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How Do You Stop Sea Captains From Killing Their Passengers?

rmorrison 16y ago
It should be mandatory for any incoming politician to take a couple introductory economics courses before serving. There are too many laws where incentives are not aligned properly, fundamentally dooming the policy to failure. A good example of an incentive problem that's recently unfolded: now nearly 50% of US households have no federal income tax liability. Edit: It's nearly 50%. It was 38% in 2007, 47% in 2009. Also, 40% of households "make a profit from the federal income tax system, meaning they get more money in tax credits than they would otherwise owe in taxes". http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-taxes_N.htm http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-...
- sigzero 16y ago
  Citation on that 50% please. I have never heard that.
  - maneesh 16y ago
    Well I just googled this: http://www.msnbc.msn.com/id/36226444/ http://www.msnbc.msn.com/id/36226444/ Another way to escape federal tax liability (up to ~$90,000 income) is to live outside the US 11 months / year
    - barmstrong 16y ago
      You are probably paying tax in the country you moved to though.
      - gyardley 16y ago
        Well, if the other country has income taxes. For example, in the British Virgin Islands the income tax rate is zero. I don't get why more Americans aren't enraged about the United States' treatment of emigrants. For citizens of most other countries, if you don't live there and you don't make money there, you don't pay taxes there.
        _delirium 16y ago
        Why would Americans be enraged about that? The U.S. has a long history of distrusting people who leave the country. Sticking it to emigrants (i.e. people who "abandoned the USA") would be popular among both the left and right, and among many social classes. Emigrants aren't very well liked among populists in either the Republican or Democratic parties, sometimes even seen as approaching a mild form of treason, whether they left for draft-dodging reasons (Candada during Vietnam), tax-dodging reasons (BVI & co.), or political reasons (communists who emigrated to Russia). People don't mean "love it or leave it" in the sense that both are legitimate choices! I say this as someone about to start a job in Europe myself; it's somewhat of a sore point with many people ("America not good enough for you?"). The current economy being bad is really the only thing that makes it relatively easy to smooth over, because I can fall back on, "well nobody in the U.S. was hiring in my area and this opportunity in Europe came up", and people sorta understand because everyone's willing to believe that the U.S. job market is bad right now. Mostly I can't think of the constituency that would support lowering taxes on emigrants. Republicans are usually the enthusiastic tax-cutters, but emigrants are even less popular among Republicans than among Democrats, partly due to heartland-patriotism type of culture, and partly because the expat vote is skewed Democratic.
  - jacoblyles 16y ago
    Actually, the bottom 50% of earners pay ~3% of federal income tax. http://www.heritage.org/budgetchartbook/top10-percent-income-earners http://www.heritage.org/budgetchartbook/top10-percent-income... People become eligible for more federal benefits as they earn less so it may net out to less than 0%, but I don't have a citation for that.
  - tseabrooks 16y ago
    This USA Today article says that 47% of people payed no Federal Taxes. I think the more interesting number is that 40% make a profit on the federal income tax. http://www.usatoday.com/news/opinion/editorials/2010-04-16-editorial16_ST_N.htm http://www.usatoday.com/news/opinion/editorials/2010-04-16-e...
  - matwood 16y ago
    Google is your friend. http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0 http://finance.yahoo.com/news/Nearly-half-of-US-households-a... About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization. Also, the irs.gov site has tons of data with various breakdowns.
- colinprince 16y ago
  For those of us outside the us, would you be able to expand on the "federal income tax liability" issue? [edit] Thanks, that helps, but I still don't understand what you think is being correctly or incorrectly incentivized here.
  - protomyth 16y ago
    <not original poster> I'll give it a go. When a majority of a countries people are not paying for the country or (worse) profiting off the government, then they have no incentive to keep government spending under control. This leads to the increase of tax money coming from fewer and fewer citizens until the whole thing collapses. Paying for something means that you pay more attention and be more critical of failures.
    - Symmetry 16y ago
      It doesn't actually work that way, if you think about it. In an election your vote pretty much doesn't matter. That means that if you're just going to vote for your own self interest you might as well not bother getting out of bed in the morning. Instead people mostly vote in ways that let them tell themselves that they're good people. Empirically, this is pretty well backed. For instance there isn't much correlation between income and how people vote on taxes, or between age and how they vote on social security. Of course people have little incentive to find out which policies will bring actual good results as opposed to those which superficially seem nice. Luckily politicians who hope to be reelected can't do anything that turns out to be too stupid in practice... some fraction of the time. And so we sort of muddle our way through things.
      - protomyth 16y ago
        There is quite a class of people who vote for their own self interest (e.g. California Government Union employees). 2000 should be the biggest counter example to your vote doesn't count(1). 1) The history of the 2000 election actually makes a serious point about polling and the failure of a news organization (Fox) to realized polls hadn't actually closed in the panhandle of Florida (Central Time). That area of Florida is heavily Republican and lower voter turn out because of the pre-announced winner (Gore). A few more Democrats voting or a non-preannouncement could have prevented one of the stupidest episodes in US voting history. Vote like you've heard nothing.
- nodata 16y ago
  But which school of economics should the politicians follow for their introductory economics class?
  - jacoblyles 16y ago
