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Archive for February 9th, 2011

Governance and Religion

Leeson brought up several great points in his discussion of government vs. governance with regard to piracy.  The economic logic and evaluation of incentives was very intuitive when it regarded pirates.  The quote that caught my attention was the one by Madison which said, “If men were angels, no government would be necessary.”  Pirates are about as far as you can get from angels and thus consequently need a lot of governance or a governing force.

This led me to think about the other extreme.  What about those groups that are on the opposite side of the spectrum?  By this I mean those that have very specific religious beliefs and affiliations which should encourage them to be “angels.”  Upon reflection, I realized that even within these organizations governance is needed (because they really aren’t filled with angels).

In a religious setting the organization ultimately provides the three major roles of governance or government.  It certainly provides several public goods through psychological benefits, community service non-profit events.  Even though we don’t commonly recognize it the churches do have a form of enforcing rules.  These can be as formal as excommunication from the organization and predicted loss of salvation or as basic as social pressure and guilt.  In addition, religious organizations also control negative externalities.  They generally teach and advocate values and morals that reduce the negative effects that “sinners” can have on their neighbors and communities.

Religious organizations even have a form of a constitution, usually known as scripture.  For example,the words and direction given in the Bible act as a code of conduct for Christians.  In addition most churches have formalized manuals or written out instructions for church proceedings.

Church members are probably far from being pirates, but governance is needed nonetheless.

Taming the Pirates?

Okay, maybe taming is a bit of an overstatement, but Leeson does come up with some good guidelines for anyone seeking to live the pirate lifestyle to get along with his fellow individuals. I think his point in doing this is to help us “honest” regular people to identify with the basic behaviors that allow for some form of governance between people. The first thought that he outlines is the defining of property rights. Even pirates in a state of chaos will seek to unite to protect what they believe to be theirs. Pure anarchy makes it difficult to live the life of selfishness. Seems like a contradiction of ideals to help one others so you can truly gain property yourself.

Leeson then easily steps into the next ideal in which I believe that this quote sums up nicely, “By privatizing the good in question, the owner internalizes the costs of his behavior, which in turn encourages him to behave in a way that recognizes all the costs associated with is behavior.” Once one has private property and feels that he truly stands to lose from the behaviors that he may persue we find a more rational approach to life taking form.

Now watching all of the Pirates of the Caribbean its matter of finding what matters to the individual in the form of property. Whether it is his ship, family, farm or sword. Property differs from person to person, but all desire to have. Governance happens spontaneously because of the desire of each individual to have claim to certain aspects of his life.

Why do we spend billions to take care of criminals?

Knowingly imposing a cost on oneself seems irrational. This is why I think the continued criminalization of illegal drugs is foolish. On page 78, Friedman talks about inefficient punishments such as imprisonment and execution. He says that “the advantage of ex ante punishment is that it can be done efficiently, using relatively small fines imposed with relatively high probability.” Therefore, I think drug laws should focus more on fines, and so drugs should be decriminalized. In this way, drug use would be a cost to the user and not to the punisher. Of course, the argument with drugs is that drug use harms more than just the user, but for something as inconsequential as growing marijuana on your patio or even smoking pot, I think it is ridiculous to pay to put those people in jail. It seems like there could be a fine high enough to deter people from using drugs while still being payable. And if the fine didn’t deter people from using drugs, I guess I wouldn’t have a huge problem with that. But then again, it really depends a lot on what kind of drugs we are talking about and the potential harm to others by use of a certain drug. But I’m sure ex ante and ex post could probably be used to argue the other way on this issue.

So is imprisoning criminals irrational and always inefficient because we do so at a cost to ourselves? I certainly would not take the position that punishments should consist of either fines or execution, and nothing in between. There must be some value to the state in paying to house criminals in jails and prisons. Yet it seems odd that my taxpayer dollars are spent to feed and care for a murderer. This is something I haven’t ever considered much before, and it is really bothering me! Do we do so because of our commitment to justice and morality?


