Ag-Gag Bills: Bad for Animals, Bad for Business

Filed Under (Other Topics) by Dan Karney on Apr 27, 2012

“Sunlight is the best antiseptic.” –Louis Brandeis, U.S. Supreme Court Justice

Over the past few years, animal-rights groups have increasingly used undercover investigations to expose horrific conditions in factory farms and slaughter houses across the United States.  One such investigation in 2008 by The Humane Society of the United States (HSUS) prompted the largest recall of beef in U.S. history and resulted in new Federal legislation banning the slaughter of downed cattle (source).

In what can accurately be described as backlash, bills have been introduced across the nation in state legislatures to discourage whistle-blowing and undercover investigations on factory farms and in slaughter houses (source).  These “ag-gag” bills criminalize undercover investigations and will have a chilling effect on future investigations into animal abuse (source).  Earlier this Spring, Iowa became the first state to pass ag-gag legislation, but a similar bill in Illinois failed (source).

In addition to protecting bad actors that abuse animals, ag-gag legislation is also bad for the honest farmers that adhere to humane animal husbandry practices.  As State Senator Quirmbach from Iowa accurately observed, “Passing this bill will put a big red question mark stamped on every pork chop, every chicken wing, every steak, every egg produced in [Iowa] because it will raise the question of ‘what have you got to hide?’”  A good question!

The recent fervor over pink-slime in beef shows that the American public demands to know more about where their food comes from and how it is made.  Hiding questionable farming practices behind ag-gag bills is the wrong way to go.  Selling food inherently requires trust between producers and consumers.  When consumers lose trust – as in the pink-slime case – the effects can be disastrous for business.  In the end, the truth always comes to the light of day.

Privatize, Privatize, Privatize!

Filed Under (Environmental Policy, Finance, Other Topics, U.S. Fiscal Policy) by Don Fullerton on Apr 6, 2012

Many advocates of small government have many ideas for how to move activities out of the public sector and into the private sector.  Social Security can be privatized, using fully-funded private retirement investment accounts.  Education can be privatized, with vouchers that can be used by parents to choose the best private school or charter school.  All could save money for the federal budget, by taking advantage of the more efficient operations of the private sector.

In this blog, I’ll describe my new idea for privatization.  Why not privatize the military!  Many rich Republicans want more military spending, and I can imagine that they might well be willing to pay for it.   Why not let them?  Now, they are probably not willing to simply donate money to the federal government, with no recognition, nor any private return on their investment.  But, we could provide the same kind of naming rights as many private operations: FedEx Field is the home of the Washington Redskins, because FedEx paid for the naming rights and they get PR advantages of doing so.  The name of the business school at the University of Texas is the “McCombs School of business”, because Red McCombs paid for the naming rights, and he gets PR advantages of doing so.  The J. Paul Getty Museum is the name of a major art museum in Los Angeles, presumably because somebody in the Getty family or foundation paid for the naming rights and gets PR advantages of doing so.

So, the idea is to write the name of any major donor on any piece of military equipment for which that donor covers at least half the cost.  Pay for half a tank, and it will be the “Your Name Here” Army Battle Tank, with the name engraved on the equipment.  You can even visit it, at certain times of year under certain conditions, and have your picture taken with it.  If you are willing to pay a little more, half the cost of a cruise missile, you can have your name on that instead.

Now I’m not suggesting that the donor ought to be allowed to decide when to push the button.  Nor even make any decisions at all.  The payment is just to help out the U.S. Federal Budget deficit, with recognition for doing so.  I’d bet that a good number of millionaires would really be willing to pay, for that kind of prestige.  It might even be greater recognition if the missile were actually used!  The well-heeled U.S. businessman might even get more U.S. business activity, after the newspaper announces that the “Your Name Here” cruise missile was launched at Tehran, killing 137 innocent civilians, but successfully deterring the Iranian government from pursuing a nuclear weapon that might kill even more.