    I'd settle for "any". If they can understand that increasing the cost of hiring workers leads to more unemployment, then that will be an improvement. Sometimes I think politicians can't even reason through the most basic of incentives.
    - wisty 16y ago
      I think they do understand this. The problem is, they don't care. Their incentive is to convince marginal voters to vote for them, not to make the economy work.
  - Symmetry 16y ago
    Don't worry about schools, just worry about what 90% of economists agree on and it'll be a huge improvement. http://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html http://gregmankiw.blogspot.com/2009/02/news-flash-economists...
- kscaldef 16y ago
  Are there any official sources for that number? All I've ever been able to find are articles like this one: http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0 http://finance.yahoo.com/news/Nearly-half-of-US-households-a... where everything is "according to projections by the Tax Policy Center" or similar groups. And, the explanations given in that article are less than compelling to me. For example, they focus heavily on the "family of four making as much as $50,000 [with] two children younger than 17". I'm a little skeptical that such families actually make up 50% of US households. (Just consider that you'll pay taxes for 50 or 60 years, but if you have 2 children, you can only be in this category for 15 years or so.) They are also throwing in stuff like credits for "buying a new home and upgrading an existing home with energy-efficient doors, windows, furnaces and other appliances". But, again, there's not that many new houses bought, and the people buying them are mostly not families of 4 making under $50K. Nor are those families running out to spend thousands, or tens of thousands, of dollars on home upgrades. Finally, this argument also ignores the fact that most of the social safety net programs are paid for from payroll taxes, not income taxes.
- klochner 16y ago
  but what are they earning? I don't see a problem if someone making $30k/year isn't paying any taxes, especially if that someone is a single parent.
  - jessriedel 16y ago
    Really? Let's put aside the single-parent part. Last year I made about $25,000. I enjoyed the protection of the US military, was treated at hospitals using techniques developed with federal funding, and benefited from the federal regulation of interstate commerce. I also had a nice room in a shared house in Santa Barbara, CA. I had a car, ate healthy food, went out to bars, and lounged on the beach. Why shouldn't I have had to pay taxes?
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    - seanalltogether 16y ago
      Oh but you did pay taxes. The cost of your rent is directly tied to the amount of property tax that house owner is required to pay. All the goods you purchased would have been taxed as well. The gas you bought for your car helped pay for the roads. You may not have paid a federal income tax (I don't know if that is true though) but you still paid social security taxes, and your employer paid payroll taxes that factor in to how much you get paid.
      - jessriedel 16y ago
        > The cost of your rent is directly tied to the amount of property tax that house owner is required to pay. All the goods you purchased would have been taxed as well. Well, we were talking about federal taxes. That's why I listed services of the federal government. Property and sales tax are state. Social security and gas axes are supposed to be a closed systems. None of those pay for the military, interstate commerce regulation, or medical research. But the important thing is that I wasn't claiming I didn't pay taxes. (I did, although not much.) I was challenging the notion that I shouldn't be paying taxes just because I make less thank $30k.
- protomyth 16y ago
  Barring a study in economics, this is why you generally want politicians who have done the budget cycle at a lower level (mayor to governor). Military Generals also tend to get it.
- deleted 16y ago
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- asmithmd1 16y ago
  But they are not including payroll tax of %15.3 that is paid on every dollar of income UNDER $106,000 They call this tax Social Security but it is just a tax like any other.
  - anamax 16y ago
    > They call this tax Social Security but it is just a tax like any other. SSI is collected like a tax, but, unlike almost every other tax, the money collected is mostly returned to the payer. (Folks who didn't pay much get much better return than folks who paid a lot.)
    - _delirium 16y ago
      This will only be true if, as seems increasingly unlikely, the social-security surpluses accumulated over the past few decades are actually used to fund social security (the mythical "lockbox"). My bet is on the money never being returned to the social-security system. In that case, the surplus portion of the payroll taxes from the past few decades should be historically reclassified as (regressive) general income taxes.
    - krschultz 16y ago
      But it is also the only regressive tax we have, as all income over a certain amount is untaxed. So it ends up being a really complicated curve of who gets what return on their money, so the super rich and the super poor get the best deal, while the middle class gets hosed.
- rstocker99 16y ago
  I'm not sure the problem is that most politicians don't have a decent grasp of the power of incentives or lack a basic understanding in economics. Unfortunately I think they are in fact extremely adept at understanding incentive. Is it possible that you haven't carefully considered which incentives are driving their behaviour :).
- gamble 16y ago
  The last thing this world needs is more people in positions of power who think that ECON 101 is all they need to know about economics.
mahmud 16y ago
What is stopping the "captain" from taking a little detour to the English country side, better yet, New Zealand, and kidnapping a few farmers?
- jeffesp 16y ago
  A sealed record of the number of prisoners on departure.
  - mahmud 16y ago
    That doesn't really stop him from the recreational murder of X prisoners, and replenishing his inventory with X Kiwis before heading to Parramatta :-) (I have the Australia Almanac and it's full of interesting tidbits. One of them was when I read "The English met with the Aborigines during a time of hunger .. 5 men where eaten". I shook my head briefly at the inhumanity and went on to read .. then paused, and re-read the passage again. Turns out, the English ate the Aborigines.)
    - hugh3 16y ago
