The question is: if peer effects are important, why don't they show up in adoption studies?

Generally speaking, when I search for literature on peer effects, the information is sparse and confusing. I'm not too surprised, since such effects are much more difficult to disentangle than heritability and shared environment.

My working hypothesis is that:

1. Peer effects matter a lot, but only up to a certain threshold of peer quality, and this threshold is basically what people intuitively perceive as sufficiently respectable company for their kids. So, basically, underclass peers will ruin your kids, but upper-class or genius peers won't improve things relative to the company of ordinary middle-class kids. (Just like downright abuse will ruin them, but helicopter parenting won't improve them.)

2. In order to quality for adoption, people must pass through sufficiently strict checks that they are highly unlikely to provide an environment below this threshold. So there aren't any good natural adoption experiments that expose kids to underclass peer groups.

I'd be curious to hear about any contrary evidence, though.

I sometimes get a very "politics" vibe from your comments [...] For example, [the middle paragraph in the above comment] reads a lot like standard political rants.

Maybe it does, but this really is my honest impression of what the situation looks like to a typical person aspiring to a middle-class lifestyle these days. I'm curious if you would disagree with any of the following statements, which seem to be roughly equivalent to what I wrote above (all given in the context of contemporary North America):

1. A house in a place where your kids will grow up with -- and, in particular, go to school with -- kids from respectable middle-class families is very expensive. In many places, and especially prosperous centers of economic activity that offer good career opportunities, it is somewhere around an order of magnitude above the median yearly household income.

2. Unless one is extraordinarily wealthy, to obtain such a house, one has to get into debt that is, just like the house price, enormous relative to one's income.

3. Such debt, due to its sheer size, can't be repaid in any time shorter than several decades. Just to pay the interest, let alone to make any dent in the principal, one must part with a significant part of one's income during this period. In this situation, a plausible bad luck scenario like job loss, health problems, etc. can easily push one into insolvency.

4. Worse yet, this situation implies that the bulk of one's net worth is completely non-diversified and invested in a single asset -- of a sort that is notoriously prone to bubbles and price crashes. Even worse, the occurrence of such crashes is positively correlated with bad economic conditions that make job loss and decreased earning power especially likely.

5. Even with a minimalist approach to parenting, raising kids is expensive. Each additional kid makes it less likely that one will manage to remain solvent under the above described conditions.

6. Sufficiently bad financial ruin can plausibly put one into a situation where one is no longer able to afford to ensure a peer group for one's kids that will be above the threshold where bad peers exercise significant bad influence. Also, generally speaking, below a certain class threshold, all sorts of social pathologies are rampant to a degree that seems frightful to a typical middle-class person -- and, again, bad financial ruin can make one unable to afford to insulate oneself from people that fall below this threshold.

7. Taken together, (1)-(6) makes for a rather stressful existence, in which having more kids will seem to a lot of people like an additional burden in an already difficult situation, and an additional risk in an already uncomfortable gamble.

I'd be really curious to see where exactly our opinions diverge here.