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I found this in JFK Airport in New York City... An automated iPod selling machine...



Believe it or not...

Parking Tickets and Incentives...

When I arrived in Jerusalem in 2004, I was very excited about fulfilling my dream of becoming an Israeli citizen. I even remember one day, I was walking down the streets, and then suddenly, a policewomen approached to me and asked me for my ID. I did not have a clue why did she stop me, but I guess I did not realize that she was about to fine me for jaywalking… yes, can you believe that? Jaywalking!!! Well, it was not a much transited avenue, but a single lane street. Of course, I was so excited of being able to speak in Hebrew that I happily gave her my ID, still without knowing about the ticket. Then she told me that I crossed the street without waiting for the walk signal, and I received a NIS 100 fine (about USD$20 at that time). I was dumb, I could have given her my Venezuelan ID, and speak in Spanish… In any case, while she was writing me the ticket, there were many other people doing the same thing as I did, and were not being punished as I was...

On that time, just when I arrived, without a job, paying that ticket was for me a lot of money. The average income for a new immigrant in Israel, who has not been inserted yet in the labor market, is about NIS 20 an hour (minimum wage). So, the fine for me was worth 5 hours of work… a lot…

This is exactly what fines are all about, or should be. Every person has a limited amount of time in which he decides whether to work or not, in order to consume goods, or to have some leisure respectively. But of course, for everyone, the “value” of time varies, depending on your schooling, experience, tenure, etc. So, fines are a punishment for low income people, or more specifically, people that cannot win more by avoiding law (like parking on a prohibited spot for example) than the cost of the fine.

For instance, imagine New York City. Now imagine you are a wealthy business man, who has a meeting that will make you earn about USD$2000, and the meeting is somewhere in Manhattan, where free parking spots are virtually impossible to find. So, you have another 10 minutes for your meeting to start, and you are still going around the block with your car trying to find a place to park it. Well, you have the information that a parking ticket will cost you USD$200… so if you park on the street, on a prohibited spot, then you will be earning $1800 instead of $2000. However, if you don’t park, you are not earning anything. What would you do? Obviously, the parking ticket is not a strong enough incentive to this person not to park where he cannot. It is all about the cost of time.

I was riding in the T (subway) in Boston, MA and I saw a sign which said: “It is prohibited by law to smoke in this train. Anyone who obeys this law will be punished with a fine not higher than $50, imprisonment for no longer than 8 days, or both”. Ok, so let’s analyze this. From my point of view, this is a very good incentive to respect the law. For an individual who has a very high cost of time, he surely doesn’t mind paying the $50, but he cannot take the risk of being 8 days in jail, and having all those foregone earnings while he is not in the office. On the other side, an unemployed individual, in terms of cost of time, being in jail for eight days is not what makes him worse off, but the USD $50 that he has to pay. I think this is a wise signal.

But what can be done with parking tickets? If we start putting in jail everybody who parks his car wherever he wants, then maybe half humanity will be behind bars. Well, I heard that in Finland, parking tickets are given taking into consideration your wages. For higher wages individuals, then your parking ticket will be higher. I don’t know exactly how does this work, and how do they construct the correct incentives so that people won’t try to cheat, but, if I have any Finn reader, please feel free to comment.

In any case, I am sorry for being away for such a long time, and there are more posts coming soon.