Too Many Pets: a Supply-Side Problem

Filed Under (Other Topics) by Dan Karney on Mar 9, 2012

Bob Barker, former host of the long-running TV game show “The Price is Right”, used to end each daily broadcast with the plea (source): “Help control the pet population. Have your pets spayed or neutered.”  Drew Carey, the replacement after Bob Barker’s retirement, continues to end each show with this same admonition.  Indeed, this is a quite curious thing to say at the end of a game show where someone just won thousands of dollars in cash and prizes.  So why did Bob Barker say this? What did Bob Barker mean?

In short, the United States has a pet overpopulation problem resulting in the euthanizing of 3-4 million cats and dogs per year (source).  One animal every 8 seconds!  These animals are euthanized because they do not have homes and stray animals are deemed a public nuisance, so animal control laws often require stray animals to be euthanized if an owner is not quickly found.

In economics jargon, these cats and dogs are euthanized because the supply of companion animal outstrips the demand for companion animals.  There is no doubt that a significant demand for companion animals exists in the United States.  The National Pet Owners Survey estimates the cat and dog population in U.S. households at 78.2 million and 86.4 million, respectively.  Obviously, Americans want companion animals and many spend significant amounts of money to acquire one.

Indeed, pet stores and breeders sell companion animals in a market system, so why the over-supply of pets?

An important reason for the over-supply of dogs and cats come from the fact that many pet owners do not spay or neuter their animals.  Inevitably, when they procreate, litters of kittens and puppies need to find new homes.  That is, when a pet is not spayed or neutered, the pet supply (likely!) increases in a non-market transaction.   When the demand does not keep up with supply and these animals cannot find homes, then they end-up in shelters and are often euthanized.

As an animal lover, Bob Barker wants to minimize the number of animal euthanasia cases.  The platform of a daily TV game show reaching millions of people allowed Bob Barker to raise awareness about the need for pet owner to spay and neuter their animals.  In honor of Bob Barker’s efforts over the many years, I remind all my readers that February 28th was National Spay & Neuter Day. It is not too late to have your pet spayed or neutered!

Make the LEAP!

Filed Under (Other Topics, U.S. Fiscal Policy) by Don Fullerton on Mar 2, 2012

Academic research is inherently a “public good”, which means that once a professor does all the research work and writes the paper, the social marginal cost of another reader is ZERO!  If the research is useful, then it could be useful to additional readers at no extra cost whatsoever.  Any charge for reading it would discourage those who could benefit while imposing no social cost whatever.  Thus, the optimal price to charge per reader is zero.

But that’s not what journals charge.  Non-profit associations might charge very little to subscribe to their journals, basically enough to cover their printing cost and mailing cost.  Now, however, any research paper can be provided even more cheaply on a website.  One useful purpose of an academic journal, still, is for the editor and reviewers to pass judgment on whether the research is good enough to be published, and to make further suggestions for improvement before publication.   So, each paper to be published has some cost to review it and some cost to post it on the web.  Even then, the social marginal cost of one additional person to read it is still zero!

How can a non-profit journal cover the cost of editing and reviewing the paper, and still provide free access?  Just as for many kinds of “public good”, the nonprofit organization might need donations!

Even worse is the still-huge number of academic journals that are published not by a non-profit research association or by a university press, but by a private for-profit company.  Those private publishers own the copyrights, and so they can charge a high enough price to make money, above and beyond their costs.  And even worse than most private for-profit publishers is Elsevier.

Elsevier had a good idea, years ago, when they founded a large number of field journals in economics and in other disciplines.  Elsevier now owns about 90% of the private for-profit academic journals, a virtual monopoly, so they charge huge prices and make huge profits.  Those journals have become prestigious, and so authors want to publish in them.  In order to “get in good” with the editors, those potential authors are willing to review other submitted papers for free.  Elsevier uses all this free help from university professors who are reviewers, to improve the quality of the product that they sell, in order to make even higher profits.

I don’t blame Elsevier, a private company, for trying to make money.  They have done a good job of it.  But as university professors, we do NOT need to provide free help to them!  I highly recommend reading a paper by Ted Bergstrom called “Free Labor for Costly Journals” in which he points out that we academic researchers at non-profit or state-run universities are helping private publishers make profits.  I would also recommend a new blog by Prof. Jacob Vigdor of Duke University.   