It’s amazing to me that pirates swore to live by a code despite their natures to rob and plunder.  Leeson continually reminds me that they did so for profit, and a constitution is the best way to preserve those profits, and protect investments of the pirates energies and faculties.  Those pirates were really smart guys, because they went right along with the outline of constitutions that Stearns and Zwicki explain (who are two people who know enough about the law and economics to write a book on it that is being used in an upper division course – and my reading comprehension is strongly challenged by it I might add).  The 2 basic facets that Public Choice sets out are 1. pre-commitments to stay in one’s rightful position and 2. rules that ensure no one will try to take more than their fair share of power (or booty) (501-2).  The sample pirate constitution in Leeson does just that (62-3).

Another impressive part of the pirate governance system is that the rules are self imposed.  As Leeson explains, there was no pirate king who imposed the rules on the others.  It was a consensus (60).  Leeson also explains the Tiebout idea, that if citizens dislike their situations, they could leave and join others where they are pleased with the rules (61).  Unfortunately, this is usually not an option for people who are displeased with the political situation of their countries currently.  If the rules are bad enough to make them want leave, chances are they aren’t able to.  This may have been possible for pirates then, but not North Koreans and others today.  Keeping the rules of the game fair and equal is not as easy, fun, and appealing as it appears to be in the context of pirates.  How do those under unfair rule change their circumstances so they can be productive and comfortable? That’s one of the huge problems I think the world will always face.

Ex ante or ex post

I find it pretty easy to understand what Friedman is saying regarding ex ante and ex post laws.  An ex ante law is basically a punishment for something that you tried or would have done.  Attempted murder and speeding and causing an accident are the ones that Friedman mentions but it got me thinking about some other ones.  For example there is a rule while hunting that says you have to be a certain distance from a house before you can shoot the animal.  Clearly an ex ante rule.  I didn’t do anything but I could have caused a lot of damage.

What about drug laws?  Are they are ex ante or ex post laws?  I would say it would depend on why the drugs are illegal in the first place, or to put it better: what is being punished?  Is it the fact of having a banned substance? Or is it the fact that you might cause society damage by dealing a substance that will cause the person to make bad choices? In the first case it is clearly a an ex post rule and in the latter an ex ante.

My ethical and moral side tends to think that in the case of drugs as I mentioned before should be punished ex ante because… it just feels right.  I don’t like drugs because they ruin everyone else’s life as well as the users.  However my economic and legal side tends to see that punishing the person for that is just not good.  People should be allowed to make their own choices so long as they accept the consequences.  Punishing a drug abuser before the damage is done just doesn’t make legal sense to me.  But I’m open to suggestions.

Rational self interest

To me the ex post and ex ante argument was a very confusing one. Before, after, after, before. I just flat got confused. If you’re looking at trying to use costs as a deterrent, then it will deter everyone at a different rate. People will put a different value on the deterrence based on what they think is rational. If they are someone that is highly averse to losing money then a fine no matter how small will keep them from breaking the law. This goes also for people who are highly averse to losing their liberty and life. As people become less adverse to the loss of any of those three things then they will weigh the cost of doing what is illegal, with not doing it. And if they come to the rational decision that the cost benefit is worth the risk then they will do it even knowing the cost of doing so. I guess my question is then if the cost of doing something is known and a rational decision for yourself is made. Why does it matter whether the cost is ex post or ex ante? A cost is still a cost. Another thought that I had is a problem that I think arises from this is the people that aren’t rational. They have no way of weighing what is best for themselves. How can we use any type of ex post or ex ante laws in that case? They won’t understand the cost of them doing something, and thus can’t be factored into an economic model.

Nothing Will Work

While the discussion of ex post versus ex ante punishments is very interesting, I can’t help but think that no matter what, they won’t necessarily be effective deterrents. As Friedman, and some other classmates have mentioned, a speeding ticket may not necessarily deter an individual from speeding. If I know that the fine for speeding in a certain area is $200, I will not speed because that is enough of an incentive for me to keep to the speed limit. However, that may not be an incentive for someone else traveling along the same stretch of road. Now, if the fine were $10 million, then it would be more of a deterrent. But most people can’t afford that much money, so we’d have to turn to incarceration or execution.

