• Quantifying the Law? Why Not?

    Quantifying the Law? Why Not?

    I attended a national conference on the rule of law last week. At the conference, I presented my paper on the application of public choice theory into legislation system in Indonesia.

    (Those interested to learn more about the subject can go to my website and search for the 'public choice' tags by clicking here)

    It was a nice experience and a good chance to see how Indonesian legal scholars perceive the law and its normative values. Having a quick reading on various papers, it seemed that abstract normative analysis still conquers the Indonesian legal scholarship, at least from the conference attendees. In this context, abstract means vague principles or values that are difficult, if not impossible, to quantify.

    For instance: the idea that law should promote the interests and happiness of the people, that law should promote justice and national interest etc. There is nothing wrong with promoting such ideas in terms of freedom of expression, but the problem is that abstract values usually stay vague in practice.

    In one discussion, a participant raised a question that is addressed to me: "Should we quantify the law?"

    I replied, "To some extent, of course, we should."

    If we want to speak about normative legal issues, about what should be done through the law for the betterment of the society, quantifying the law is absolutely necessary. This is, after all, the essence of all of my law and economics discussion in this blog.

    Normative law and economics uses terms like efficiency, costs and benefits analysis, and welfare maximization as tools to analyze quantitatively whether a law can really make a society better off after the enactment of such law, and whether a law will improve the welfare of the society or only imposing another unnecessary burden.

    We all know that the law should be made by the people, of the people and for the people. Not the other way around. But how can we really know that a law is made for the sake of the people if we do not have any standard for measuring a successful law?

    Therefore, how can we say that a law is good or bad if we are simply relying on abstract standards? Even worse, have any of you realize that politicians love those abstract standards because they can abuse them as a way of gaining votes or distracting public attention?

    Anti-corruption law is a good example. Politicians play with people's moral values when they toss the idea of whether death penalty should be abolished for corruptors. The debates range from the protection of human rights, the moral cruelty of corruption, to deterrence effect of the death penalty (on the basis that death penalty is the ultimate punishment).

    The notion of law and economics would criticize the above abstract discussion because frankly there is no way that we can resolve a conflict between those basic principles until the end of time. Some people still think from morality point of view that death penalty against human rights, while others think that it is fine if it is used to punish such a morally reprehensible act.

    Instead, law and economics will ask the following questions:

    1. Are there sufficient data supporting the claim that death penalty really reduces the rate of crime?

    2. Is death penalty an efficient sanction for corruption? Or should we instead focus on something else, such as taking away the corruptors assets and preventing them to take any other official positions?

    3. What would be the cost and benefits of having death penalty from procedural perspective? Is our criminal justice system ready to implement the higher standards of imposing death penalty?)

    By proposing the above questions, we are, in a sense, quantifying the issues that need to be tackled in order to formulating a good law. We think how the current procedural problems in administering death penalty will affect the people, the innocent and the villains (the costs that will be imposed to them); the impact of solving such problem to our state budget; the incentives that we will create for current and future corruptors, etc.

    Of course, quantifying the law might not be a perfect standard, but it would be better to have some concrete measures of success than none at all. And the above is just a really simple explanation. The same way of thinking can be used for analyzing any area of law, from criminal law to family law, and will be effective in analyzing controversial laws such as laws dealing with people's clothes.    

    Quick question, have we ever heard any of our politicians ask similar questions with the questions presented by law and economics? Most likely no.

    Why bother asking the public to think critically about very important issues if nice rhetoric is enough to make the public confused or to vote for the most dramatic act of politicians?
  • The Law and Economics of Police Compensation

    The Law and Economics of Police Compensation

    The National Police Deputy Chief Nanan Sukarna on Thursday admits that there are corruption practices in his organization, as quoted by One of the many factors he cited was inadequate salary for police officers.

    "How should we ask them to not stay clear of corruption if their salary is not enough to pay for their children's school?" he said.

    From an economics perspective, this is an interesting topic. It is widely known by the public that being a police officer who only depends on salary will not make them rich or even survive day-to-day living. But despite such truth, why are there still many people apply to be one? If the job and payment are that bad, why do they pursue such career?

    A case like this offers several explanations. First, it might be possible that the majority of people who apply to become a police officer put more value on the authority attached to their position. This means that for these people, the fact that they gain such position is more valuable than getting a civilian job — even with higher salary. Thus, there is a trade-off between authority and money.