Mathematicians are forming a boycott of Elsevier.  For another example, the nonprofit “Association of Environmental and Resource Economists” (AERE) are discussing whether to break away from Elsevier and start a new non-profit journal (read about all the difficulties in an article starting on page 23 of the AERE Newsletter).   Finally, Ted Bergstrom has lots of info on his website.

We are stuck in a “bad equilibrium.”  University researchers want to publish in the prestigious journals, which are often journals of private publishers like Elsevier.  So those researchers review for free, for Elsevier, and they want their university to subscribe to those good journals of Elsevier.  And profits are made, by Elsevier.  We’d all be better off if we could “leap” to the “good equilibrium” where only non-profit associations and universities publish academic journals, at cost.  Then when we review papers for free for those journals, and when the universities subscribe to those journals, we are all contributing to a public purpose, the provision of a public good.

Regulating working conditions

Filed Under (Other Topics) by Tatyana Deryugina on Jan 30, 2012

Recently, New York Times ran an article on working conditions in Apple’s factories in China. This article surfaced on my Facebook feed and instead of posting my thought into the crammed comments section, I decided to write a more extensive blog post.

How should we should think about regulating working conditions? The first rule of economics is: if labor markets are competitive, don’t mess with them. What does it mean then to have a competitive labor market? It doesn’t mean that wages are high or “fair”. It doesn’t mean that workers put in 40 hours a week and no more. It means that there are lots of companies and lots of workers. Workers know what the working conditions are like and voluntarily enter into a labor contract. In other words, there is no market power and everyone knows what they’re getting themselves into. The result might be people working 80 hours days for low wages, but if we were to say this was unacceptable, we would be infringing on individual rights to choose for themselves and possibly making those workers worse off.

Even concerns about fairness can have unintended effects. Sure, if we could magically provide everyone with better working conditions, without putting some people out of work and without raising the prices of the goods, no one would be against that. But there’s no such things a free lunch. What is likely to happen if higher standards are imposed is that prices of the product will go up, demand for the product will go down, and some unlucky workers (who were perfectly happy working there before) will end up unemployed. Even if we as a society decide that we don’t mind the first two effects, we probably don’t want the last one.

What if labor markets aren’t competitive? First, workers could be physically coerced into working at the factories. No one thinks slavery should be tolerated. That doesn’t seem to be the case here – from what we can tell, the workers went willingly. However, if the company prevented existing workers from leaving by withholding wages in a way that wasn’t part of the original deal, that could also be a type of coercion.

There is another kind of coercion that deserves serious consideration in this case. Economists have always recognized that monopolies are bad for society. So are its lesser-known cousins – monopsonies. Here, a big firm is able to exercise market power as a buyer. Foxconn is a large employer and it’s plausible to think that it may have the power to depress wages (and working conditions) below what would be the competitive market outcome. China is large too, so it’s not clear that Foxconn is “big enough”, but it’s certainly a possibility.

The second major source of problems here could be biased information. Workers may believe that working conditions or wages are better than they really are when they sign up to work there. If information doesn’t travel well, this is entirely possible. Biased beliefs have to be combined with significant moving or quitting costs, however. Otherwise, workers would simply leave the job once they find out how bad the conditions are. Unfortunately, the article says almost nothing about what the workers believe when they decide to take these jobs.

The NYT piece isn’t the first article on poor working conditions in developing countries and it won’t be the last. There may be lots of reasons to think that, in this case, regulation, better enforcement and public pressure are warranted. But the questions we should be asking are not “Are wages low?” or “Are working conditions dangerous?” or “Would I take this job?”, but whether there are labor market failures that resemble those described above.

How Teachers can be Both Undervalued and Overpaid

Filed Under (Other Topics, U.S. Fiscal Policy) by Jeffrey Brown on Jan 24, 2012

In recent months, there has been a spirited debate about the value of teachers and whether they are undervalued or overpaid.  The point of this post is to explain how both statements can be simultaneously true.    

 Before continuing, I should disclose that I come from a family of teachers.  My mother and father were both public high school teachers.  My niece, who I adore, is about to enter the profession after she graduates later this year.  If that were not enough to bias me in favor of teachers, I count myself among the millions who attribute much of my success in life to a handful of incredible educators who really made a difference in my life.  And I am impressed on a daily basis with the phenomenal teaching that my children receive. 

