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Richard Posner on the changing attitude of radical feminists to the commodification of labour
23 Dec 2014 Leave a comment
Can crime be deterred: hijackings as a case study of the increase in the probability of apprehension
05 Dec 2014 1 Comment
in economics of crime, law and economics, transport economics Tags: crime and punishment, deterrence, economics of crime, hijacking, law and economics
In 1977, William Landes published a classic study of crime and punishment. He investigated what happened to the number of hijackings in the USA after mandatory screening of passengers and their carry-on luggage was introduced in 1973.
During the peak period of hijackings, 1968 to 1972, the probability of apprehension the hijacker was 15%. For those hijackers that were caught, their average prison sentence was 30 years in 1972 to 1974. One quarter of hijackers were committed to mental institutions. Hijackings became so common that:
[a]irliners carried approach plans for the Havana airport and crews were instructed not to resist hijackers. There were also standard diplomatic procedures for obtaining the return of planes and passengers
No hijackers were killed during the course of their crimes until 1971. After that, there is about a 10% chance of the hijacker being shot dead. Air marshals started riding on US planes in 1970; there were about 1200 of these air marshals, who had to be about the most boring job in the world.
The primary purpose of hijackings in the USA in the late 60s and early 70s in the USA initially was to obtain free transport to Cuba for the political purposes or to avoid prosecution for crimes. However, in the early 1970s, this demand for air transport started to decline as news filtered back about how poorly these hijackers were treated in Cuba. A few of these hijackers chose to return to the United States.
Interestingly, the substitute for flying to Cuba was para-hijackers. They demanded a ransom of an average of $300,000 and then parachuted out of the plane. One out of 18 succeeded. Their average prison sentence for the 11 that survived was 43 years.
As the table above shows, the number of hijackings in the USA immediately fell from over 20 per year, with a maximum of 38 in 1969, to one or two per year after the introduction of mandatory screening of passengers and their carry-on luggage In 1973.
All hijackers were apprehended between 1973 and 1976. Apparently, hijackers of all breeds and political complexions do not enjoy the prison experience. Criminals don’t like to be caught.
Interestingly, lunatics could be deterred. They retained sufficient capacity for planning to abandon their plans to hijack a plane because of the inevitability of arrest at the boarding gate after the metal detector sounded off from 1973 onwards. Only to the 12 offenders that were apprehended for attempted hijacking between 1973 and 1976 were committed to mental institutions. The remaining 10 were just plain stupid.
If lunatics cannot be deterred, do not respond incentives, they should have continued to hijack planes at the same rate as prior to the introduction of mandatory screening in 1973.
That said, mandatory screening was not cheap, which may explain why airlines and their passengers were putting up with up to 40 hijackings per year, as Landes explained using 1977 dollar, which was back when a dollar actually bought something:
Although the mandatory screening program is highly effective in terms of the number of hijackings prevented, its costs appear enormous.
The estimated net increase in security costs due to the screening program (which does not include the time and inconvenience costs to persons searched) is $194.24 million over the 1973 to 1976 period.
This, in turn, translates into a $3.24 to $9.25 million expenditure to deter a single hijacking. Put differently, if the dollar equivalent of the loss to an individual hijacked passenger were in the range of $76,718 to $219,221, then the costs of screening would just offset the expected hijacking losses.
I should add, however,that air travel was much more expensive and much less frequent in 1973. The jumbo jet had only been introduced two years previous. Air travel is much more frequent these days so would the contemporary travelling public be willing to put up with the equivalent of hundreds of hijackings per year?
Caption: A Northwest Orient Airlines plane that was hijacked on July 1, 1968, is pictured at the Miami International Airport after returning from Cuba.
What did happen after the crackdown on hijacking was the terrorists change tactics. Embassy takeovers another type of sieges surged. Prior to the crackdown on hijacking, these were rare.
When embassies became fortified, the terrorists instead started kidnapping or murdering diplomats after they left the Embassy compound. As Walter Enders and Todd Sandler found
The existence of complements and substitutes means that policies designed to reduce one type of attack may affect other attack modes.
