We would have liked to post an article from the Vancouver Sun today on the efficiency of market economies. However, the Sun seems to think that its content is sufficiently valuable that people will pay for online access. We don't share their opinion. The Globe and Mail, New York Times, Reuters, Associated Press, Bloomberg, Deutsche Welle, London Telegraph, BBC and many others offer free access. Even the Wall Street Journal and Financial Times of London offer limited free access. But that is not today's topic, just a note on why we don't cite certain papers.
Today's article comes from CBS's New York office. Cell phones are a distraction while driving, no question about it. We have all seen drivers in front of us drifting across lanes will talking. A recent train crash in California occured 22 seconds after the driver sent a text message from his cell phone. (Click here for article)
Many jurisdictions, including seven Canadian provinces and according to the article, New Jersey, have made it an offense to use a cell phone while driving. You wouldn't know it from watching drivers on the road though. Just because politicians decide something is illegal does not make the general populace obey the law. Rational individuals will obey a law only if the cost of breaking that law exceeds the benefit from breaking that law. The cost of breaking a law is the penalty incurred times the probability of being caught. A very large fine won't work if no one enforces it.
In BC, the fine is $167 but enforcement isn't consistant. Yesterday I was driving beside a young woman talking on her phone. The car in front of her was a police car. In New Jersey, they have propsed an increase the fine from $125 for a first offense, $250 for the second, $500 thereafter. If the law is enforced and the fines are levied, the sale of hands-free bluetooth devices should rise in New Jersey.
Today's lesson? Even law enforcement is a matter of economics.
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To me it seems like this is a problem of imperfect information in a decision under uncertainty. The probability of being caught and fined is basically unknown, and there hasn't been enough time with this law for anyone to get a good idea of how often people get fined. The expected value of talking on the phone would be (probability of getting caught) * (-167).
ReplyDeleteNot knowing anyone who's been fined yet, I might assign that probability at 1/200 maybe. In that case, if the phone call is worth more than 80 cents to me, I'll make the call. However, I might be badly underestimating (or overestimating) that probability, which could lead me to make a bad decision.
Well said, the probability of getting caught is a function of enforcement efforts, which must be asymmetric for them to work. If the police announced that they were monitoring cell phone use at the corner of 1st and Main, no one would use their phone at that corner. 100% compliance.
ReplyDeleteEnforcement must be random otherwise the probablility of getting caught is either zero or one.