Daily Comet editorials — I like them, I like them not
Tuesday, March 9th, 2010First off, a rare editorial on unnecessary regulation of florists from the Daily Comet with which I wholeheartedly agree. This is pretty blatant case of using regulation to limit competition. How has this made it this far, I wonder? Check out the original article from nola.com that outlines what incumbent businesses do to make it harder for new florists to compete with them.
I like the Daily Comet editorial page…
And yet I am fickle…
Check out this editorial, on a proposed law that would revoke the (government provided portion of) pensions of public service officials convicted of stealing from tax payers. Apparently, some Louisiana lawmakers are proposing such a law. And the Daily Comet isn’t completely on board.
Take for example, this quote:
The idea is the product of an understandable sentiment, but taking away so much of a public employee’s pension might be an unfair penalty on top of whatever fine or jail time he or she owes.
Unfair is a normative term — let’s talk positive economics for a moment.
As an example, let us take the case of someone like Tim Whitmer (the now resigned former Jefferson Parish Chief Administration Officer). Mr. Whitmer is under federal investigation — if he is convicted of a crime, he of course will have additional penalties to contend with. But consider that the pension he is slated to receive is in the neigborhood of $150,000 per year. If he received this pension in perpetuity (he won’t live that long), assuming an interest rate of say 8% (I’m being conservative here), the present value of this pension would be rougly $1.875 million.
Economists model criminal behavior as rational — criminals weigh the expected benefits of the crime with the expected costs of crime. Of course, the expect costs of the crime are probabilistic — they consist of the probability the person will get caught multiplied by the penalty if they are caught.
If the law that was being suggested was passed, the penalty, conditional on being caught would increase. This would increase the expected costs of a potential crime. And thus, holding the benefit of crimes constant, would reduce the number of crimes that were rational for criminals to commit.
Further, think of the types of people for which this additional penalty would be particularly costly. Most pensions are a function of time served and the average salary earned. Thus, pensions (and thus the penalty if one lost their pension) would be higher for high earning, long-time politicians. Would it not be nice that those with perhaps the best ability to steal would also have the most to lose?
Back to the editorial. Here is another quote…
Still, the wrongdoers should forfeit only the money that was gotten illegally. For instance, a state employee who works without incident for years before committing a crime should not lose all the state pension benefits he or she earned while doing the job legitimately.
Surely they don’t mean the first part of that. Wrongdoers should forfeit only the money that was gotten illegally?
So say the only I crime I commit is to steal $10 dollars. The expected benefit of my crime is $10.
Suppose when I I am caught, they fine me $10. So long as the probability I get caught is less than one (I get away with it some time), the expected costs of the crime are less than $10. Therefore, the expected benefit is greater the expected costs, and it is rational to commit the crime. In non-econ terms, if you ever got away with one, you’d come out ahead.
Now surely that is not exactly what the editorial means (is it?). They understand there will be jail time and other fines — but I’m back to the the original point? Wouldn’t increasing the penalty be a good thing?
Perhaps the good people at the Daily Comet (and those of my readers who don’t understand the term) should look up the term “treble”.
Now back to the normative. Do you think it is really unfair that people lose their pension if they commit the crime? What is unfair about that?
Am I missing something?
–CT
