Sunday, February 9, 2014

Crime and Punishment, Law and Order, Optimal Rulebreaking

From Advanced NFL Stats:
Last week a WSJ article about the Seahawks' defensive backs claimed that they "obstruct and foul opposing receivers on practically every play."  I took a deeper look in to the numbers and found that as long as referees are reluctant to throw flags on the defense in pass coverage (as claimed in the article), holding the receiver is a very efficient defensive strategy despite the risk of being penalized.
That is from a guest post by Gary Montry, a professional applied mathematician. The article is very interesting, but gets a little deep into the statistics beyond the points I want to discuss here. Nevertheless, it is a rewarding read that I encourage including being as Brian Burke puts it, "a great refresher on conditional probabilities and Bayes' theorem".

The article made me think a little about how economic efficiency many times runs counter to our intuition and ideals when it comes to wrongdoing. Novices often get confused by the fact that the economically optimal level of pollution, crime, et al. is not at all zero. It is not that a certain level of pollution is a pure good or that some amount of crime is desirable in an absolute sense--these are still and always "bads" rather than "goods". It is just that at some point the benefit of eliminating the next (aka, marginal unit of) crime or amount of pollution is not worth the cost. At that point we tolerate the "bad". Fortunately, economic progress implies that the cost curve for fighting problems is ever declining.

Tying this back to the article, the question is how could the rules or enforcement be restructured so that this manipulation, which is arguably against the spirit as well as the letter of the law of the game, is corrected or reduced. Howard Wasserman's new paper on Football and the Infield Fly Rule, which is on my to-read list, may offer some help here. The paper is an exploration of how some football situations may imply and incite behavior that is counter to the spirit of the game and sportsmanship. I don't expect him to address this specific issue, but I do expect the analysis to offer some help in situations such as this.

The article also got me thinking about how my neighborhood's HOA is considering instituting fines for uncorrected violations of the neighborhood's covenants. At issue mainly is roof-mounted satellite dishes that are visible from the street--because we all know that things like this "obviously" lower property values by "a lot" (economic research forthcoming I'm sure). Here are some of my concerns assuming we even have the authority as an HOA to do this and assuming (a BIG assumption) the covenants are optimal as written:

  • Will the punishment (fine) fit the crime? How would we know? If the fine is set so that the behavior is undoubtedly discontinued, we've probably set it too high. If the fine is always paid with no change in behavior, it is not necessarily but could be too low. In fact the optimal fine probably has some of the violations corrected and some continued. But the same people who roll their eyes when economists say we want some level of pollution to continue probably roll their eyes in uproar to think that the neighbor gets to just pay a pittance to continue their property-value-destroying activity. Mrs. Kravitz would be shocked!
  • Do we set the fine equal for all violations (that is the proposal on the table)? Is parking a trailer or a boat for "long periods" in a driveway equal to satellite dishes being visible and equal to trash cans out of compliance and equal to dead trees not removed or not replaced by the right kind/size of tree etc.? It seems the answer to the second question is most likely "no", which implies the problems of getting the fines right is growing in magnitude.
  • Do we really want the reputation as the neighborhood who runs around assessing fines on one another? Is that property value maximizing? The list and litany of compliance violations came out a bit during the recent HOA meeting. The implication seemed to fall on deaf ears.
  • Have we given up on neighborly persuasion? Can't we all just get along? 
Rule making and rule enforcing are endeavors fraught with unintended consequences. Just desires and outcomes are almost always highly debatable and are always evolving. Simplier is usually better. Persuasion is generally preferred to force. Tread lightly. 

PS. I knew I was in trouble when the HOA asked if the trees I had planted were "free-range" or "farmed".