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It's unnecessary to set a fine so high that the person doing it would "pay back" the harm to society on average if they did it. You merely have to set a fine so

It's unnecessary to set a fine so high that the person doing it would "pay back" the harm to society on average if they did it. You merely have to set a fine so high that it deters people from doing it. Let's say speeding causes a harm of 500 dollars, and there's a 10% chance of getting caught. Then you would put the fine at 5000 dollars. However, it might be the case that a 500 dollar fine (with an expected payment of 50 dollars) is already enough to stop everyone from doing it, since nobody likes speeding so much that they would pay 50 dollars for it on average. In that case, setting a 5000 dollar fine would just be overkill, and it could hardly be called efficient. Moreover, your answer assumes that utility can always be measured solely in terms of money. If we measure the utility of society in terms of the number of people speeding (lower is better), then no amount of money can compensate for an increase in the number of people speeding. Then the answer would be to set the fine such that the number of people who choose to speed is the lowest, and does not involve the "expected harm" to society at all. Even if you do assume that there is a conversion factor between "number of speeders" and "money", then it might still be sufficient to set the fine at a much lower number than you would get using your formula. You cannot just take into account the utility of the society, you also have to take into account the preferences of individuals (which guide their actions). This can also be used to justify individual fines: if a 100 dollar fine is enough to stop you from speeding, and a 200 dollar fine is necessary to stop someone else from doing it, then why should I set the fine for both at 200 dollars? How can this be called efficient? You could argue it's more fair, but that's more a question of what's moral and has little to do with simple calculations, which you seem to be advocating for.

ikeboy 7y ago
Yes, if for whatever reason nobody values an activity over the fine my formula produces, then any amount in between will be equally efficient: in your example any fine above $500 is equally efficient. But note that nobody ever pays the fine! In the real world, someone ends up paying the fine, it is not the case that fines deter everyone. So your example isn't reality. >Moreover, your answer assumes that utility can always be measured solely in terms of money. If we measure the utility of society in terms of the number of people speeding (lower is better), then no amount of money can compensate for an increase in the number of people speeding. Then the answer would be to set the fine such that the number of people who choose to speed is the lowest, and does not involve the "expected harm" to society at all. Sure, if your goal is prevent speeding at any cost then you should set the fine to be infinite. Or rather, set it at max wealth (since above that can't be collected) and pour all your policing resources into detection. Obviously, this also doesn't reflect reality. >This can also be used to justify individual fines: if a 100 dollar fine is enough to stop you from speeding, and a 200 dollar fine is necessary to stop someone else from doing it, then why should I set the fine for both at 200 dollars? How can this be called efficient? Again, it depends on the goals. In my framework the goal is to prevent people from doing something that harms society if and only if the benefit they get from it is less than the societal harm. Setting the fine equal to the harm (modulo probability) does that. If you charge some people more than this number, then they'll be deterred away from the action even when it would be efficient to do it. Conversely if some people are charged less.

ikeboy 7y ago

Yes, if for whatever reason nobody values an activity over the fine my formula produces, then any amount in between will be equally efficient: in your example any fine above $500 is equally efficient. But note that nobody ever pays the fine! In the real world, someone ends up paying the fine, it is not the case that fines deter everyone. So your example isn't reality. >Moreover, your answer assumes that utility can always be measured solely in terms of money. If we measure the utility of society in terms of the number of people speeding (lower is better), then no amount of money can compensate for an increase in the number of people speeding. Then the answer would be to set the fine such that the number of people who choose to speed is the lowest, and does not involve the "expected harm" to society at all. Sure, if your goal is prevent speeding at any cost then you should set the fine to be infinite. Or rather, set it at max wealth (since above that can't be collected) and pour all your policing resources into detection. Obviously, this also doesn't reflect reality. >This can also be used to justify individual fines: if a 100 dollar fine is enough to stop you from speeding, and a 200 dollar fine is necessary to stop someone else from doing it, then why should I set the fine for both at 200 dollars? How can this be called efficient? Again, it depends on the goals. In my framework the goal is to prevent people from doing something that harms society if and only if the benefit they get from it is less than the societal harm. Setting the fine equal to the harm (modulo probability) does that. If you charge some people more than this number, then they'll be deterred away from the action even when it would be efficient to do it. Conversely if some people are charged less.