Wednesday, June 5, 2013

Chicago Litterbugs Take Note!

From the Tribune:
Adults who toss litter out the window of vehicles in Chicago would face fines of $1,500 and the impoundment of their cars, SUVs or trucks under a proposal being introduced at today’s City Council meeting. 
“I’ve been behind one too many cars where they are throwing trash — chicken bones, paper, McDonald’s bags, you name it,” said Ald. Howard Brookins, 21st, the sponsor of the measure. 
“It is a big deal in our community, with respect to people who throw trash and debris and litter on the street,” added Brookins, whose ward is on the South Side. “We have put out garbage cans, to no avail. We need to do something to get their attention, and if we take their cars, we think that will get their attention.”

Whoa. That's a hefty fine!

Here's a reminder from economonomics 101:
When the goal is to incentivize socially optimal behavior, there is such a thing as an optimal fine.  How much should we charge for parking in front of a fire hydrant? Not $0, but also not $1,000,000.  Sometimes it's socially optimal to park there!  (Say you need to pick up your kid to take him to the hospital and there's nowhere else to park while you run inside, etc, etc...).  The great thing about a well-chosen fine as opposed to, say, a strip of spikes in front of the hydrant, is that it incentivizes people to park there only when it is socially optimal to do so. 
What's the ideal fine?  To simplify a bit, the fine you expect to pay (i.e. what you pay in expectation each time you park in front of a hydrant) should equal the harm to the rest of society imposed when you block a hydrant.  This ensures you will properly internalize the externality you impose upon others. 
Now to my main point.  We like to assume, as economists, that incentivizing good behavior is as simple as setting the right fines, in the sense described above.  But there's a problem with this, which is that people don't know most of the fines.  We walk around with nothing more than a vague idea of how much we will be charged for our various transgressions.

So if you want to curtail littering, maybe the naively-calculated optimal fine will have little effect, because nobody hears about the new law.  (And, since the chance of being caught is low, learning by firsthand experience will also be slow).  In this case, maybe the true socially optimal fine is so ridiculously high that it ends up on the front page of the Tribune.  Throw in a crazy measure about the car being impounded and people are sure to notice!

That said, drawing attention to a new law does crowd out attention people could have devoted to another law or issue.  That said, most of the stuff in the daily paper has little importance to society.  And certainly it is in Alderman Brookins' interest to direct our attention towards his proposed law.

One prediction is that laws with some "novel" component to them will have a bigger impact on behavior.  It's also possible that novel proposed laws that aren't passed will have bigger impacts than boring laws that are passed.  Another prediction is that changes in laws will be more radical, when the laws concern lower-probability events.