Tuesday, November 28, 2006

Mineola Police Force and Marginal Utility

Using Economics: The Mineola Police Force.

The Village of Mineola is considering opting out of the Nassau County Police Force and establishing its own police force (ala Garden City). To read a summary of the debate (scheduled for a vote on Dec 5th), click here. For a more detailed summary, click here

This is certainly a contentious issue, but how can we use economics to wade through the debate?

1) Rational Ignorance and vested interests - The first topic we can use is the idea of government failure. That is, most of the voters are rationally ignorant about how their taxes are being used. How many people here know how much of their property taxes went towards funding the Nassau County Police Department? On the other hand, the Police department has a strong vested interest in maintaining the revenue source coming from Mineola (estimated at $6.7mn dollars a year). Part of the problem seems to be that taxes have gone up while coverage has gone down. A first pass look at this suggests that the increase salaries of police officers over the years has made it harder to hire police officers (since that increases revenues and necessitates a tax hike. With taxes at already high levels in the county, this is a problem.)

On the other hand, the village certainly has a vested interest in making sure the report favors establishing a police department rather than maintaining the current service (although the Village debate mentioned this, they curiously understated the vested interest mentioned above). However, from the standpoint of the Village residents, a Village police force would bring the police closer to the "check" of the voters. That is, if the residents are unsatisfied with how things are going they can vote in a change. The mayor, in turn, has a vested interest in getting re-elected so he is unlikely to want things to spiral out of control. As far as I can tell, the voters do not have this choice under the current police force (since their votes are dispersed among the county).

2) Marginal Utility - However, the economics of government can only take us so far here. The key issue is whether the marginal utility per tax dollar goes up or go down. So the question for residents becomes, how much "juice" (police coverage) am I getting for the "squeeze" (tax dollars). But this makes the whole debate about a tax hike completely irrelevant. If the marginal utility of the tax dollars goes up, you should support it. If it goes down, you should oppose it. Here is how I can demonstrate this:

Assume that initially you pay $100 a year in taxes to the government for police protection (your coverage is the Nassau Police Force). Assume also that there is only one type of crime, robbery, and that crime, if committed, will cost you $100,000. Finally assume that the police force, via the deterrant of arrest and prosecution, lowers the risk of arrest to 1% (0.01). Without a police force the probability of your home being robbed is 25%

The benefit to you of the police force is, of course, huge. Without it the expected cost of a robbery is $25,000. With a police force it is $1000. (According to Marginal Utility theory you should support a measure so long as the MB>MC. Here the Marginal Cost is $200 while the Marginal Benefit is $24,000.)


Now lets assume that under the Village police department two things change. Your taxes go up to $200 a year while the added protection decreases the risk of robbery to 0.1% (0.001). This lowers the expected cost of the robbery to $100 dollars. Obviously you would support it over no police force, but would you support it over the next best alternative (the Nassau Police Force.)

Well,

The expected cost of the crime under the Nassau Police force is $1000
The expected cost of the crime uncer the Mineola Police Force is $100
The marginal benefit is therefore $900

On the cost side,

The cost of the Nassau Police force is $100
The cost of the Mineole Police force is $200
The marginal cost is $100

So you should still support it since (MB = $900 which is greater than MC = $100.)

Although these figures do not support or oppose a police force--since I made them up in my head--they do clear away a lot of nonsense such as

1) You should automatically oppose a police force if your tax dollars go up. Not true. If your taxes go up but the benefits go up by MORE then you should still support it. (Note: The Village Mayor believes that the tax change will be neglible. So this point could be moot. But it may not be, so it is worth discussing).

2) How much of a benefit does a community police force bring via increased accountability to the voters and more direct policing? This is hard to estimate (although I could probably do a study if the Village paid me some money and gave me the data---hint hint). But one quick way to estimate is to look at the current villages who do have their own Police Force and then see if they have succeeded or whether they are happy or not. (A quick pass suggests that they are succeeding and are happy, but I stand ready to be refuted by better estimates).

Then you can decide.

1 comment:

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