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.

3 comments:

  1. If everyone knew the fines maybe we'd park in front of hydrants more often (maybe knowing what you're risking makes it feel less risky). But more interesting to me is the frequency with which different types of people will park in front of hydrants. Rich vs Poor? Conscientious vs Not? What different groups will have strongly different frequencies? And what does that tell us about *ahem* their utility functions?

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  2. Exogen(e)ous CombustionJune 11, 2013 at 10:55 PM

    This line: "That said, most of the stuff in the daily paper has little importance to society" is unclear to me.

    There's evidence that newspapers are deliberately slanting their news coverage towards their audience. (Or, just think a profit-maximizing paper is optimally choosing news articles to fit their audience).

    The creation of news that crowds out consumable entertainment news ("Celebrity X's dog looks fat!") would seem to be a welfare loser. The overall benefit is less clear, as I contend this consumable news is as important to society as (for instance) a marginal TV show.

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  3. Robert,

    Interesting point about the hydrants. Although I dare not get into utility functions with you right now...

    EC,

    You are surely right. Let me clarify.

    Reading a story can generate both
    (a) private entertainment,
    and
    (b) social value accruing to everyone besides the reader

    Suppose the newspaper cares primarily about (a), and so puts on its front page the articles that maximize the private entertainment of its readers. This may not be socially optimal since knowledge can have externalities that the readers don't care about.

    In such a world, all articles on the front page have a big (a) component, and may or may not have a strong (b) component. Making a crazy law gets it onto the front page because craziness is entertaining; however, unlike most articles it could crowd out, the story about the law also has positive externalities.

    I shouldn't have implied that the crowded-out story was socially worthless -- and thank you for calling me on that -- but in both cases, the social value from entertainment is already internalized by both the newspaper and its readers. If the crazy law jumps to the top of the stack, it is more entertaining than the story it crowds out. In addition, it's probably not crowding out much social value *over and above* that.

    Interestingly, at other times I am fond of making provocative statements seemingly in the opposite direction! I assert that following the news is surprisingly worthless *to the individual*, besides the private entertainment he gets from following the stories. Paradoxically, many of the so-called "most important" things are the most useless to know, because they are so big that we can't affect them in any way. Why should I care to follow the fine details of a political campaign when my vote will never be pivotal? Similarly, macroeconomics is extremely important, but *understanding* it is not important for most individuals. But micro reasoning can be valuable to anyone, on a day-to-day basis.

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