Monday, September 24, 2012

Incentive Compensation Can Be Too Strong

A recent NY Times article reports that about 1,000 of the elderly in Shaoyang, have been deputized to enforce minor nuisance laws. They have been given the authority to ticket citizens who litter, spit in public or park illegally. Except that they get to pocket 80% of the fines collected from the tickets they issue. What would we expect to happen to enforcement?

That's right, violations have been found where perhaps none occurred:
A convenience store clerk reached by phone described how the newly empowered urban management officials have been pouncing on motorcyclists stopped at red lights, summons books at the ready. “Many of us depend on motorcycles to get around, but they’re now giving us tickets for not wearing a helmet, for not having insurance, or for not carrying our licenses,” complained the clerk, who would give only her surname, Li. “None of us dare drive our motorcycles anymore — it’s just too risky.”

What I expected, but has not been reported yet, is the settling of old grudges by trumping up violations against some neighbor who won't "toe the line." Or worse, extorting payments from the neighbor so as to avoid ticketing - an ersatz senior citizen protection racket.

From the policy perspective, the choice seems to be between imperfect under-enforcement of the laws and imperfect over-enforcement.
Zhang Yue, a downtown shop owner, acknowledged that city streets have become increasingly chaotic but suggested that the government reconsider its experiment. “People in this city have no respect for the law, making the traffic situation really terrifying,” he said, “but this crackdown is going very far, perhaps too far, in the other direction.” 

Hat tip: Angus

4 comments:

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  4. This seems like a really unethical policy. You’ve outlined the major reasons why in your post, but ultimately it comes down to the fact that it leaves the door open for corruptions. I work as a fundraiser, and a question I’m often asked by those who don’t understand philanthropy and fundraising is, “do you get a percentage/commission of the money you raise?” I’m always bothered by this question, and emphatically answer, “NO!” It would be highly unethical to be compensated relationally when I’m trying to raise money for a nonprofit organization. The donor believes that their entire contribution is going toward the wonderful things I’ve talked about. While I am indirectly compensated for my work, a “commission” on philanthropic contributions would completely change the industry (and not for the better!).

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