Vienna Woods Law & Economics

Should law enforcement be conducted with an objective of maximizing public revenues? Should police departments be allowed to retain revenues they generate through fines and forfeitures?  An argument might be advanced that pursuing an objective of revenue generation will encourage law enforcement to enforce the law more effectively, particularly if revenues generated are returned to law enforcement agencies.  This essay argues that such policies may have surprising and unintended results in many common, everyday situations.

From time to time there are reports in the media of law enforcement seizing property using asset forfeiture laws. The crimes involved are typically serious, and convicted violators are subject to severe penalties including large fines. These actions occur in situations where it is difficult and expensive to identify offenders correctly given the large pool of un-identified offenders.  Because of the difficulty and expense involved, pursuing an objective of maximizing revenues and then recycling them back into enforcement activity would create incentives for enhanced enforcement efforts against a seemingly inexhaustible pool of offenders.

Although this result may be true under circumstances where the pool of offenders remains large, it would be too easy to conclude that attempting to maximize revenues will universally result in improved enforcement. Instead, let us consider situations where it is easy to identify and fine most offenders correctly.  In such situations, it may well be that pursuing a revenue objective can lead to routine, systematic under enforcement of everyday laws—for example, traffic regulations.

To see how this might occur, consider a nobleman who is the owner of a hunting preserve. The nobleman knows that to ensure a perpetual supply of game, he must not over-hunt the preserve.  If he does, the volume of game will decline and in the extreme become non-existent.  The “wise” nobleman will only engage in limited hunting so as to ensure a continuous stream of game in perpetuity.

By analogy, a traffic intersection controlled by signals or a road with high occupancy vehicle (HOV) lanes can be thought of as a hunting preserve. If law enforcement seeks to eliminate red light running or HOV violators, it can do so by rigorous enforcement—the violators are hunted to extinction.  Once the consideration of revenue generation is introduced, however, there becomes a strong incentive to under-enforce the law.  The rationale is simple:  if you enforce to the extent that there are few violators, there will be little revenue.

More specifically, if revenue maximization becomes a significant consideration, there will be a level of enforcement short of complete enforcement that will maximize revenue. Enforcing more rigorously, say more days per month, will, other things constant, generate more revenue.  But, other things are not constant.  As the number of enforcement days grows, the number of violators on any one day to be caught will decline—people will learn that if they commit violations they will likely be caught.  At some point, the decline in violators will just offset the gain from enforcing one more day per month.

Casual observation lends support for the notion that revenue maximization can lead to under enforcement:

Interstate 66 HOV Lanes Inside the Washington, D.C. Beltway.

The segment of I66 between Washington D.C. and the beltway around the city has HOV lanes. Vehicles using these lanes during commuting hours are required to have a minimum number of occupants.  Those that do not are subject to a fine.  Because access to I66 is controlled, enforcement is straight forward.  Police stationed at the exits can easily stop cars that do not have the minimum number of riders and issue tickets—and they do, but not on all days or even many days.  As a consequence, violators are numerous and road congestion and delay more extensive that it would be if most violators were eliminated.  This raises the question of why is there not more aggressive enforcement?  A typical governmental response is that limited resources do not allow it.  But police departments, like other government service providers, do not staff for the mean demand for their services, but rather for a certain percentile of the peak.*  This strategy allows the police to meet most, but not all, randomly occurring emergencies.  It also means that most of the time the police department will have excess staff on duty.  So, why cannot these extra staff be utilized, absent an emergency, for duties such as enforcing HOV regulations?  As suggested, a reason consistent with observed behavior is that more revenue will be generated by enforcing such regulations only sporadically, thus ensuring that there are plenty of violators to be fined when enforcement does take place.

Red Light Cameras in Central Florida.

Several small and medium-sized cities in central Florida have installed “red light cameras” to ticket motorists that run red lights. The cameras are typically provided by a private contractor who installs and operates them in cooperation with law enforcement.  The cities share the revenue that the cameras generate with the private contractor, subject to a minimum guarantee that the cities pay the contractor irrespective of revenues collected.  Initially these cameras made most jurisdictions significant amounts of money.  But, over a period of time, they also drastically reduced the number of red light runners.  Revenues from the cameras precipitously declined, in some cases to the point that some local jurisdictions were losing money on them after meeting their contractual guarantee to the commercial provider.  As a result, some jurisdictions have not renewed their contracts and are removing the cameras, sometimes even after the private contractor has offered to reduce substantially the minimum payment guarantee. Other jurisdictions have accepted the idea that the cameras improve public safety and that this improved safety comes at a cost—what they must pay the private contractor over and above revenues generated so as to meet the payment guarantees.

As outlined above, a revenue maximizing approach to law enforcement can have unintended and surprising consequences. In situations where it is difficult to identify and catch offenders, it can provide resources and incentives for aggressive enforcement.  In other situations, where potential offenders can be easily and accurately identified and caught, focusing on revenue maximization has the potential to lead to deliberate, significant under enforcement.

*  The Federal Aviation Administration, for example, uses this model for staffing air traffic controllers.  See the FAA’s document, A Plan for the Future: 10-Year Strategy for the Air Traffic Control Workforce, at page 20, available here.

Stefan N. Hoffer is a transportation economist, formerly with the Federal Aviation Administration. His areas of specialization include benefit-cost analysis and valuation of non-market traded items.  See the Contributors page for more about Mr. Hoffer.  Contact him at snhoffer@aol.com.