    Second, it might also be possible that the applicants believe their comparative advantage is to become a police officer and they will not be able to compete with other people in doing their jobs. As a result, receiving low payment is a risk they must bear due to their own limitation.

    Third, worst case scenario, the applicants might see a possibility of becoming rich in the future, provided they can use their power for their own benefits. Being underpaid can be considered as an investment that must be sacrificed in order to gain more money in the future.

    Last but not least, it is always possible that there are some people out there who pick the career as a temporary job until they find a better job offering. These people might be clueless about their choice of life or simply see the police badge as a stepping stone into something bigger.

    Based on the possibilities above, we have two complex issues to be solved if we want to reduce the level of corruption in the police body.

    First of all, we don't know to what extent the trade-off between salary and authority will remain useful to control the behavior of the police. Will eventually the basic needs of life defeat the need to obtain power and respect in the society? I'd say yes.

    Then, how does one control authority? Without any proper check and balance mechanism, the ability to abuse the authority would increase significantly. Thus, the fact that they can't get much money from their salary would be meaningless since they can get more money from abusing their authority anyway.

    In solving the above issues, although its effect is limited, increasing the overall compensation of police officers might be a good start. It must be combined with good indoctrination on the intrinsic value of becoming a police officer and strict sanctions for violation of code of conduct.

    Otherwise, increasing the salary would be useless since they can get higher income from doing side jobs and abusing their authority — and they have a lot of incentives to choose that way. In such case, we will end up wasting more money for paying higher compensation, but with worse results.

    If we do choose to increase the overall compensation, there is a budgetary problem. Asking the government to simply increase their salary might be problematic if the government does not have enough fund. So, what if we sell certain services of the police to private parties but with different price tag?

    Although this might be a good way to raise funds, it will also create discrimination of service. I fear that the costs of such discrimination might outweigh the intended benefits.
    Once the police service can be legally bought by certain party with higher price, the police will have more incentives to act for a certain group instead of the society and thus they will no longer be different from private security officers or troops.

    It would be nice if they have enough officers to satisfy the entire need of the society and the higher price for special services can be considered as a subsidy from the rich to the poor. But if the supply of police officers is limited, it will be counterproductive.

    Another thing to be considered is to let criminals, especially those that are involved in financial crimes and corruption cases, to bear the costs of legal enforcement. This can be in the form of giving a portion of the recovered assets or fines for such crime to the police officers who successfully solve the criminal case.

    Of course, the case must be legitimate and any abuse of authority in getting the additional benefits must be strictly punished (including taking back all of the profits made by the officers from such illegitimate case) to avoid any incentives to bring false claim to innocent people. 

    My final suggestion is to make the resignation process easier within the police corps. Considering the fact that the compensation is not high enough, it might be better to let officers leave as soon as possible once they feel that this is not the right job for them.

    This might save a lot of money and reduce the incentives to corrupt from the very beginning. If you realize that being a police is not the right job for you and yet you have no way out, what would you do? Could you stay sane or would you succumb to the temptation of corruption?

    Men are weak, so we should not put too much burden on them.

  • The Protection of Criminal Suspects in Law and Economics Perspective

    Forthcoming in Jurnal Teropong Edisi RUU KUHAP 2015 | 23 Pages | Posted: 10 May 2015 | Date Written: April 28, 2015

    Public Choice Theory and its Application in Indonesian Legislation System

    24 Pages | Posted: 8 Oct 2012 | Last revised: 8 Nov 2014 | Date Written: October 8, 2012

    Special Purpose Vehicle in Law and Economics Perspective

    Forthcoming in Journal of Indonesia Corruption Watch, 'Pemberantasan Kejahatan Korupsi dan Pencucian Uang yang Dilakukan Korporasi di Sektor Kehutanan', 2013 | 15 Pages | Posted: 22 Aug 2013 | Date Written: August 18, 2013

    Legal Positivism and Law and Economics -- A Defense

    Third Indonesian National Conference of Legal Philosophy, 27-28 August 2013 | 17 Pages | Posted: 22 Aug 2013 | Last revised: 3 Sep 2013 | Date Written: August 22, 2013

    Economic Analysis of Rape Crime: An Introduction

    Jurnal Hukum Jentera Vol 22, No 7 (2012) Januari-April | 14 Pages | Posted: 12 Nov 2011 | Last revised: 8 Oct 2012 | Date Written: May 7, 2012


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