      Got a reference for that? The history of precisely who killed whom in British/Aboriginal relations is pretty well studied, and I've never heard of any cannibalism on either side. Whether the Aborigines ever engaged in cannibalism was a somewhat fraught political topic in Australia a few years ago. (The answer is "probably someone got eaten by somebody at some point in the 40,000 year history of the thousands of Aborginal tribes, but you're not supposed to talk about it.") Anyway, the story isn't about captains "recreationally murdering" prisoners, which is the kind of thing that only a tiny number of psychopaths would do. It's just about them failing to take quite as much care of them in terms of food, water and medical treatment as they really should have.
      - mahmud 16y ago
        Heh. I said right there "Australia Almanac". It's a popular book in Aus, and have seen it in a few places. It chronicles Australia from the stone ages to late 80s (at least my old copy does.) As for cannibalism, my profile info has been a passing reference to it, in jest; it doesn't concern me at all, at least not until the zombie apocalypse (if food rations run low, I might have to hunt a few zombies and raid the mall shops for flat-screens and warm Heineken!)
greatgoof 16y ago
Sorry for this off topic comment but it's related(kind of): I've always wondered how a crime committed on a ship can be caught. For example, the crew of a ship mutinies against their captain and throws him overboard. When they get back to port, they claim that their captain was swept overboard during a storm. The crew, as one man, sticks to their story. Will anybody ever be able to prove otherwise? This approaches being the perfect crime as the number of crew members go down, doesn't it? How is this handled?
- pavel_lishin 16y ago
  How is this different from a crime committed anywhere else? If my friends and I push another friend off a balcony, we could say he tripped.
  - greatgoof 16y ago
    Yes, but the scene of crime in this case is still available for the police to look at, and the dead body doesn't go anywhere. The position of the body can in most cases show if the victim tripped or was pushed. Tampering with the body after the fall leaves even more clues for the police to find.
    - billswift 16y ago
      Tampering with the body - unless it is really, really obvious that he's dead, somebody is going to check the body and most likely even try first aid.
- varjag 16y ago
  It is very infrequent that the whole crew is a part of mutiny. Captain usually has at least a few adherents as well. Kind of hard to explain away disappearance of the captain and his clique.
- Tycho 16y ago
  I suppose the investigators would look for inconsistencies in 'the story' as told by different parties. If 'the story' is true then additional detail will be forthcoming and generally non-contradictory between accounts. If its all a cover-up then individual suspects will invent different details and give themselves away. 'We know at least one of you is lying.' At which point someone will betray the conspiracy for favourable terms, and the police will have a real witness. Maybe also this is the reason for a 'captain's log' - if that went missing too then there'd be even more suspicion.
randomwalker 16y ago
It is easy to underestimate the difficulty of creating the right incentives. In the 1940’s, the paleontologist von Koenigswald was searching for early human remains on Java and decided to enlist the help of the locals in his search by offering them “ten cents for every piece of hominid bone they could come up with.” Unfortunately for von Koenigswald (and for his findings), he discovered too late that the locals “had been enthusiastically smashing large pieces into small ones to maximize their income.” From http://freakonomics.blogs.nytimes.com/2009/10/20/when-youre-paying-per-bone-fragment-expect-more-fragments/ http://freakonomics.blogs.nytimes.com/2009/10/20/when-youre-... (The story is from the book A Short History of Nearly Everything, which is one of the best books I've ever read. The amazing thing about the book is that it is in fact a short history of nearly everything.) Combine the difficulty of getting incentives right with the inherent problems of Government and a dangerous mix results. For example, every time a subsidy is created, a special-interest group sprouts up dedicated to preserving the subsidy in perpetuity, long after it has outlived its utility.
- colkassad 16y ago
  Sorry, off-topic: I highly recommend the audio book version of A Short History of Nearly Everything narrated by Richard Matthews (not the one narrated by the author).
- CWuestefeld 16y ago
  An old friend from India told me a parable he brought from his homeland. It's similar to this, except it backfires on the greedy guy. There's a king who wants have very rich and flavorful soup, so he tells his chef that, for every drop of grease floating in his bowl, he will pay a coin. The greedy chef wants to maximize his pay, so he dumps a lot of oil into the soup. Of course, this results in a single oil slick across the entire top of the bowl, so the king pays him only a single coin.
  - confuzatron 16y ago
    Mmmm. Oil-covered soup! I think that one backfires on everybody involved.
- 16y ago
guelo 16y ago
This story seems too cute and oversimplified. Did it really take an economist to figure that out? I'd like to see the real story, does anyone know have a reference?
- pessimizer 16y ago
  It really does. It's as if I was paying UPS to pick up my packages, but it only delivered 2/3 of them. I wouldn't be wracking my brain very long to come up with the same solution. My guess is that the problem was that there were no incentives for politicians to think of this as a problem, and seeing as it survived a "scandal," probably some incentives not to care. I'd like to know who was getting the contracts, and who their connections were. I also wonder if there was some faction screaming about not imposing crushing regulation on the noble businessmen who were providing a crucial and critical function to protect our civilization, and if they overlapped with the connections:) EDIT: Also, this is a simple matter of paying for what you want. If you want people to get rid of the prisoners, pay them to haul them away. If you want prisoners delivered somewhere, pay them for what they deliver.
jacoblyles 16y ago
