What do a car manufacturer, a group of hungry friends, the National Institute for Health and Care Excellence, the Group Director Safety, Technical and Engineering of the UK’s railway network, and legal policymakers have in common? Could be many things, but one of those, for sure, is that they face difficult choices, having to decide what, among two or more options, is the preferred one.
Take the car company. They need to decide whether to invest hundreds of millions in the development of either an electric SUV or an electric sports car. What they would do is — based on the best available information — work out the total cost of the investment in either case, and the total expected revenue they might expect over time. Whichever of the two options provides the best return is then the one they would favour.
The economics of saving lives
This economic way of thinking, considering the trade-off between costs and benefits and comparing alternatives is something that can be (and is) used to good effect elsewhere as well, even if it’s not all about money. The hungry friends might have a choice of two places to have a meal. They would probably drive for 20 minutes without much question to a reasonably good restaurant, but if the eatery is a 2 hour drive, it had better be really exceptional. They are trading off time (and fuel) against the perceived value of the meal — very much a matter of emotion.
The Network Rail’s safety director and NICE have a much tougher task than the car maker or the hungry friends: they need to decide where to spend money to protect passengers and staff, or which drugs the NHS will provide, and which it won’t. They too look at costs and benefits. The costs are easy to see — investment in trackside fencing to stop trespassers and in <look up> automatic train protection, or the price of pharmaceuticals are straightforward. The benefit is a bit trickier, as it literally is a matter of life or death. But they manage: the railway puts a value on each life saved (something Richard Thaler cut his teeth on) to determine the return on a safety investment. NICE uses a more sophisticated concept: the QALY or quality-adjusted life year takes into account both the life-prolonging capabilities of a drug, and the quality of that extra bit of life. By mapping lives and their quality on an objective scale, both organizations can not only apply economic thinking but also neatly sidestep the ethical difficulty of their decisions.
But all of this is about preventing loss of life. After the spate of terrorist acts in Europe, some people are contemplating whether the death penalty should be reintroduced for particularly horrible crimes. Could economic thinking also be used for deciding when the state can take a life?
The economics of crime
Crime in general can be seen as an economic transaction between the criminal and society. In his classic paper, Crime and Punishment — an Economic Approach, Gary Becker, a Nobel prize winning economist, paints both criminals and the public policy system as rational actors. The perpetrator determines whether ‘crime pays’, trading off the gain of the crime against the likelihood of being caught and expected penalty, and public policy attempts to ensure that ‘crime does not pay’ through increasing the cost of committing the crime (if caught) — which of course comes also at a cost to the state (the judicial system, prisons etc).
It would be in the interest of the state (and hence society) to deliver a given reduction of crime (through a severe punishment) for the lowest possible cost — for example having three inmates to a cell and feeding them water and bread. That would fly in the face of the widely shared ethics of a civilized society, though, and such approaches have mostly long been abandoned. So ethics do not figure in any trade-off here: the ethical boundaries are an inherent part of the penal system, and non-negotiable.
But when it comes to determining what penalty fits what crime, economic thinking is inevitable. In order to provide an appropriate deterrent to any would be perpetrator (or recidivist), it makes sense to punish grievous bodily harm more harshly than the theft of a bottle of water. From that perspective, the proposition in a Twitter discussion I was involved in last week, “the death penalty is a suitable punishment as retribution for the most terrible crimes” fits with Gary Becker’s economic approach: there is a price to be paid for a crime, and more terrible crimes come at a higher cost.
The trouble is of course that the death penalty is a hard upper limit to this cost: you cannot be executed twice. So inevitably some criminals will ‘overpay’: someone executed for murdering one person is penalized relatively more than someone who kills twenty or a hundred. Moving the threshold for execution up doesn’t help of course: it is always possible to perpetrate an even more terrible crime. Furthermore, a purely quantitative view of the outcome of a crime (number of victims) neglects other ways in which a crime can be terrible: would a murderer who tortured just one person before killing them deserve the death penalty more than someone who killed two people in a painless way? (It is worth noting that these questions also apply for any other ‘maximum’ sentence such as life imprisonment. The important difference is that only the death penalty violates a fundamental moral principle.)
Becker’s economic approach uses the severity of the penalty as a cost on the crime to suppress its incidence — i.e. as a deterrent. The death penalty would obviously completely eliminate recidivism, but for deterrence the evidence points the other way. Between 1990 and 2014, murder rates in the USA declined by 50% in states with the death penalty, and by 60% in states without. Over that period, the murder rate in states where the death penalty applies has been consistently higher (marginally so at the beginning, but later on between 20% and 40%).
The utility of retribution
A comprehensive economic discussion needs to look at all the stakeholders, though, and look for externalities. Treating crime as a transaction between a criminal and the general public overlooks the victims. But here we run into the problem that any direct victims of the most terrible crimes are dead, so no level of punishment could possibly make any difference to them.
There are of course the bereaved who have lost a relative or friend forever. The old biblical rule, ‘an eye for an eye, a tooth for a tooth’, seeks to equate the punishment to the original crime, so would it not be fairer for the perpetrator, instead of being killed, to be forced into a similar loss that the bereaved experience? Clearly, executing the murderer’s brother, father, son, cousin and/or best friend would be absurd, but lifelong incarceration with no access to family and friends would come quite close. It would be perfectly possible to convict a murderer to a regime that denies them contact with a certain class of people, mirroring the loss they caused to those surviving the victim — very much in an economic way, and without risking violating a fundamental ethical principle.
But the penal system provides another important element of utility to society and the direct and indirect victims of crime: the sense that ‘justice is done’. This desire for justice and fairness is remarkably strong. One of the most striking illustrations is the so-called ultimatum game in which one of two players is given a sum of money (say £10) to be divided between the two of them. If the proposition of the first player is rejected by the second one, neither gets anything. A rational second player would accept any offer — even a penny is better than nothing at all. Yet it turns out that, on average, offers below 30% of the total are rejected: the second player is willing to sacrifice £3 in order to deny the first one an ‘unfair’ gain.
No trading off
For a large part, the Beckerian economic approach, imposing a larger cost on more serious crimes, satisfies this sense of justice. The punishment (being fined or locked up) is detrimental to the criminal, and that detriment also serves as retribution. The death penalty does not serve society economically (since it does not act as a deterrent), though. Can executing perpetrators of a terrible crime be justified on the grounds that the retribution provides more utility for society and the indirect victims?
My answer is no.
The death penalty does not work as a deterrent, and neither does it represent a lower cost to society than alternative penalties: according to the Death Penalty Information Center, not only is the court case in which the death penalty is sought more expensive, keeping an inmate on death row also costs a lot more.
But even if there were a pure economic benefit, bringing ethics into an economic trade-off is precarious. If, under certain circumstances, execution is OK, then what fundamental argument would there be against torture? If it turns out that flogging acts as an effective deterrent, how could we reject calls for introducing penalties of, say, ten blows for shoplifting, or twenty blows for drunk-driving — both much cheaper than a few months’ imprisonment?
If such economic considerations are not valid to justify the death penalty, then neither is the utility of retribution. Ethics are not for sale, not even in return for more justice. The economic way of thinking has limits, an ethics are outside these limits. As Meat Loaf sang, we “won’t do that” — there are things we won’t do for love nor for any economic utility.
Originally published at koenfucius.wordpress.com on August 11, 2016.