 Many of those in the teaching profession feel that they are under-valued by society.  And given some of the recent political rhetoric, their beliefs are not unfounded. 

 At the same time, my good friend Andrew Biggs of the American Enterprise Institute has written a number of highly interesting and provocative pieces arguing that public school teachers are over-paid.  And, as an economist, I find many of his points quite persuasive.        

 So how do I reconcile these views?  After giving this issue much thought, I have concluded that teachers are undervalued.  But this does not necessarily mean that they are underpaid. 

 Let me begin in a roundabout way by reminding readers of what economists call the “diamond water paradox.” 

 Water is critical for life.  Yet in the United States, we treat water as virtually free: when was the last time you were required to insert a few quarters to get a drink from a water fountain? 

 In contrast, diamonds serve very little practical purpose to individuals (I am ignoring industrial uses of diamonds as well as any romantic purposes).  They certainly do not help keep us alive.  And yet they are enormously expensive. 

What is going on here?  In a nutshell, water is plentiful, while diamonds are scarce.  Thus, while water creates enormous social value, it is relatively inexpensive “on the margin.”  This does not mean it is not valuable overall!  To put it in the language of economics, water generates enormous amounts of “consumer surplus.”  This means that, overall, the value that water creates for society far exceeds its market price. 

Yet few would argue that we should have to pay diamond-like prices for water just to prove to water that we understand how much more important it is to our lives than those silly, useless diamonds.

Like water, good teachers add enormous value to society.  This is not just a “feel good” statement written by the son of teachers:  there is strong empirical evidence to back it up.  Most recently, a new NBER working paper by three brilliant economists (Raj Chetty, John Friedman and Johah Rockoff) is able to link school district data on 2.5 million kids to the tax returns of these children many years later (after they have grown up and entered the labor force).  Their results show that good teachers create enormous social value.

The authors state:  “Replacing a teacher whose [value-added] is in the bottom 5% with an average teacher would increase students’ lifetime income by more than $250,000 for the average classroom in our sample.”

Think about that for a moment:  in a single year, an average quality teacher (relative to a low quality teacher) can create a quarter million dollars of economic value!  Needless to say, that is far above what we pay our good teachers.  Like water, teachers are generating enormous “consumer surplus” for the students and communities that they serve.

Those who advocate for teachers sometimes use data like the above to argue that teachers are underpaid.  Indeed, in a recent NYT piece, David Hambrick wrote “where I live, the average starting pay for a teacher is about $20 per hour.  A bartender can make double that.  Which job is more important?” 

While the NBER researchers referenced above did not measure the lifetime economic value created by good bartenders, I am going to simply assert that “teachers are more important.” 

But does that mean teachers are underpaid? 

Not necessarily. 

Just like we do not pay diamond-like prices for water even though water is more important, neither should we necessarily pay teachers more than plumbers, bartenders, or professional athletes. The reason, to be blunt, is that we do not have to, because we have plenty of smart, dedicated individuals that are willing to teach at current compensation levels.

My father – who dedicated 30 years of his life to teaching high school social studies – once reposted a quote on Facebook along the lines of “teachers are not in it for the income, we are in it for the outcome.”  

I believe that.  Indeed, many of the best teachers that I have had in my life were teachers because they loved the job.  They believed what they were doing made a difference in the lives of the students and their communities.  And they were right.

But, in the cold, hard logic of economics, these intangible benefits to teaching are precisely why we have so many people willing to teach, even though the compensation is far below the value-added to society.  The same is true for other professions that attract passionate, selfless, and altruistic individual, such as social work or those who work in the not-for-profit sector.  Fortunately for society, but perhaps unfortunately for those in these professions, there are plenty of people motivated to do these jobs in spite of the pay. 

Some will say this is “not fair.”  That may or may not be true, depending on one’s definition of fairness.  But is it rational?  Absolutely.  Almost nobody likes to pay more than necessary to obtain the goods and services they value, and that includes education.  And if the calculations of Biggs and Richwine http://www.aei.org/papers/education/k-12/assessing-the-compensation-of-public-school-teachers/are even approximately correct, taxpayers may be paying more than necessary to attract and retain the teachers that we have.            