It's interesting that they tried the tactic of micro-regulating every aspect of the ship captain's business and that didn't work as well as broad incentives. Today, this micro-regulation is politically popular as voters can more easily comprehend the direct effects of regulation as opposed to the indirect effects of broad incentives. For example, we force drug companies to perform very extensive clinical trials for new drugs and this makes us feel safe. But simply increasing the liability drug companies face for producing harmful drugs may be more effective and would certainly be a lot cheaper (as much as 90% of the cost of a new drug is meeting FDA requirements). But I doubt voters would feel as safe in a regime of broad incentives even if it worked better.
- protomyth 16y ago
  I'm not terribly certain of that one. I don't disagree on the principle in the general sense, but (having been in clinical trials at one point) it seems every new drug will kill / have adverse effects on someone. Its the nature of the thing, drugs do not react the same for everyone and sometimes it is adverse. No amount of testing will fix that.
- _delirium 16y ago
  It's also driven partly by a preference for that kind of regulation from the companies themselves (though they would prefer less regulation overall). Having to follow a bunch of rules on FDA trials is a manageable, mostly predictable expense; large, nearly unlimited potential liability if a drug turns out to have significant negative effects 10 years down the line is much scarier to managers and stockholders. That's one reason the health industry is currently lobbying to move it in exactly the opposite direction of what you propose: they want less broad liability, and are willing to accept more FDA micromanagement in return if that's what it takes. The proposed bargain is something like: the FDA should tell us what to do, and if we follow their rules, we should be shielded from all liability.
  - T_S_ 16y ago
    Regulation = Barriers-to-Entry. Businesses accept (and secretly cheer on regulators.) People get this connection, even though it is non-intuitive on the face of it. What is less studied are the regulators themselves. They rarely impose the kind of regulation that opens industry actions to sunshine and converts them to common knowledge. There is a substantial body of theory that shows that the price system breaks down in the face of informational asymmetry. But regulators don't go for it since it does not make them more powerful. That's human nature. And it's fine with businesses, who would prefer to answer to the One rather than the Many. Preserves barriers to entry.
Jinzang 16y ago
I once worked with a guy whose grandparents sailed from Portugal to California. The captain of the ship held food back from the passengers to sell when he got to California. When they arrived in California, the passengers found out and hung the captain. Which is a different kind of incentive.
zurla 16y ago
Charlie Munger: "One of my favorite cases about the power of incentives is the Federal Express case. The heart and soul of the integrity of the system is that all the packages have to be shifted rapidly in one central location each night. And the system has no integrity if the whole shift can't be done fast. And Federal Express had one hell of a time getting the thing to work. And they tried moral suasion, they tried everything in the world, and finally somebody got the happy thought that they were paying the night shift by the hour, and that maybe if they paid them by the shift, the system would work better. And lo and behold, that solution worked."
CWuestefeld 16y ago
The Maersk Dubai incident is a real-world modern-day story of a captain killing some stowaways: On March 12 1996, two Romanian stowaways, Radu Danciu and Petre Sangeorzan, were discovered on the container ship Maersk Dubai and ordered overboard on a makeshift raft, approximately 70 kilometres off the coast of Gibraltar. On May 18 of the same year, en route to the Port of Halifax, another Romanian, Gheorghe Mihoc, was found hiding in a large cargo container and forced overboard at knife point by Captain Sheng Hsiu and four of his officers. A fourth stowaway, Nicolae Pasca, was discovered by Filipino crew member Rodolpho "Rudy" Miguel and kept hidden until the ship arrived at Halifax, where eight Filipino crewmen (including Miguel) jumped ship and reported the incident to the authorities. Upon arrival in Halifax the Maersk Dubai was stormed by the Royal Canadian Mounted Police (RCMP) and Captain Hsiu and his Taiwanese officers were arrested and charged with first degree murder. The radio operator attempted to escape by jumping into the Halifax harbour and was later arrested. Captain Hsiu attempted to deny access to the ship under international shipping laws... https://secure.wikimedia.org/wikipedia/en/wiki/Maersk_Dubai_incident https://secure.wikimedia.org/wikipedia/en/wiki/Maersk_Dubai_... I learned about this story because it's part of the theme of the concept album Magellan's Wake, by Savatage (which is largely the same as the more popular "Trans-Siberian Orchestra")
devmonk 16y ago
I totally agree that incentives are great, but sometimes laziness beats incentives. I was told by someone that they paid workers in a 3rd world country by the amount they did, thinking they would do more, but instead they did the same amount in less time and then sat around for the rest of the day.
pixcavator 16y ago
One party (the government) was paying another party (the captain) for their services and then they figured out the best way to do it to get what they wanted. This is not an example of governmental regulation.
Mz 16y ago
I'm wondering if folks here have any "best practices" they can share for creating the right incentives? (Or should that be a new thread?) This was something I was very good at figuring out for raising my sons. Thus, issues related to this at my job really get on my nerves (because I am convinced it can be done better). So I am wondering what people know about solving this issue for corporate culture -- or even on the start-up scene.
Estragon 16y ago
There's no denying that incentives matter, but the key difference between the regulations they tried and the financial incentive they finally adopted is accountability. It was easy to hold the captain of a ship accountable for the number of prisoners who walked off a ship in good health, and impossible to enforce regulations about what should happen on the ship itself. The fact that they tied that accountability to a financial incentive is a red herring. They could have just as easily tied it to a regulatory penalty, with similar results. It's depressing that a professor is using such sophistry to justify his existence to his students.

