backbone of their families and their communities, providers on whom both young children and elderly parents rely for support. Consequently, the illness and death of these economically active prime-age adults result not only in higher medical expenses and lower incomes for family members, but also in many other sequelae of poverty, including worsened health and reduced investment in the future productivity of their survivors. Because deterioration from AIDS is such a slow process, many families exhaust their entire savings before the person with AIDS dies. Furthermore, families lose income not only from the infected person, but also from other family members involved in his or her care. This loss is especially significant in families with more than one infected person. Finally, apart from losing a valuable contributor to household labor supply, survivors may also lose access to land, housing, or other assets.
Understanding and accurately predicting the long-term impact of HIV/AIDS on society depends critically on our understanding of how individual decision making is affected by the epidemic. For example, if individuals trust both in the future and in their fellow citizens, they are more likely to save a portion of their current income and invest those savings in risky, but potentially profitable, enterprises. Savings from current consumption can be invested (directly or through the intermediary of a savings bank or association) either in physical capital (e.g., a new irrigation pump) or human capital (e.g., a child's education or training). Thus, the HIV/AIDS epidemic makes immediately relevant the question of whether an individual's belief that he or she is or is likely to become infected causes that person to save or invest less.
Some economists have argued that one of the underlying causes of slow development in Africa has been the failure of states to develop dependable judicial and social mechanisms for enforcing contracts and thereby lowering the transaction costs for all concerned. Will people continue to choose to invest time, energy, and capital in social relations and the economy if they know that they, or others around them, are HIV-infected? Normal social relations, built on a degree of faith in the future and mutual trust, may be one of the most neglected casualties of HIV/AIDS in Africa. Relationships of trust that depend upon the participants' both knowing that they will be trading together for years to come may dissolve quickly if one or both of the participants become aware that either is infected with HIV. This observation raises the question of whether the epidemic, by reducing the willingness of individuals to trust one another, increases transaction costs and if so, whether government intervention could mitigate that increase.
Many AIDS researchers have indicated that people in Africa are unconcerned about HIV because of its long incubation period. Apparently, in the calculus of everyday life, the slow plague is a low priority for many (Caldwell et al., 1994). By the time one dies from AIDS, the logic goes, one could well have died from other things many times over (Schoepf, 1988). If a disinterest in long-term planning is independent of (or even partially causes) the sweeping prevalence of HIV, we would not anticipate transaction costs to increase perceptibly