Does Mother Nature Punish Rotten Kids?

The demand for children and for children’s consumption goods have been central themes in the economics of the family. Most economic studies of these topics are based on theory that would apply equally well to the demand for pets and the derived demand for pet food. Children are assumed to have no decisionmaking authority and hence their preferences are assumed to have no bearing on economic outcomes. In 1974, Gary Becker [3] introduced an economic model of the household in which children are rational decision-making agents with interests distinct from those of their parents. Becker’s model allows children to have economic spheres of influence where they can make decisions that influence their own well-being. Becker found a surprising result—which he called the “Rotten-Kid Theorem.” The Rotten-Kid Theorem assumes that offspring care only about the money value of their consumption and that there is a benevolent “household head” who is so much wealthier than his children that he chooses to make gifts to each of them. Thus all “marginal” allocational decisions are made by the household head. Although children are entirely selfish and are able to influence the pretransfer income distribution in the family, it will be in the interest of each to try to maximize total household income. The outcome is the same as the allocation that would have been selected by a benevolently dictatorial household head. According to Becker,