For example, the installation of metal detectors in airports reduced skyjackings and diplomatic incidents but increased other kinds of hostage attacks (barricade missions, kidnappings) and assassinations.
In the long run, embassy fortification decreased barricade missions but increased assassinations.
Speaking of natural monopolies and predatory entry – Netscape is 20 years old today!
15 Oct 2014 Leave a comment
in entrepreneurship, industrial organisation, law and economics Tags: browser wars, law and economics, Microsoft anti-trust trial, Richard McKenzie, Robert Bork, scourge of lower prices, William Shugart
You show your age when you remember that people used to pay $49 to download the Netscape Navigator browser.
Yes,people used to pay for browsers until nasty Microsoft came along in act of predatory entry started giving its Internet browser away from free in the hope of monopolising the market once Netscape went out of business when it would jack its price up again to recoup the intervening losses.
After the first browser war, the usage share of Netscape had fallen from over 90 percent in the mid-1990s to less than one percent by the end of 2006.
During the 1990s, Microsoft competitors — Netscape, IBM, Sun Microsystems, WordPerfect, Oracle, and others —pressed the Justice Department to sue Microsoft for tying Internet Explorer to Windows even though only one of them, Netscape, had a browser.
The demise of Netscape was a central premise of Microsoft’s antitrust trial, where the Court ruled that Microsoft’s bundling of Internet Explorer with the Windows operating system was a monopolistic and illegal business practice.
After losing on appeal , the Department of Justice announced in September 2001 that it was no longer seek to break up Microsoft and would instead seek a lesser antitrust penalty. Microsoft decided to draft a settlement proposal allowing PC manufacturers to adopt non-Microsoft software.
As William Shughart and Richard McKenzie observed:
Microsoft’s critics have advanced a number of economic theories to explain why the firm’s behaviour has violated the antitrust laws.
None of those critics has articulated why or how consumers have been harmed in the process.
Instead, the furious attacks on Microsoft have focused on the injuries supposedly suffered by rivals (on account of Microsoft’s pricing and product-development strategies) and by computer manufacturers and Internet service providers (on account of Microsoft’s “exclusionary contracts”).
Before former Judge Robert Bork became a lobbyist for Microsoft’s rivals, he said in The Antitrust Paradox:
Modern antitrust has so decayed that the policy is no longer intellectually respectable.
Some of it is not respectable as law; more of it is not respectable as economics; and … because it pretends to one objective while frequently accomplishing its opposite … a great deal of antitrust is not even respectable as politics.
A simple rule for a complex world: the moment that evidence is tended to a court about what happened to the competitors in a lawsuit under competition law, that court must dismiss the suit out of hand.
Too many lawsuits under competition law are designed to protect the consumer from the scourge of lower prices!
The best proof that a merger or other business practice is pro-consumer is the rival firms in that market are against it. Why would a firm be against a merger or other business practice that raises the prices of their business rivals?
HT: HistoricalPics
Legal Systems Very Different from Ours – David Friedman’s forthcoming book
14 Oct 2014 Leave a comment
in comparative institutional analysis, constitutional political economy, David Friedman, law and economics Tags: comparative economic analysis, comparative law, David Friedman, law and economics, Legal systems very different to ours
The central idea of David Friedman’s forthcoming book on legal systems of different societies is they face similar problems and solve them, or fail to, in an interesting variety of ways.
Looking at a range of such societies and trying to make sense of their legal systems provides a window into both problems and solutions, useful for the general project of understanding law—in particular but not exclusively from an economic point of view—and for the narrower project of improving it.
Unlike the usual course in comparative law, he did not look at systems close to ours such as modern Civil Law or Japanese law. Instead, Friedman examined systems from the distant past (Athens, Imperial China), from radically different societies (saga period Iceland, Sharia), or contemporary systems independent of government law (gypsy law, Amish).