Like water, good teachers are critical for meaningful human life.  They create tremendous value for society.  And we should respect and honor them for what they do.  But it does not necessarily mean that we should pay them like diamonds.    

 

Christmas Lights: A Tale of Cheer?

Filed Under (Environmental Policy, Other Topics) by Dan Karney on Dec 9, 2011

Christmas lights are a funny thing.  Many people hang lights on the outside their homes during the holiday season.  The light displays run the gambit from small affairs around a door to enormous light extravaganzas on every surface, tree, and shrub.  The quality of a display varies greatly depending on the skill and effort exerted by the homeowner.  It is curious though–Since the lights are on the outside of the house where the owner cannot see them, why do they exist?

To begin, I list (some) benefits of Christmas lights.  One, to be fair, the owner does see the lights for a brief moment when she comes home at night, providing an aesthetic joy.  Two, a religious homeowner can be use a holiday light display to advertise her beliefs.  Three, passer-bys and neighbors receive the enjoyment of looking at the display (if it is well done, of course)!  This last benefit is a classic positive externality, where non-displayers receive benefits without incurring the cost directly.

Next, I list (some) costs of Christmas lights.  One, the displayer holiday lighting increases their electricity bill compare to normal electricity usage.  For large displays the electricity cost can be quite high, and I have seen houses that never turn off their Christmas lights from Thanksgiving until Easter!  Two, the extra electricity usage requires more production from power plants that likely burn coal, leading more air pollution and greenhouse gases.  Three, excess lighting creates a phenomenon called “light pollution” that impedes car driver sight-line at night, disturbs nocturnal animals, and blots out the stars.  These last two items are negative externalities.

On net, it is hard to say if Christmas lights are “worth it” for the displayer.  It is even harder to determine if they are a net benefit for society when the externalities are added-up.  Regardless, Christmas lights are an ingrained tradition in America, and will be around for foreseeable and likely distant future.  Hopefully with increasing awareness about the costs of holiday lights, people will consider lower impact decorations such as low-wattage bulbs, or putting existing lights on timers so that they turn off over night.   Happy holidays and joyous New Year!

The WSJ is “Wrong”: The U.S. is NOT a Net Exporter of Petroleum

Filed Under (Environmental Policy, Finance, Other Topics, U.S. Fiscal Policy) by Don Fullerton on Dec 2, 2011

Just a couple days ago, the Wall Street Journal reported that “U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.”  Taken literally, this fact is strictly “correct”, but it is misleading.  It is therefore very poor reporting.  The authors either don’t understand the words they use, or they are deliberately trying to mislead readers.

The reason it is misleading is because the article implies the U.S. is headed toward “energy independence”, and that implication is wrong.  It goes on to say:  “As recently as 2005, the U.S. imported nearly 900 million barrels more of petroleum products than it exported.  Since then the deficit has been steadily shrinking until finally disappearing last fall, and analysts say the country will not lose its ‘net exporter’ tag anytime soon.”  That statement and several expert quotes in the article clearly imply the U.S. is headed toward “energy independence”.   

Strictly speaking, the WSJ is correct that the U.S. exports more “petroleum products” than it imports, … but “petroleum products” do not include crude oil!!  “Petroleum products” include only refined products like gasoline, diesel fuel, or jet fuel.  The implication is only that the U.S. has a large refinery capacity!

The U.S. is a huge net importer of crude oil, and a huge net importer of all “crude oil and petroleum products” taken together, as you can see from the chart  below (provided by the U.S. Energy Information Administration).   In other words, we import boatloads of crude oil, we refine it, and then we export slightly more refined petroleum products than we import of refined petroleum products.  Big deal.

If the WSJ reporters knew what they were talking about, or if they were not trying to mislead readers, then they should have just stated that the U.S. is a huge net importer of all “crude oil and petroleum products” taken together.  They didn’t.  That is why I conclude they do not understand the point, or that they are trying to misrepresent it. Neither conclusion is good for the Wall Street Journal.

