The economic way of thinking demonstrates that it is marginal ðecisions that matter. Thus, students that learn about the economic way of thinking understand that it might not be a good idea to institute the death penalty for crimes like littering and petty theft, even if society really hates having litter and petty theft. Why is this?
Thinking at the margin allows us to look out for unintended consequences! The term margin is perhaps a bit confusing – but all we really mean by “marginal” thinking is to focus on what benefits and costs change when you make a decision – it is only those that matter.
While being tougher on those specific crimes may very well reduce the amount of litter and petty theft (it raises the cost of committing theft and littering), think about how this harsh penalty affects decisions at the margin. By increasing the penalties for being caught committing litter or petty theft, you have lowered the cost (i.e. lowered the the marginal penalty) for armed robbery or for murdering someone who catches you in the act of littering! When a petty thief decides to commit the crime of armed robbery, he is not likely thinking about the penalty for armed robbery or murder, he is likely thinking about the extra penalty for being an armed robber conditional on him already being caught as a robber. Therefore when we attempt to get really serious about prosecuting and penalizing petty criminals, our efforts might backfire into creating a more violent society, since the cost of committing armed robbery and murder is now lower, at the margin.
Similarly, raising the penalty for littering to the death penalty will increase the incentives for litterers to shoot anyone that might possibly have seen them litter! If the penalty for murder is death and the penalty for litter is death, there is no additional cost for shooting someone, conditional on you littering. But there is a benefit! By shooting possible witnesses, you have reduced your chances of being found out.
Therefore, even though society hates litter and petty theft, instituting the death penalty for those actions might not be in their best interest. This way of thinking lends itself nicely to a whole host of interesting empirical tests, one of which I will discuss tomorrow.
Excellent illustration of marginal costs. I look forward to tomorrow’s lesson. And by God, if anyone sees me leaving dog poop in the park in the universe you describe, s/he’s in for a rude surprise!
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