Incentives Are Everything

A few years ago, I was asked to be part of a “This I Believe” presentation at the Unitarian Universalist Society of River Falls (WI) society. If you know me at all, you know that was a tough subject because I'm not much of a "believer." I found a few things that turned out to be more core to my belief system than I'd suspected and among that small list was "incentives." The study of economics has been pretty much a waste of air until the last few decades. For most of my life I've been in agreement with John Maynard Keynes who supposedly said, “Capitalism is the astonishing belief that the nastiest motives of the nastiest men somehow or other work for the best results in the best of all possible worlds.” Our current executive branch is consistently demonstrating that fact and the last four decades of American economics ought to be enough to put the last nail in most of capitalist theory. Market-driven capitalism tacks on a giant list of poorly designed incentives which work to damage democracy, decimate the ecology, limit personal liberty for all for a tiny percentage of wealthy and powerful bad actors, and promote illiteracy and ignorance in the general population. The mythical “free market” libertarians and traditional feudalists argue so irrationally for is just not a sustainable or just economic system.

What doesn’t work for business works just as badly for government. In our current irrational and poorly functioning “representative” system, unjustifiably powerful groups like the police, prison system employees, military, and government employees are isolated from their customers—the rest of us—by layers of union protection, political clout, and outright terrorism. When cops murder unarmed citizens, the only defense we have is the civil lawsuit. Convicting a cop of any crime, regardless of the evidence, is nearly impossible but getting a violent crime conviction requires all out magic. With that kind of insulation from responsibility and the soaring cost of police departments and their pension funds, cities are going broke trying to pay off the multitude of police misconduct lawsuits. “Dallas civil-rights lawyer Don Tittle says the increased availability of camera footage and shifting attitudes toward police are affecting cases. ’Up until recently, when it came to civil lawsuits, there were two groups that had a distinct advantage, where you had to knock them out to win. And that was doctors and cops. But with the advent of video, and the changing perception of society, I don’t think police are held in the same regard.’”¹  Suddenly the cost of maintaining abusive police officers is turning into a major city budgeting problem.

With the city government budgeting systems as they exist, that problem is unsolvable. For example, the Alberquerque, NM police department is the most expensive, lawsuit-wise, department in the country and has been under federal investigation and oversight often in the last few decades, but appears to be completely impossible to rein-in. New York City, between 2010 and 2014, spent $601M dollars settling police misconduct lawsuits. In 2015, New York City paid out $228M for police misconduct lawsuits. In 2017, New York paid $302M for the same kind of crap. That city’s 2018 police department budget is $5.6B or a little more than $101k per employee (~55,000 employees). Small towns aren’t immune to this kind of idiocy, either. "In Sorrento, La., for example, a newly hired cop in 2013 slammed into another car on a highway after going on a high-speed chase to catch a separate driver who was speeding. The driver who was hit sued. It was later revealed that the officer was already one of the town's most zealous issuers of speeding tickets, hundreds of which were later thrown out in court. That incident, combined with other lawsuits against the police department serving the small town of 1,500 people, prompted the city's insurer to drop its coverage. The town disbanded its police department shortly thereafter."²

The fix for this is to change the incentives, not to shield bad cops with even more anti-democratic police state Republican stupidity like the unconstitutional and anti-democratic House bill grossly misnamed the “Protect and Serve Act.” New York City covers the cost of those lawsuits out of the general budget, shifting all of the responsibility from the cops to the taxpayer. That is an example of a mindless system with no feedback loops to reinforce decent behavior or to inhibit misconduct.  The solution is to move the cost of settling these cases to the departments that caused them. If, for example, the NYPD had to pay $302M out of its budget to settle misconduct cases, that would result in roughly 3,000 fewer employees (at that $101k/employee cost). If it is true that the cops involved in misconduct cases are “a few bad apples,” the many good apples (if that turns out to be the case) would start cleaning up the department before their own jobs are on the line.

Like I said, incentives are everything. You just have to design them to serve a better purpose.

¹ https://www.wsj.com/articles/cost-of-police-misconduct-cases-soars-in-big-u-s-cities-1437013834

² http://www.governing.com/topics/finance/gov-police-misconduct-growing-financial-issue.html