It should be mandatory for any incoming politician to take a couple introductory economics courses before serving. There are too many laws where incentives are not aligned properly, fundamentally dooming the policy to failure. A good example of an incentive problem that's recently unfolded: now nearly 50% of US households have no federal income tax liability. Edit: It's nearly 50%. It was 38% in 2007, 47% in 2009. Also, 40% of households "make a profit from the federal income tax system, meaning they get more money in tax credits than they would otherwise owe in taxes". http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-taxes_N.htm http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-...

sigzero 16y ago
Citation on that 50% please. I have never heard that.
- maneesh 16y ago
  Well I just googled this: http://www.msnbc.msn.com/id/36226444/ http://www.msnbc.msn.com/id/36226444/ Another way to escape federal tax liability (up to ~$90,000 income) is to live outside the US 11 months / year
  - barmstrong 16y ago
    You are probably paying tax in the country you moved to though.
    - gyardley 16y ago
      Well, if the other country has income taxes. For example, in the British Virgin Islands the income tax rate is zero. I don't get why more Americans aren't enraged about the United States' treatment of emigrants. For citizens of most other countries, if you don't live there and you don't make money there, you don't pay taxes there.
      - _delirium 16y ago
        Why would Americans be enraged about that? The U.S. has a long history of distrusting people who leave the country. Sticking it to emigrants (i.e. people who "abandoned the USA") would be popular among both the left and right, and among many social classes. Emigrants aren't very well liked among populists in either the Republican or Democratic parties, sometimes even seen as approaching a mild form of treason, whether they left for draft-dodging reasons (Candada during Vietnam), tax-dodging reasons (BVI & co.), or political reasons (communists who emigrated to Russia). People don't mean "love it or leave it" in the sense that both are legitimate choices! I say this as someone about to start a job in Europe myself; it's somewhat of a sore point with many people ("America not good enough for you?"). The current economy being bad is really the only thing that makes it relatively easy to smooth over, because I can fall back on, "well nobody in the U.S. was hiring in my area and this opportunity in Europe came up", and people sorta understand because everyone's willing to believe that the U.S. job market is bad right now. Mostly I can't think of the constituency that would support lowering taxes on emigrants. Republicans are usually the enthusiastic tax-cutters, but emigrants are even less popular among Republicans than among Democrats, partly due to heartland-patriotism type of culture, and partly because the expat vote is skewed Democratic.
- jacoblyles 16y ago
  Actually, the bottom 50% of earners pay ~3% of federal income tax. http://www.heritage.org/budgetchartbook/top10-percent-income-earners http://www.heritage.org/budgetchartbook/top10-percent-income... People become eligible for more federal benefits as they earn less so it may net out to less than 0%, but I don't have a citation for that.
- tseabrooks 16y ago
  This USA Today article says that 47% of people payed no Federal Taxes. I think the more interesting number is that 40% make a profit on the federal income tax. http://www.usatoday.com/news/opinion/editorials/2010-04-16-editorial16_ST_N.htm http://www.usatoday.com/news/opinion/editorials/2010-04-16-e...
- matwood 16y ago
  Google is your friend. http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0 http://finance.yahoo.com/news/Nearly-half-of-US-households-a... About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization. Also, the irs.gov site has tons of data with various breakdowns.
colinprince 16y ago
For those of us outside the us, would you be able to expand on the "federal income tax liability" issue? [edit] Thanks, that helps, but I still don't understand what you think is being correctly or incorrectly incentivized here.
- protomyth 16y ago
  <not original poster> I'll give it a go. When a majority of a countries people are not paying for the country or (worse) profiting off the government, then they have no incentive to keep government spending under control. This leads to the increase of tax money coming from fewer and fewer citizens until the whole thing collapses. Paying for something means that you pay more attention and be more critical of failures.
  - Symmetry 16y ago
    It doesn't actually work that way, if you think about it. In an election your vote pretty much doesn't matter. That means that if you're just going to vote for your own self interest you might as well not bother getting out of bed in the morning. Instead people mostly vote in ways that let them tell themselves that they're good people. Empirically, this is pretty well backed. For instance there isn't much correlation between income and how people vote on taxes, or between age and how they vote on social security. Of course people have little incentive to find out which policies will bring actual good results as opposed to those which superficially seem nice. Luckily politicians who hope to be reelected can't do anything that turns out to be too stupid in practice... some fraction of the time. And so we sort of muddle our way through things.
    - protomyth 16y ago
      There is quite a class of people who vote for their own self interest (e.g. California Government Union employees). 2000 should be the biggest counter example to your vote doesn't count(1). 1) The history of the 2000 election actually makes a serious point about polling and the failure of a news organization (Fox) to realized polls hadn't actually closed in the panhandle of Florida (Central Time). That area of Florida is heavily Republican and lower voter turn out because of the pre-announced winner (Gore). A few more Democrats voting or a non-preannouncement could have prevented one of the stupidest episodes in US voting history. Vote like you've heard nothing.