However, those who are going to break the law will do so regardless. Any person who commits murder knows that if he gets caught, he will go to prison and could possibly receive the death penalty. At the point where he is committed to murder someone, the consequences, or ex post, punishments are an incentive to not get caught instead of the intended incentive to not kill in the first place. It would be the same situation if you were to use outrageous fines in order to prevent speeding. If the punishment for speeding is incarceration, then you just create more of an incentive for people to try not to get caught. We can argue over which actions will put the incentive where it will do the best good all we want, but the fact of the matter is we’ll still have people speeding down the highway and killing each other.

Ex Post Punishments?

In the beginning of chapter 7 of Law’s Order Friedman claims several times that ex post punishment takes into account private information that cannot be observed. My question is, how can ex post punishment do this? He uses the example of driving. He says that when he is driving the most dangerous thing he does is listen and participate in conversations with others which could cause him to collide into another vehicle. Obviously the outcome of his distracted driving is a collision and then he would be ticketed for being distracted. Is that what he means when he says that ex post punishment factors in private information? The cop obviously could not observe that the driver is actively engaged in a distracting behavior, but the collision is the tip off that the drive was distracted. Does it mean that eventually the private information will manifest itself in some way that will be punishable? I am so confused.

ex post

I would argue that one of the issues with ex-post punishments is that they are limited in how far reaching the punishments effect our actions.  For example take drunk drivers in the state of Utah.  Everyone knows that it is against the law to DUI, and most people know that you it can cost you Ten thousand or so in fines and attorney fees.  I would bet that there will be several given out this week end alone.  The big variable of why most people drive drunk is the odds of being caught.   If giving the circumstances you have a 90% chance of making it home safe you would be more willing to take the chance.   Which is why there have been several ads on TV telling you that you will be caught?  It is the laws attempt to make you change the odds in your mind from a 90% to maybe 50% which will make it more economical to get a taxi.  It is stated that “ex ante approach prevents accidents before they happen, while ex post only punishes afterwards.”  I think the statement made here is accurate if and only if we know for sure you will be caught and punished

Ex Poste could supersede the ex ante

If Friedman could talk.  No but really I think that I have figured out the solution to all of our problems and let me just give you a quick breakdown.  So this is what I understand and feel free to comment on here if you feel that I am way off base.  If I make a bet using Ex Ante then basically I made the bet with as much understanding as I possibly could before-hand.  So for example it seems like every time we gamble, the first bet is always ex ante.  Ex poste means that I use the information that I have gathered based on my experience from the situation, after the fact, and use it to make the next best possible bet.  So the government uses the same methods to deter us from breaking the law.  If we speed and that kind of thing we will be fined, even though we technically didn’t hurt anyone or anything.  I understand this principle based on the fact that it really does work.  It is a perfect deterrent.  But, I have an interesting different idea.  What if we just made the ex poste punishment like 50 times worst.  I understand that it sounds ridiculous.  But, what if for every car wreck you caused (where it was deemed a result of speeding) you were sentenced to 2 years in jail and a $2,00.00 fine?  Would the ex poste punishment act as an ex ante punishment also?  If we were to make it so unbearable the thought of getting in a wreck for speeding then maybe it would have a great effect.  Unfortunately one of the externalities would be a hundred new law firms like Robert J. Debry wanting to be your counsel for every single wreck, promising you a ton of money.

I know that this will never happen.  Especially considering the punishment and that kind of the thing, but, it is always good to at least try and think outside of the box.

I also agree with Friedman in that I don’t think that it is right to punish people for feeble attempts at murder.  I wouldn’t really feel physically threatened knowing that someone was pushing needles into a doll of me.  I would probably, realistically, be more worried about the mental stability of the person and ask the authorities to get them some help at a facility.  A possible externality could be a more realistic attempt on my life.  Which could really go either way at this point.  (not a window into suicidal tendancies, more of a cry for diversity in my life… that could spice things up)