System Chapters
Icelandic Law
18th c. English Criminal Law
Gypsy Law
Chinese Law
Athenian Law: The Work of a Mad Economist
Jewish Law
Islamic Law [Recently Updated]
Plains Indian Law
Puzzles of Irish Law
Amish Law
Somali Law [Recently Updated]
Commanche, Kiowa and Cheyenne: The Plains Indians
Thread Chapters
Enforcement Mechanisms: Civil, Criminal, And Lots More
The Incentive to Enforce: What and How Much
Embedded and Polylegal Systems
God as Legislator
Making Law
Guarding the Guardians
His Class web page is based on Student Papers from the SCU Seminar
On the economics of nuisance suits
10 Oct 2014 Leave a comment
in law and economics Tags: Eric Rasmusen, law and economics, nuisance suits, vexatious litigation
A lawsuit with a low probability of success at trial, brought even though the plaintiff knows that his probability of prevailing would not justify his costs if the judicial process were to be completed instantly.
There are a range reasons why plaintiffs bring suits with little or no chance of success; some of these reasons include extracting a small cash settlement from a respondent who is too busy to spend time in court, and preparing for court. In the area of intellectual property law, nuisance suits are sometimes called patent trolls. Patent trolls are a real problem with major corporations spending large sums of money to defend these suits.
Courts are increasingly used as a high-cost, last-resort venue of business negotiation for parties who are unable to negotiate more economically.
It is costly to respond to the plaintiff’s nuisance suit and failure to respond will lead to a default judgment against the defendant. The defendant will settle with a plaintiff for any amount less than the cost of responding to the plaintiff’s complaint even if the suit is wholly meritless.
The source of nuisance suits is the ability of the plaintiff cheaply to place the defendant in a position where he would lose unless he engaged in a relatively costly defence.
Nuisance suits actually have quite a simple solution in the case of plaintiffs who really don’t want to go to court even in the American system where each party pays their own legal fees.
That solution is to call their bluff by tying your own hands in terms of offering a settlement out of court. Introduce a legal rule that gives defendants the right to have courts declare that settlement agreements will not be enforced. Defendants can simply waive their right to settle out of court and have any such settlements enforced in courts.
This burning of the bridges by the defendant on any option of settlement puts the vexatious litigant in the position of having to go to court even though they don’t want to incur those expenses.
The vexatious litigant will drop the case because they have nothing to gain, and something to lose by going to court, especially in the English system where the losing party pays part of the other side’s costs. Anticipating that the defendant would elect to prevent court enforcement of any settlement, the plaintiff would not bring his nuisance suit in the first place.
The optional for going the right to settle out of court will not deter all nuisance suits.
- The suits might be a a grudge suit or official vindication of one’s cause.
- The plaintiff may value the publicity as is commonly suspected of public prosecutors who bring sensational but legally dubious civil or criminal suits.
- The plaintiff may value the delay that litigation brings. If the suit includes a preliminary injunction, or if the plaintiff can win with a biased lower court even if he knows he will lose on appeal, he is able to delay something costly to them. The defendants may be able to delay yielding up property or complying with rules. Also, especially in land-use disputes, delay may enable a litigant to lobby to change the relevant law to his advantage.
There are limited versions of this prevention of the enforcement of offers of settlement through payment into court and Calderbank offers of settlement without prejudice save as to costs.
Under each of these litigation cost rules, if an offer of settlement is made without prejudice save as to costs, if the plaintiff does no better in court than he does under a prior settlement offer made without prejudice save as to costs, he is not entitled to recover costs of litigation beyond the point where the settlement offer was made.
The issue with which of the American and English system of liability for costs deters low value litigation is for another blog. As a hint, the English system where the losing party pays a substantial part of the winning party’s costs, makes strong cases stronger and weak cases weaker. Strong cases are more likely to go to trial because they also get the costs back.
A loser-pays rule for legal fees doesn’t work if the nuisance suit is filed with the intention of never ending up in court, but rather to waste the time of defendant, and that time is sufficiently valued by the defendant that it will pay a small cash sum for the suit to go away.
Nuisance suits are different to suits that profit from errors of law by the courts. Many suits that appear ridiculous win. Their problem is not procedure, but substance.
The proper derogatory term is court error and unjust law, depending on whether other courts would replicate the same bad result. Such suits may make up the bulk of what the public complains of as nuisance suits, but are hard to remedy by procedural reform.
HT: Eric Rasmusen
Utopia, you are standing in it! 
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