nodata 16y ago
But which school of economics should the politicians follow for their introductory economics class?
- jacoblyles 16y ago
  I'd settle for "any". If they can understand that increasing the cost of hiring workers leads to more unemployment, then that will be an improvement. Sometimes I think politicians can't even reason through the most basic of incentives.
  - wisty 16y ago
    I think they do understand this. The problem is, they don't care. Their incentive is to convince marginal voters to vote for them, not to make the economy work.
- Symmetry 16y ago
  Don't worry about schools, just worry about what 90% of economists agree on and it'll be a huge improvement. http://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html http://gregmankiw.blogspot.com/2009/02/news-flash-economists...
kscaldef 16y ago
Are there any official sources for that number? All I've ever been able to find are articles like this one: http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0 http://finance.yahoo.com/news/Nearly-half-of-US-households-a... where everything is "according to projections by the Tax Policy Center" or similar groups. And, the explanations given in that article are less than compelling to me. For example, they focus heavily on the "family of four making as much as $50,000 [with] two children younger than 17". I'm a little skeptical that such families actually make up 50% of US households. (Just consider that you'll pay taxes for 50 or 60 years, but if you have 2 children, you can only be in this category for 15 years or so.) They are also throwing in stuff like credits for "buying a new home and upgrading an existing home with energy-efficient doors, windows, furnaces and other appliances". But, again, there's not that many new houses bought, and the people buying them are mostly not families of 4 making under $50K. Nor are those families running out to spend thousands, or tens of thousands, of dollars on home upgrades. Finally, this argument also ignores the fact that most of the social safety net programs are paid for from payroll taxes, not income taxes.
klochner 16y ago
but what are they earning? I don't see a problem if someone making $30k/year isn't paying any taxes, especially if that someone is a single parent.
- jessriedel 16y ago
  Really? Let's put aside the single-parent part. Last year I made about $25,000. I enjoyed the protection of the US military, was treated at hospitals using techniques developed with federal funding, and benefited from the federal regulation of interstate commerce. I also had a nice room in a shared house in Santa Barbara, CA. I had a car, ate healthy food, went out to bars, and lounged on the beach. Why shouldn't I have had to pay taxes?
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  - seanalltogether 16y ago
    Oh but you did pay taxes. The cost of your rent is directly tied to the amount of property tax that house owner is required to pay. All the goods you purchased would have been taxed as well. The gas you bought for your car helped pay for the roads. You may not have paid a federal income tax (I don't know if that is true though) but you still paid social security taxes, and your employer paid payroll taxes that factor in to how much you get paid.
    - jessriedel 16y ago
      > The cost of your rent is directly tied to the amount of property tax that house owner is required to pay. All the goods you purchased would have been taxed as well. Well, we were talking about federal taxes. That's why I listed services of the federal government. Property and sales tax are state. Social security and gas axes are supposed to be a closed systems. None of those pay for the military, interstate commerce regulation, or medical research. But the important thing is that I wasn't claiming I didn't pay taxes. (I did, although not much.) I was challenging the notion that I shouldn't be paying taxes just because I make less thank $30k.
protomyth 16y ago
Barring a study in economics, this is why you generally want politicians who have done the budget cycle at a lower level (mayor to governor). Military Generals also tend to get it.
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asmithmd1 16y ago
But they are not including payroll tax of %15.3 that is paid on every dollar of income UNDER $106,000 They call this tax Social Security but it is just a tax like any other.
- anamax 16y ago
  > They call this tax Social Security but it is just a tax like any other. SSI is collected like a tax, but, unlike almost every other tax, the money collected is mostly returned to the payer. (Folks who didn't pay much get much better return than folks who paid a lot.)
  - _delirium 16y ago
    This will only be true if, as seems increasingly unlikely, the social-security surpluses accumulated over the past few decades are actually used to fund social security (the mythical "lockbox"). My bet is on the money never being returned to the social-security system. In that case, the surplus portion of the payroll taxes from the past few decades should be historically reclassified as (regressive) general income taxes.
  - krschultz 16y ago
    But it is also the only regressive tax we have, as all income over a certain amount is untaxed. So it ends up being a really complicated curve of who gets what return on their money, so the super rich and the super poor get the best deal, while the middle class gets hosed.
rstocker99 16y ago
I'm not sure the problem is that most politicians don't have a decent grasp of the power of incentives or lack a basic understanding in economics. Unfortunately I think they are in fact extremely adept at understanding incentive. Is it possible that you haven't carefully considered which incentives are driving their behaviour :).
gamble 16y ago
The last thing this world needs is more people in positions of power who think that ECON 101 is all they need to know about economics.

