, which would be very fortunate for Haitian orphans. Tragically, states allow no firms to compete with them on these grounds, and thus we see failures such as the backlog of transfer paperwork.

Therefore, we can see that whether these firms are profit-driven corporations or charitable associations would be absolutely immaterial from the point of view of the orphaned children. Indeed, it is entirely possible that private firms would provide higher standards for the collection, transportation, and distribution of orphans.

Conclusion

Reluctance to consider the private provision of orphan adoption is destructive and inhumane. Private providers of orphan transfer can be expected to treat orphans with deeper respect than governments can be expected to; in a free market, in fact, they will have no other option.