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Saturday, August 16, 2008

Government bait-and-switch as a solution to externalities?

I am an excellent driver, an excellent driver. As such, I know that I have never presented my fellow drivers with a negative externality while driving and using my cell phone. Nevertheless, I try hard to not use the cell phone while driving or, if I do, I put the phone on speaker mode and place it in the dash. I know I could buy a hands-free device but to date most of the ones I have seen are of low quality and the great state of North Carolina hasn't found it in its wisdom to require me to use one while driving and therefore I have saved the money.

However, California has made it illegal to drive while using a cell phone without a hands-free device. The advertised price for the first offense? $20. The actual price for the first offense? $97!!

As enumerated Gary Richards at the Mercury News here's the breakdown of the fine (get ready to be outraged):


  • Base fine: $20.
  • State penalty: $20.
  • State courthouse security fee: $20.
  • County penalty: $14.
  • County prior search fee: $10.
  • State court construction fund: $7.
  • State criminal penalty surcharge: $4.
  • Proposition 69 DNA sampling: $2.
  • Total cost: $97
  • I agree with Gary Becker that using fines is generally more efficient than jail to dissuade criminal behavior. However, in the case of cell-phone driving, there is less of a crime and more of a negative externality imposed on other drivers. Is the optimal fine to dissuade chatting on the cell phone while driving $97? Probably not. I say this because I doubt that the State of California solicited a study to investigate what fine would reduce cell-phone driving to its "optimal" level, which is not zero.

    Rather, the State of California (like many other states and local governments) sees the cell-phone violation as a way to tax certain individuals more than others. Those who don't own a cell phone will never contribute (at least through this avenue) to the Proposition 69 DNA sampling fund. Why a cell-phone driver should contribute to such a fund is beyond me; perhaps a commenter can fill me in.

    Unless the cell phone violation is challenged in court, why should someone who mails in their fine pay for security at the State Courthouse?

    The final outrage is that the government is lying about the cost of the violation. If a firm said the price of a washing machine was $20, but the cost out the door was actually $100 (not accounting for government taxes, fees, etc), there would be lawyers and regulators all over the case.

    The State of California is deliberately, in my cynical opinion, under-representing the price of the first violation. Why? Because if individuals perceive the price is low, they will be less likely to discontinue their cell-phone use. If an individual values using the phone while driving at $30 but thinks the price of a violation is $20 (deflated by the odds of being caught), then the individual will choose to use the phone. Once caught, the driver will have full information of the cost and might change their behavior.

    However, if the government accurately advertised the fine to be $97 then many individuals who might get caught (once) at $20 would not use their phone while driving and the government would not have the opportunity to hand out a violation and collect $97.

    Thus, the California state government has found a way to increase revenues in the short-medium run at the expense of individuals who would otherwise have chosen to not violate the law. Moreover, the policy continues to leave other drivers in dangers and therefore the stated benefit of safer roads is mitigated.

    You gotta love it.

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    Comments:
    "I am an excellent driver, an excellent driver."

    Is that you Rain Man?
     
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