Wednesday, February 24, 2010

An application of marginal benefit equals marginal cost

Last week, I read an article about how University of Chicago's drinking policy remains unchanged in spite of a recent uptick in number of emergency room cases. Here's an excerpt.

There are currently no plans to change University alcohol citation policy despite a spike in alcohol-related ER visits last quarter, administrators said this week. The policy, relatively lenient compared to that of peer institutions, has resulted in a handful of disciplinary cases, but no arrests.

“The incidence of over drinking on our campus is still quite small compared to other schools,” Dean of Students Susan Art said. “It’s not a prevalent part of our culture in the College.”

According to crime statistics provided by the University of Chicago Web site, there were 14 disciplinary referrals for campus violations of liquor law during the years 2006–2008, and no arrests. According to similar information published online by the University of Pennsylvania, the UPenn campus had 73 disciplinary referrals and 54 arrests for on-campus violations of liquor law in the same time period.

Despite last quarter’s spike in emergency room visits due to excessive alcohol consumption, Art said that fewer than 20 students were sent to the ER as a result of alcohol intoxication last fall quarter.

“Certainly there is protocol for students committing violations. But we just don’t have that many incidents,” said Bob Mason, a UCPD spokesman. “Maybe that has to do with the size of the student population or maybe that has to do with the kind of people here at the University of Chicago.”

Mason added that the UCPD arrests underage drinkers. “Students are treated like any other member of the community,” Mason said.

First, I'd like to offer a clarification. The article is concerned with whether University of Chicago ought to involve the campus police when non-police authorities on campus discover underage drinking. From the sounds of it, Northwestern and UPenn like to involve the authorities in underage drinking incidents. UChicago doesn't. But, regardless of where you're caught drinking, if the police catch you, you're subject to a standard process (citations and arrests).

Clarifications aside, I'm worried about the economics of the article. We should evaluate a drinking policy based on what it accomplishes, rather than empty comparisons of total amount of drinking. What is the marginal benefit of having one policy rather than another? The article doesn't address this. Instead, we have two opposing red herrings.

UChicago students don't drink that much (Dean of Students Susan Art's position).
The recent increase in excessive drinking is a reason to change the policy (The article's position)

Both parties use the same logic.

More drinking ==> Stricter policy is optimal

Both parties make the same mistake. They don't think on the margin. The article tries to deal with the "total" problem, rather than address what the policy change would accomplish.

The relevant questions are not "how much do UChicago undergrads drink?" and "How much did UChicago underage drinking increase last quarter under the old regime?" The relevant questions are "How much would UChicago underage drinking change if the administration switched to a policy of citing and arresting?" and "How would the change in drinking last quarter be different under a cite-and-arrest policy?"

Thinking on the margin about UChicago underage drinking

Deterrence is the primary goal of a strict underage drinking policy. After all, the article is complaining that the kids who drink don't get arrested or cited for the alcohol violations. Deep down, I suspect the author wants to deter undergraduates from excessive underage drinking. She just didn't come out and say it.

In my view, citing and arresting kids would probably have a bigger effect on underage drinking at UChicago than "dealing with it as a health issue." People respond to incentives, and calling underage drinking a "health issue" is not exactly going to deter an overworked undergraduate from partying hard after midterms. There's probably a deterrence effect of strict punishment, and therefore, there might be a benefit to the cite-and-arrest policy.

On the other hand, there are clear costs of having a cite-and-arrest policy.

On one front, UChicago police have their hands full in protecting students from other members of the community. The south side of Chicago is not especially safe at night, but it is better when the UCPD are on their patrols. Dumping a bunch of petty underage drinking cases on the UCPD is going to make them less effective in this task (because they'll have to divert some resources).

On another front, it's possible that issuing a cite-and-arrest policy could increase excessive drinking. It's true that we would expect the total amount of drinking to decline if the University issued a cite-and-arrest drinking policy, but most of this will happen on the extensive margin. People who don't value partying that much won't have their one or two beers. They'll have none at all.

But, it isn't clear what this will do to excessive drinking (which takes place on the intensive margin). If your punishment doesn't depend on how much you imbibe, you might as well get hammered if you're going to drink at all. Someone who would have 8 drinks might switch to 10 drinks because they want to take advantage of the fact that they're already breaking the law.**

Without some concrete data on the effects of other universities switching from lenient policies to more stringent ones regarding drinking, I don't know where to stand on the issue. That said, I think the above discussion identifies the relevant margins.

A note on economics

Economics is often criticized for "restating common sense." This complaint is at the top of the list of complaints that people offer while taking an Econ101 course. The students will say, "It's just common sense. Economics isn't hard at all." After making this complaint, many students will proceed to fail the exam. How can this be? First, economics isn't so easy. Most people find mastering economic logic to be a difficult task. Second, common sense isn't so common. Many people lack it -- even if they recognize that economics is purely and "merely" logic.

** Note: I realize this "imbibe more because I'm already in trouble if I get caught" motive is not thinking on the margin. Under most assumptions, a rational utility maximizing drinker would stop at 8 in either case. But, I have two points to counter this. First, I think this notion of how to behave is commonplace. Second, in the real world, we might not be dealing with a rational utility maximizing drinker (though I'll admit that if a "rational utility maximizing drinker" exists, he's probably at UChicago).

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