THE STATE,THE CHILD,AND IMPERFECT PARENTING

Abstract

This paper considers state interventions in families on behalf of children whose parents are negligent. The state faces an `agency problem' when it intervenes on behalf of neglected children because it cannot fully monitor families; for instance, it can give cash transfers to poor parents, but it cannot observe them and make sure that they spend the money on their children. Consideration of this agency problem leads to three additional considerations: that because of the state's agency problem, legislators have preferred giving in-kind benefits, rather than income transfers, to negligent parents; that society benefits economically from maintaining alternatives to the traditional family, such as foster homes; and that parents neglect their children because they prefer their own consumption over that of their children.