Caplan on optimal restitution

So this is a bit of a delayed response:
After reading my paper, Caplan recently posted that he began to think about the challenge of optimally calculating restitution. While Bryan’s willing to admit that the United States is excessively punitive when it comes to victimless crimes, he struggles accepting that violent and property crimes are overly punished. If you assume a functioning restitution-based criminal justice system, as many libertarian philosophers prefer, then Bryan thinks punishments (calculated as time served within forced work prisons) might increase rather than decrease compared to today’s system.
Bryan writes:

Let’s start with willingness to pay. If you have a comfortable First World existence, I doubt you’d settle for less than $10,000 to be the victim of a violent arm-breaking. It’s not just the pain; it’s the fear. If you add on medical expenses, that’s probably another $5000. If you count the willingness to pay of the people who care deeply about your well-being – most obviously your parents – that’s probably at least another $5000.
This all adds up to $20,000. But that is only reasonable restitution if the criminal is sure to be caught. In the real world, the chance of catching an arm breaker is, say, more like 20%. The roughly optimal restitution then comes out to $20,000/.2=$100,000.
How many years of indentured servitude in a prison factory would be required to repay this debt? While violent criminals are generally healthy, young men, they’re usually hard to monitor and manage and have few marketable skills. Even if you could get their gross marginal productivity up to $20,000 a year, and hold room and board at the prison factory down to $15,000 a year, it would still take 20 years to work off the debt. And that’s ignoring interest! At a 5% interest rate, $5000 per year just covers the interest on $100,000 of principal, so even an immortal arm breaker would never work off his debt.

While I agree that the problem of optimal punishments is more complicated than many punitive severity theorists accord, I am hesitant to conclude with full certainty that property-based crimes are under-punished in today’s system.
Bryan’s right to point out that incarceration seems unlikely to be able to extract large returns from inmate laborers. But this is precisely why restitution advocates should question the presumed efficiency of prisons punishment technology. What if any amount of imprisonment is inefficient and therefore excessive? (Bob Murphy brings this up in the comment thread on Bryan’s post).
Secondly, I’m not as comfortable making monetary estimates of inmate productivity as Bryan is. First, we don’t have a good vision as to what sorts of economies of scale would exist within a restitution-based system. Many would argue that the competitive market for law enforcement services would be more innovative. Lowering costs and increasing quality of service would thus lower crime and make security more affordable for lower economic classes. Thus crime trends and labor market conditions for poorer classes might look different to the extent that they are currently shaped by law enforcement policies.
It is true that today’s average inmate, prior to entry, yields a relatively low annual wage rate. But a variety of cases have shown to promote significantly higher levels of inmate productivity. The following material [with some editing] was cut from the final publication of my paper on repealing tattoo prohibition amongst inmates:

There are several cases where creative wardens took laissez-faire approaches to inmates participating in market exchanges. Such cases can be considered successful on three margins. Inmates employed and contracted with one another in peaceful and nonviolent ways rather than fighting violently. Second, previously unused prison labor was applied to lowered prison operating budgets. Finally, inmates gained real work experience. Once released, these skills may change their opportunity costs to commit crime.
Benson (1990) surveyed a dense prison market microcosm at Maine State Prison that attracted attention from Reason magazine in 1982 (Shedd, 1982).

[I]nmates were given access to the prison’s shop equipment to produce novelties. Other prisons have done the same thing, but Maine’s program differed from others in some significant ways. First, there is a strong market for novelties because the prison is located on a major tourist route. Second, inmates were allowed to hire one another, thus allowing for specialization and the division of labor. The prisoners could not use dollars for these transactions so the currency used was canteen coupons, which could be spent in the prison’s canteen or banked in the prison’s business office.
After Warden Richard Oliver was appointed in 1976, prisoners were allowed to “patent” their novelty designs so they had incentives to innovate and expand their production. More significantly, Oliver lifted the limit on inmates’ economic activity, and by 1978, the cap of 5,000 dollars and 5 novelty patterns that existed in 1976 was tripled. A “miniature economy” developed inside the prison, with two-thirds of the inmates participating as employers, employees, or both. Some entrepreneurs were extremely successful. One took over the prison’s canteen and turned it into a profit-making operation. This prisoner also had 30 to 50 employees in novelty production, and had diversified into other areas (e.g., he owned and rented about 100 TV sets to inmates). One prison administrator considered him to be the “most brilliant businessman I’ve ever seen.” He is now out of prison running a novelty firm that employs former prisoners. As Shedd concluded, “It wasn’t called that, but Maine State Prison had a rehabilitation program that was working (Benson, 1990, p. 337).”