They are simply wrong when they say:  “The reversal raises the prospect of the U.S. becoming a major provider of various types of energy to the rest of the world, a status that was once virtually unthinkable.”  Just look at the figure!

 

Not something that happens every day …

Filed Under (Other Topics) by Nolan Miller on Dec 1, 2011

That is, somebody said something nice about a bipartisan US effort.  Given the partisan rancor in this country right now, I found it refreshing to read this piece in the New York Times.  Of course, it was by Bono, but he was writing about something he’s actually an authority on — the worldwide fight against AIDS.  This is a fight that we’re actually starting to win, and Bono chalks the success up to American leadership by the Clinton, Bush and Obama administrations.

Read it here:

http://www.nytimes.com/2011/12/01/opinion/a-decade-of-progress-on-aids.html

The Economics of Jury Pool Representativeness

Filed Under (Other Topics) by Jeffrey Brown on Nov 14, 2011

The United States Constitution guarantees individuals the right to a trial by a jury.  To implement this right, however, one must find jurors.  Many argue that one characteristic of a good pool of jurors is “jury representativeness,” i.e., a set of jurors that is roughly representative of the community from which it is drawn.  As an academic, it is quite interesting to think about conditions under which “representativeness” is an appropriate goal (for example, we might not want a representative jury if the population of the local community has strong biases that would make it difficult to ensure a fair trial).  But, for purposes of this post, let us assume that representativeness is, indeed, a valuable characteristic of juries.

One way, in theory, to select representative juries is through random selection.  If every individual in a population has an equal chance of being selected as a juror, then the average jury will be representative of the population from which it is drawn.  This does not mean, of course, that each individual jury will be representative.  With only a small number of individuals (e.g., 12) serving on any given jury, most juries will not be representative.  But, importantly, because the average jury is representative, we would be able to say with a straight face that the jury-selection system is not biased against any defendant on the basis of being non-representative.

According to a recent news article, Champaign County, IL, picks jurors by randomly drawing names from various lists, including the list of registered voters, licensed drivers, those with state of Illinois ID cards, and those with certificates of disability.  Recently passed legislation, which will take effect on January 1, will add to the pool the names of individuals receiving unemployment benefits from the State.

For purposes of discussion, let’s assume that these various lists have done an effective job of providing a list of names that is roughly representative of the Champaign County population.  If so, then by randomly drawing names from these lists, the jury pool ought to be representative.  Right?

Wrong.   It is well-known that when a judge calls down to the “assembly room” for potential jurors, he or she is not selecting from a representative population.  Relative to the population, the people who appear for jury duty are disproportionately white, higher educated, and higher income than the population.  Today’s jury pool is an effective illustration.  I dutifully showed up at the Champaign County Courthouse at my designated 9:30 a.m. time for jury duty.  As I casually looked around the room, I could not help but notice how much the room was lacking in diversity.  While the lack of racial and ethnic diversity was immediately noticeable, I would also guess that, on average, this pool of jurors was drawn disproportionately from the upper three-quarters of the income and wealth distribution.

Why do we get non-representative jury pools even though we randomly choose names from the various lists?  It is because of what economists call “self-selection.”  Put in everyday language – not everyone shows up.  While I have been unable to confirm the statistic, I remember hearing on a local radio show the statistic that only about half of individuals who receive a summons for jury duty show up and/or have what we educators would call “an excused absence.”  To put it simply, “showing up” is not random.

There are many reasons that some groups are more likely to show up than others.  No doubt there are differing levels of trust and confidence in the judicial system.  Different levels of access to transportation.  Differing job and family situations that make it easier for some people to report for duty, and much harder for others.  Differing reactions to the bold print warning on the juror summons that warns recipients that a failure to report is a “criminal offense.”  And so on …

Aaron Aamons, chairman of the Citizens Advisory Committee on Jury Service, was quoted in the Champaign News-Gazette a few days ago stating that the solution is “education, education, education.”  As an economist, I have a different view.  I say it is all about “incentives, incentives, incentives.”  Or the lack thereof.

