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A few weeks ago in class I was discussing what I refer to the, “you might as well do something worse” (i.e. the marginal cost equals zero) problem in deterrence. I am sure there is a fancy real name for it, but the simple idea is this: whenever you have a maximum penalty for some undesirable behavior and are unwilling or unable to impose a more serious penalty, then you effectively lower the costs of the next undesirable action to be zero!

Here is a long post discussing it in detail. A student of mine sent the following to me:

I have a parallel to what we talked about in class last week. My old high school just imposed a suspension on pantsing people. My brother was given a two day suspension and in-school suspension for doing this as an example, before the rule was known about. The penalty is now a 5 day suspension. I was having a conversation with my mother about the punishment not fitting the crime and I explained to her that having a penalty like suspension for pantsing may lead to mass pantsing or pantsing the underwear as well because they would get suspended anyway and that the school probably made their problem worse. She laughed at me and told me that high schoolers, specifically the young boys, don’t think that way and that the effect probably wouldn’t be as I described. I was wondering what you thought of this.

Indeed, very few people consciously think about things this way, but that does not change the underlying economics. Here are a few points of consideration.

(1)    Despite this sounding sensible, we see it regularly in the data – especially in the murder and violent crime data, where I think a strong case can be made that “they don’t think about it.” Or see here – it was argued that altering the incentives to have children out of wedlock would do little to the probability of women having children out of wedlock. But indeed, it has. A lot. So how might one reconcile this observed behavior with the theory that “people don’t think of the marginal incentives?”  Here is how McArdle explains it:

C’mon said the activists. That’s just silly. I just can’t imagine anyone deciding to get pregnant out of wedlock simply because there are welfare benefits available.

Oooops.

Of course, change didn’t happen overnight. But the marginal cases did have children out of wedlock, which made it more acceptable for the next marginal case to do so. Meanwhile, women who wanted to get married essentially found themselves in competition for young men with women who were willing to have sex, and bear children, without forcing the men to take any responsibility. This is a pretty attractive proposition for most young men. So despite the fact that the sixties brought us the biggest advance in birth control ever, illegitimacy exploded. In the early 1960s, a black illegitimacy rate of roughly 25 percent caused Daniel Patrick Moynihan to write a tract warning of a crisis in “the negro family” (a tract for which he was eviscerated by many of those selfsame activists.)

By 1990, that rate was over 70 percent. This, despite the fact that the inner city, where the illegitimacy problem was biggest, only accounts for a fraction of the black population.

(2)    Thus, we only need to have a few marginal cases change their behavior, not the entire population – because remember we are talking about how behavior changes at the margin. There are some “pantsers” that are not at the margin of committing a worse act, and though this rule now brings them closer to the next awful act, they are still below the threshold of doing it. However, there are obviously marginal cases where the effect will kick in.

(3)    The most serious impacts are the psychological ones, which in the long run tend to promote the more serious behaviors that we are worried about.

(4)    People do not have to act in the heat of the moment for this effect to be noticed. Given that the marginal costs of serious pantsing is lower, they may alter their behavior before the incident itself ever takes place. Think of an analogy first. In the case of the death penalty being imposed for robbery, it could very well be the case that potential robbers are more likely to secure guns long before they go to the scene of the robbery. So, even if the robber is not thinking about marginal incentives at the time of the robbery, we are very likely to see more robberies occurring where the criminal is carrying a weapon as compared to before – basically expanding the criminal’s “budget constraint” or options for doing bad things in case the robbery does not go smoothly. Granted, the case of pantsing is dealing with far lower stakes and I cannot think offhand how the analogy works, but I would not dismiss it out of hand.

(5)    Students need only act as if they know these costs are different. We, for example, probably do not consciously tell ourselves that cheap food and good medicine will make us eat more, but it turns out that we do just that. How might one explain the phenomena? We are altering the typical person’s choice set so that even if behavior is random, we should expect to see more of the proposed behaviors.

(6)    Remember we are not trying to argue that there will be more pansting, but rather that we may get less pansting in general, but more serious violations. It still is an empirical question.

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