mahmud 16y ago

What is stopping the "captain" from taking a little detour to the English country side, better yet, New Zealand, and kidnapping a few farmers?

jeffesp 16y ago
A sealed record of the number of prisoners on departure.
- mahmud 16y ago
  That doesn't really stop him from the recreational murder of X prisoners, and replenishing his inventory with X Kiwis before heading to Parramatta :-) (I have the Australia Almanac and it's full of interesting tidbits. One of them was when I read "The English met with the Aborigines during a time of hunger .. 5 men where eaten". I shook my head briefly at the inhumanity and went on to read .. then paused, and re-read the passage again. Turns out, the English ate the Aborigines.)
  - hugh3 16y ago
    Got a reference for that? The history of precisely who killed whom in British/Aboriginal relations is pretty well studied, and I've never heard of any cannibalism on either side. Whether the Aborigines ever engaged in cannibalism was a somewhat fraught political topic in Australia a few years ago. (The answer is "probably someone got eaten by somebody at some point in the 40,000 year history of the thousands of Aborginal tribes, but you're not supposed to talk about it.") Anyway, the story isn't about captains "recreationally murdering" prisoners, which is the kind of thing that only a tiny number of psychopaths would do. It's just about them failing to take quite as much care of them in terms of food, water and medical treatment as they really should have.
    - mahmud 16y ago
      Heh. I said right there "Australia Almanac". It's a popular book in Aus, and have seen it in a few places. It chronicles Australia from the stone ages to late 80s (at least my old copy does.) As for cannibalism, my profile info has been a passing reference to it, in jest; it doesn't concern me at all, at least not until the zombie apocalypse (if food rations run low, I might have to hunt a few zombies and raid the mall shops for flat-screens and warm Heineken!)

greatgoof 16y ago

Sorry for this off topic comment but it's related(kind of): I've always wondered how a crime committed on a ship can be caught. For example, the crew of a ship mutinies against their captain and throws him overboard. When they get back to port, they claim that their captain was swept overboard during a storm. The crew, as one man, sticks to their story. Will anybody ever be able to prove otherwise? This approaches being the perfect crime as the number of crew members go down, doesn't it? How is this handled?

pavel_lishin 16y ago
How is this different from a crime committed anywhere else? If my friends and I push another friend off a balcony, we could say he tripped.
- greatgoof 16y ago
  Yes, but the scene of crime in this case is still available for the police to look at, and the dead body doesn't go anywhere. The position of the body can in most cases show if the victim tripped or was pushed. Tampering with the body after the fall leaves even more clues for the police to find.
  - billswift 16y ago
    Tampering with the body - unless it is really, really obvious that he's dead, somebody is going to check the body and most likely even try first aid.
varjag 16y ago
It is very infrequent that the whole crew is a part of mutiny. Captain usually has at least a few adherents as well. Kind of hard to explain away disappearance of the captain and his clique.
Tycho 16y ago
I suppose the investigators would look for inconsistencies in 'the story' as told by different parties. If 'the story' is true then additional detail will be forthcoming and generally non-contradictory between accounts. If its all a cover-up then individual suspects will invent different details and give themselves away. 'We know at least one of you is lying.' At which point someone will betray the conspiracy for favourable terms, and the police will have a real witness. Maybe also this is the reason for a 'captain's log' - if that went missing too then there'd be even more suspicion.

randomwalker 16y ago

It is easy to underestimate the difficulty of creating the right incentives. In the 1940’s, the paleontologist von Koenigswald was searching for early human remains on Java and decided to enlist the help of the locals in his search by offering them “ten cents for every piece of hominid bone they could come up with.” Unfortunately for von Koenigswald (and for his findings), he discovered too late that the locals “had been enthusiastically smashing large pieces into small ones to maximize their income.” From http://freakonomics.blogs.nytimes.com/2009/10/20/when-youre-paying-per-bone-fragment-expect-more-fragments/ http://freakonomics.blogs.nytimes.com/2009/10/20/when-youre-... (The story is from the book A Short History of Nearly Everything, which is one of the best books I've ever read. The amazing thing about the book is that it is in fact a short history of nearly everything.) Combine the difficulty of getting incentives right with the inherent problems of Government and a dangerous mix results. For example, every time a subsidy is created, a special-interest group sprouts up dedicated to preserving the subsidy in perpetuity, long after it has outlived its utility.

colkassad 16y ago
Sorry, off-topic: I highly recommend the audio book version of A Short History of Nearly Everything narrated by Richard Matthews (not the one narrated by the author).
CWuestefeld 16y ago
An old friend from India told me a parable he brought from his homeland. It's similar to this, except it backfires on the greedy guy. There's a king who wants have very rich and flavorful soup, so he tells his chef that, for every drop of grease floating in his bowl, he will pay a coin. The greedy chef wants to maximize his pay, so he dumps a lot of oil into the soup. Of course, this results in a single oil slick across the entire top of the bowl, so the king pays him only a single coin.
- confuzatron 16y ago
  Mmmm. Oil-covered soup! I think that one backfires on everybody involved.
16y ago

guelo 16y ago

This story seems too cute and oversimplified. Did it really take an economist to figure that out? I'd like to see the real story, does anyone know have a reference?

pessimizer 16y ago
It really does. It's as if I was paying UPS to pick up my packages, but it only delivered 2/3 of them. I wouldn't be wracking my brain very long to come up with the same solution. My guess is that the problem was that there were no incentives for politicians to think of this as a problem, and seeing as it survived a "scandal," probably some incentives not to care. I'd like to know who was getting the contracts, and who their connections were. I also wonder if there was some faction screaming about not imposing crushing regulation on the noble businessmen who were providing a crucial and critical function to protect our civilization, and if they overlapped with the connections:) EDIT: Also, this is a simple matter of paying for what you want. If you want people to get rid of the prisoners, pay them to haul them away. If you want prisoners delivered somewhere, pay them for what they deliver.