I suspect that nearly every individual who receives a jury summons goes through some sort of cost-benefit analysis.  They may not think of it in those terms, but they are almost surely asking themselves about factors that would go into such an analysis.  “Can I afford to miss that much work, or will I fall hopelessly behind?”  “Will my employer pay me, or do I have to take vacation time or uncompensated leave?”  “How much will it cost me to get the transportation I need to get to the Courthouse?”  “Who will watch my kids, and how much will I have to pay them?”  “What are the odds that the Sheriff will really show up and make me report for duty?”  (Answer: virtually zero).  “What are the reputational costs if I fail to appear?”

There are enormous social gains to having people willing to serve as jurors.  But the benefits to any individual juror are quite small.  Aside from a general sense of satisfaction associated with doing one’s civic duty, there are no direct benefits.  (Unless you count the pitiful $10 per day stipend, which is not enough to cover transportation and lunch for most people, let alone the cost of their time.)

So we have a classic “collective action problem” – it is in society’s best interest for people to serve, but it is in most individuals’ self-interest not to spend time on a jury.

One way to overcome such a problem is to mandate participation.  This is what we try to do, but the problem is that we do not enforce it.  As I once heard an official say, the County simply does not have the resources to enforce the mandate.

Another way to overcome the problem is to try to increase the non-financial benefits of service.  Labeling jury duty as a “civic duty,” appealing to patriotism, giving public kudos to those who serve, and other such appeals are meant to do this.  Undoubtedly, these are effective at getting some people to serve.  But it is obviously not sufficient to incentivize those who have not been showing up.

A related approach is to try to increase the costs of failing to show.  As an individual who tries to behave ethically and in accordance with the law, it is sufficient to deter me from skipping jury duty to simply tell me it would be a criminal offense.  But that is printed on every juror summons, and yet we still have highly unrepresentative jury pools.

One obvious answer is to pay jurors more that the pitiful $10 per day that they now pay.  If one is a single mother of three young kids who is holding down a minimum wage job at an employer that will not pay for time on jury duty, then the cost of appearing for jury service would be extraordinarily high – foregone wages, payment for childcare, and possibly a lost job.  As a matter of social policy, I find it hard to believe that we want to force the group least able to afford jury duty to show up for $10 per day.

But most state and local governments are severely strapped for funds.  Quite possibly the last thing they can afford is for each court to pay thousands of potential jurors hundreds of dollars per day for potential service.

Is there a solution?  Possibly – but one that only economists would love.  To implement it would be highly controversial, and not without reason.  But just for the sake of discussion, let me toss it out here.  The idea is simple – so simple, in fact, that the inspiration for it comes from a pre-school.

The pre-school to which I am referring offers parents a choice.  All parents are expected to volunteer 10 hours per academic year.  In lieu of volunteering, parents can donate a fixed amount (e.g., $75) per hour that they want “relieved” of duty.  So let’s say that a parent is expected to volunteer at a time in their life where the opportunity cost of their time is enormously high.  It may well be socially efficient for the parent to simply donate money to the school instead of volunteering.

You see where I am going with this … let’s suppose that the average jury pool has too many high income professionals (e.g., self-employed business people, highly paid executives, etc.) relative to the population, and not enough low-income individuals.  The jury pool would be more representative if we dropped a few of the high income folks and added some low income individuals.  So why not have the Court “auction off” a limited number of “excused absences,” and then use the money to provide a more meaningful level of juror pay to lower income jurors?

In a narrow, economic sense, it appears everyone wins.  Those released from duty are clearly better off, otherwise they would not have bid so high for release.  The low income individuals added to the pool are clearly better off if the additional compensation is sufficient to overcome the barriers to service.  And, if implemented effectively, the jury pool would be more representative than it is today.  Of course, one would need to avoid the temptation to auction off too many excused absences, or else one might end up with the opposite problem, i.e., too few high opportunity cost individuals on juries.

I am totally sympathetic to many alternative views – especially that this is not just an economic issue, but an issue that strikes at the core of how we define ourselves and our judicial system.  So I am not necessarily suggesting this as a serious policy proposal.  But it seems that the current system is so highly flawed that serious consideration ought to be given to alternatives, no matter how radical they might at first seem.