German correctional institutions recently experimented in the production of high-end fashion apparel. The clothing line, Haeftling, German for “inmate,” uses prison labor to make shirts, pants, shoes, and clothing accessories traditionally worn by inmates. Haeftling brought these styles to European fashion markets. It was successful as a prison reform program and a profitable fashion enterprise immediately after its debut. “With 40 per cent of Tegel’s prisoners unemployed, the internet project has come as a welcome boost to the jail. The prisoners get an allowance of EUR 26 a month, but ones working on the clothing line can earn up to EUR 12.50 a day. The cash from the sales is divided among the bankrupt city of Berlin, the prison and the inmates (Paterson, 2003).”

Bohle [the marketing head] and his team applied market psychology to market the Haeftling range in such a way as to snare the fashionistas: “It’s about unusual labels; it’s about telling a story, delivering an authentic message and conveying credibility.” By being up front about the origins of the clothing, Bohle believes it will only be a matter of time before the Haeftling (prisoner) line takes on a cult following. Indeed, the initial reception indicates that his instincts are spot on (Amies, 2003).

The Financial Times listed Haeftling among many successful prison labor initiatives that lowered the tax burden of prison operations, and provided inmates with labor opportunities (Rigby, 2005).
Louisiana’s Angola prison hosts an annual rodeo where inmates ride and compete with one another to paying audiences. Inmates sell handmade crafts and souvenirs to over 5,000 attendees during full-day craft festivals.18 The rodeo has grown and been successful for over 40 years and has improved conditions and won awards for the once controversial Angola prison.

In conversation (we had lunch after his post), Bryan seemed interested in these examples and thought researchers and policy makers should probably look more closely at them. On the other hand, he and I agreed that neither of us would be the first to invest our own monies in such systems were the opportunity to arise.
Nonetheless, I think Mario Rizzo’s insights in Law Amid Flux should keep us from too narrowly defining our institutional parameters on this topic. The institutional changes necessary to usher in a restitution-based criminal justice system are so great that several of today’s relevant price vectors would be subject to change.

Frudent asks me about the tea-party movement.

I recently received an email from a former student now friend. He simply asked, “What’s your take on the Tea Party? On the money or just a decent direction? Or just plain wack jobs?”
I replied quickly but have since continued to think about this issue and have come up with the following response:
A significant population motivated by an ideological position that supports liberty and dislikes government, even for stupid reasons, can do a lot of good for society. If we lined up soldiers from the American revolution, or other “legitimate” revolutionary movements from history – my guess is that they would look and sound much closer to tea-party activists today than they would look or sound like 1960s radicals. The simple fact is that formal governments have a great capacity to do a lot of harm, if a group of people walk around hostile to governmental power, even if it is because they think the government is run by evil aliens from outer space, they might still be doing something very useful for society if government actually has a harder time causing harm because of their presence.
I think of the tea party movement in the same way as I think of many conspiratorial movements (911 truthers, reptilians, bohemian grove, etc.). While I think that their particular psoitions are ridiculous, I am not surprised that these groups exist and persist. In a world where the government claims to know what is best for you, better than you know what is best for yourself, it seems an obvious next step in that logical chain to presume that the government knows things that you don’t know, knows things that you would like to know and that the government actively tries to keep these things from you. I’m not convinced that the government knows what they think they know let alone do I believe that they know things that I don’t.
At the very least I think the tea-partiers represent a general sentiment that large amounts of the American people are fed up. In the recent past, the American government has launched and perpetuated unwanted wars, bailed out unpopular banks and companies and are now fiddling with the health care system. While the tea party activists seen on television communicate some not so compelling arguments against government largess and in favor of liberty – that is not to say that their frustrations are ill formed or ill directed. There are better arguments that these ordinary people perhaps do not understand nor can they well articulate. What we should be willing to admit when seeing these protests is that something is in fact wrong.
Lastly, I find it strange that everyone is so focused upon the anger of the right. To me it is no surprise that the right is angry – they lost an election. What is more surprising to me instead is the lack of anger on the left. Let’s say you were the typical coffee-shop, neo-liberal hipster before 2008. You and I probably disagreed on all things fiscal but agreed on most things cultural and social. You were anti-war, pro-gay marriage, pro-immigration, and anti-drug war – me too. Obviously you voted for Obama and probably thought of his platform and campaign “hope and change” in these near and dear policy spaces. It probably felt like you were a 1960s radical, the sort you always admired. But as the last few years have shown, Obama ain’t no JFK and health care ain’t no civil rights movement. So my question is, where are all the angry hipsters? I hold all of those same political opinions. I am anti-war, pro-gay marriage, pro immigration and anti-drug war and I am really frustrated at this administration for failing to do anything productive on these margins. But where are all my hipster friends?
A homosexual friend of mine recently argued that gay marriage is a second term issue, and that the gay community should work for health care reform first. I can’t imagine a black activist in the 1960s saying civil rights are a second term issue, so why is this similar position acceptable today?
Today I saw these two videos, they give me hope:

The captivating Amy Sturgis

This week I had the privilege of enjoying a lecture by Amy Sturgis at IHS’s summer conference Liberty and Society. Amy’s talk was awesome! Both fun and fascinating.
For those unfamiliar with her work, Amy traces the ideals of classical liberalism throughout fantasy fiction. Why would an economist like me enjoy work like Amy’s? As Pete and I explain briefly in our paper on Hayek’s Sensory Order; in lieu of neuroscience and similar to McCloskey’s perspective, literature can provide a window into the ideas, cultures and beliefs of its readers and writers. Secondly, (as I briefly allude in my recent appreciation paper of Boettke forthcoming in the Journal of Private Enterprise), many of the hypothetical worlds of the economist at times look akin to science fiction – and this can be a good thing.
Amy’s current research is centered around an interesting puzzle. As strange as it sounds, dystopian fiction used to have loveable heroes and happy endings. In recent years, young adult fiction has experienced a dystopic boom, but these newly-imagined, depressed worlds are populated with comparably depressed characters and sad endings. Apparently the emo kids have taken over the genre – so what gives?
I wasn’t aware of the pessimistic turn in young adult dystopic fiction, but I have long thought that dystopia was a special sub category of science fiction. I took a science fiction fantasy literature class in undergrad. We relied upon the following definition of science fiction – fantasy literature in which the fantastical elements of the plot are explained and accounted for with the scientific technologies of the time. According to this definition, Mary Shelly’s Frankenstein is the archetype of the genre. She brings her monster to life with electricity, just as electricity brought power and life to Shelley’s early industrialized surroundings.
This framework may help make sense of Amy’s puzzle, especially in light of Brian Caplan’s work on economic biases. Why has the genre become so fatalistic? In short, social science (economics in particular) is more complicated to understand than are the physical sciences.
After I began to study economics I thought back upon two of my favorite novels with confusion. Economics taught me that technologies do not inevitably progress with time, but they instead require an institutional environment that promotes economic freedom and entrepreneurial discovery. So it seemed odd that Orwell’s 1984 and Bradbury’s Fahrenheit 451, both socialist dystopias, contained advanced technologies.
Two exceptions to this anomaly support the case for this framework (dystopia as social science fiction) they also allude to an answer to Amy’s puzzle. In Ayn Rand’s Anthem and Hazlett’s Time Will Run Back, technology declines under socialism and society retrogresses to an almost primitive state. Why were these authors outside the trend? They knew good economics!
To fully explain Amy’s puzzle would require demonstrating that the authors and audiences of today’s young adult dystopias are systematically more ignorant or biased of economic insights than in the past. My first impressions are that while nerdy guys used to be the bulk of sci-fi authors and readers, today more young women are driving the genre. Caplan has found that the former think more like economists than the latter.