jacoblyles 16y ago

It's interesting that they tried the tactic of micro-regulating every aspect of the ship captain's business and that didn't work as well as broad incentives. Today, this micro-regulation is politically popular as voters can more easily comprehend the direct effects of regulation as opposed to the indirect effects of broad incentives. For example, we force drug companies to perform very extensive clinical trials for new drugs and this makes us feel safe. But simply increasing the liability drug companies face for producing harmful drugs may be more effective and would certainly be a lot cheaper (as much as 90% of the cost of a new drug is meeting FDA requirements). But I doubt voters would feel as safe in a regime of broad incentives even if it worked better.

protomyth 16y ago
I'm not terribly certain of that one. I don't disagree on the principle in the general sense, but (having been in clinical trials at one point) it seems every new drug will kill / have adverse effects on someone. Its the nature of the thing, drugs do not react the same for everyone and sometimes it is adverse. No amount of testing will fix that.
_delirium 16y ago
It's also driven partly by a preference for that kind of regulation from the companies themselves (though they would prefer less regulation overall). Having to follow a bunch of rules on FDA trials is a manageable, mostly predictable expense; large, nearly unlimited potential liability if a drug turns out to have significant negative effects 10 years down the line is much scarier to managers and stockholders. That's one reason the health industry is currently lobbying to move it in exactly the opposite direction of what you propose: they want less broad liability, and are willing to accept more FDA micromanagement in return if that's what it takes. The proposed bargain is something like: the FDA should tell us what to do, and if we follow their rules, we should be shielded from all liability.
- T_S_ 16y ago
  Regulation = Barriers-to-Entry. Businesses accept (and secretly cheer on regulators.) People get this connection, even though it is non-intuitive on the face of it. What is less studied are the regulators themselves. They rarely impose the kind of regulation that opens industry actions to sunshine and converts them to common knowledge. There is a substantial body of theory that shows that the price system breaks down in the face of informational asymmetry. But regulators don't go for it since it does not make them more powerful. That's human nature. And it's fine with businesses, who would prefer to answer to the One rather than the Many. Preserves barriers to entry.

Jinzang 16y ago

I once worked with a guy whose grandparents sailed from Portugal to California. The captain of the ship held food back from the passengers to sell when he got to California. When they arrived in California, the passengers found out and hung the captain. Which is a different kind of incentive.

zurla 16y ago

Charlie Munger: "One of my favorite cases about the power of incentives is the Federal Express case. The heart and soul of the integrity of the system is that all the packages have to be shifted rapidly in one central location each night. And the system has no integrity if the whole shift can't be done fast. And Federal Express had one hell of a time getting the thing to work. And they tried moral suasion, they tried everything in the world, and finally somebody got the happy thought that they were paying the night shift by the hour, and that maybe if they paid them by the shift, the system would work better. And lo and behold, that solution worked."

CWuestefeld 16y ago

The Maersk Dubai incident is a real-world modern-day story of a captain killing some stowaways: On March 12 1996, two Romanian stowaways, Radu Danciu and Petre Sangeorzan, were discovered on the container ship Maersk Dubai and ordered overboard on a makeshift raft, approximately 70 kilometres off the coast of Gibraltar. On May 18 of the same year, en route to the Port of Halifax, another Romanian, Gheorghe Mihoc, was found hiding in a large cargo container and forced overboard at knife point by Captain Sheng Hsiu and four of his officers. A fourth stowaway, Nicolae Pasca, was discovered by Filipino crew member Rodolpho "Rudy" Miguel and kept hidden until the ship arrived at Halifax, where eight Filipino crewmen (including Miguel) jumped ship and reported the incident to the authorities. Upon arrival in Halifax the Maersk Dubai was stormed by the Royal Canadian Mounted Police (RCMP) and Captain Hsiu and his Taiwanese officers were arrested and charged with first degree murder. The radio operator attempted to escape by jumping into the Halifax harbour and was later arrested. Captain Hsiu attempted to deny access to the ship under international shipping laws... https://secure.wikimedia.org/wikipedia/en/wiki/Maersk_Dubai_incident https://secure.wikimedia.org/wikipedia/en/wiki/Maersk_Dubai_... I learned about this story because it's part of the theme of the concept album Magellan's Wake, by Savatage (which is largely the same as the more popular "Trans-Siberian Orchestra")

devmonk 16y ago

I totally agree that incentives are great, but sometimes laziness beats incentives. I was told by someone that they paid workers in a 3rd world country by the amount they did, thinking they would do more, but instead they did the same amount in less time and then sat around for the rest of the day.

pixcavator 16y ago

One party (the government) was paying another party (the captain) for their services and then they figured out the best way to do it to get what they wanted. This is not an example of governmental regulation.

Mz 16y ago

I'm wondering if folks here have any "best practices" they can share for creating the right incentives? (Or should that be a new thread?) This was something I was very good at figuring out for raising my sons. Thus, issues related to this at my job really get on my nerves (because I am convinced it can be done better). So I am wondering what people know about solving this issue for corporate culture -- or even on the start-up scene.

Estragon 16y ago

There's no denying that incentives matter, but the key difference between the regulations they tried and the financial incentive they finally adopted is accountability. It was easy to hold the captain of a ship accountable for the number of prisoners who walked off a ship in good health, and impossible to enforce regulations about what should happen on the ship itself. The fact that they tied that accountability to a financial incentive is a red herring. They could have just as easily tied it to a regulatory penalty, with similar results. It's depressing that a professor is using such sophistry to justify his existence to his students.