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This was in a novel I read in the 1980s (I think).

In the novel, about a decade prior, aliens arrive at Earth and make first contact.

About 75% of humans are so stodgy and set in their ways that they become permanently insane. Apparently aliens are not the sort of thing that are real in their mind set. The mass insanity is not necessarily a bad thing. The insane are placed in newly constructed insane asylums and cared for. The 25% who are not insane inherit the wealth and worldly goods of the insane, resulting in a drastically increased standard of living, and a drastically reduced level of stodgy humans.

This is all just a back-drop to the main story, which as I recall was about some aliens contracting some human detectives to solve some sort of mystery.

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    How on earth did they restrain and confine 75% of the earth's population? And presumably that 75% didn't have the same dramatic increase in living standards that the remaining 25% did? – user867 Feb 24 '16 at 2:02
  • 1. They told them it was for their own good, and got their families to commit them. 2. They live in asylums, they don't count. – CigarDoug Feb 24 '16 at 13:16
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Pretty sure that this is The Haunted Earth by Dean R. Koontz, 1973.

The Maseni had been on Earth for ten years -- years in which the human race reeled under the shock not only of meeting an alien intelligence, but of knowing for the first time that Earth did not belong to men alone. For the Maseni held the secret of contacting the worlds of the supernatural, and now all of the creatures of legend and mythology had been released from their ancient bondage.

Our hero is a private investigator; his partner is a hellhound named Brutus, iirc, and the novel opens with the P.I. busting a vampire for not reading his victim her rights.

They're hired by the aliens to investigate the murder of a sibling. I can dig up my copy if you want more- meanwhile, user 'wally' at goodreads gives a good rundown:

http://www.goodreads.com/review/show/704550629?book_show_action=true&from_review_page=1

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