Ex Post/Ex Ante:The ldea 。In Ordinary Life Should I go home by 880 or local streets? Should I have bought that lottery ticket? Should you have gone to law school? 。In Employment Do we pay salesmen by the hour? Or by a commission on each sale? In The Context of Law and incentives Do we punish bad outcomes,or Inputs that produce them?
Ex Post/Ex Ante: The Idea • In Ordinary Life • Should I go home by 880 or local streets? • Should I have bought that lottery ticket? • Should you have gone to law school? • In The Context of Law and incentives • Do we punish bad outcomes, or • Inputs that produce them? • In Employment • Do we pay salesmen by the hour? • Or by a commission on each sale?
Why Punish Attempts? Why are you arresting me?The bullet hit the tree. The man I was shooting at is fine 。The tree is fine To stack an ex ante punishment on an ex post punishment ·WhyR Because we are not willing to impose an adequate ex post punishment
Why Punish Attempts? • Why are you arresting me? The bullet hit the tree. • The man I was shooting at is fine • The tree is fine • To stack an ex ante punishment on an ex post punishment • Why? • Because we are not willing to impose an adequate ex post punishment
Advantages of Ex-Post Punishment Exploits actor's private information I can monitor myself at no cost And can see and know things the external regulator cannot Rather like the advantage of an effluent fee over regulation Which is also an ex-post punishment Court can observe damage instead of guesstimating probability and damage Probably lower enforcement costs easier to spot crashes than speeders ·and a lot fewer of them
Advantages of Ex-Post Punishment • Exploits actor’s private information • I can monitor myself at no cost • And can see and know things the external regulator cannot • Rather like the advantage of an effluent fee over regulation • Which is also an ex-post punishment • Court can observe damage instead of guesstimating probability and damage • Probably lower enforcement costs • easier to spot crashes than speeders • and a lot fewer of them
Disadvantages of Ex-Post Punishment ·Neorgne taipherent,.met punis协y?deterrence Ex-post requires large punishment with low probability People are risk averse And may be judgement proof And non-monetary payments are inefficient But there is an organ shortage...(We will return to this)
Disadvantages of Ex-Post Punishment • We want to prevent, Wrong. Punishment prevents by deterrence not punish? • Ex-post requires large punishment with low probability • People are risk averse • And may be judgement proof • And non-monetary payments are inefficient • But there is an organ shortage … (We will return to this)
Why There Should Not Be Pure Ex-Ante Systems A Small ex-post punishment does not have the problems of ex-post Does have the advantages So why not always supplement ex-ante with ex-post? Are there any counter-examples?
Why There Should Not Be Pure Ex-Ante Systems • A Small ex-post punishment does not have the problems of ex-post •Does have the advantages • So why not always supplement ex-ante with ex-post? • Are there any counter-examples?
Ex Post Insurance Could Provide a Market Mechanism to Generate Ex-Ante Rules To drive,I require adequate liability insurance The insurance company can set any rules it wants as a condition So makes the optimal tradeoff between risk aversion and moral hazard How do we enforce the rules? Convert traffic cops into private contractors enforcing the contract Uber for(private)speeding fines?
Ex Post + Insurance Could Provide a Market Mechanism to Generate Ex-Ante Rules • To drive, I require adequate liability insurance • The insurance company can set any rules it wants as a condition • So makes the optimal tradeoff between risk aversion and moral hazard • How do we enforce the rules? • Convert traffic cops into private contractors enforcing the contract • Uber for (private) speeding fines?
Should We Punish Voodoo Killers? More generally,should we punish impossible attempts? In some sense,all failed attempts were impossible So this brings us back to "should we punish attempts
Should We Punish Voodoo Killers? • More generally, should we punish impossible attempts? •In some sense, all failed attempts were impossible • So this brings us back to “should we punish attempts
The Moral Argument for Punishing Attempts Punish on the basis of moral guilt Being a bad shot is not a moral virtue Which brings us to the problem of moral luck Should you think worse of an ex-Nazi concentration camp guard than of someone who would have been one If he happened to be born in that time and place?
The Moral Argument for Punishing Attempts • Punish on the basis of moral guilt • Being a bad shot is not a moral virtue • Which brings us to the problem of moral luck • Should you think worse of an ex-Nazi concentration camp guard than of someone who would have been one •If he happened to be born in that time and place?
Game Theory The Problem of Strategic Behavior What I do depends on what he does and... ●Vice versa
Game Theory • The Problem of Strategic Behavior • What I do depends on what he does and … • Vice versa
The Coward's Solution:Evasion ·Perfect competition ·Monopoly Doesn't work for oligopoly When my firm expands output Will my competitors drop their price to compete Or hold price,accept fewer sales?
The Coward’s Solution: Evasion •Doesn’t work for oligopoly • When my firm expands output • Will my competitors drop their price to compete • Or hold price, accept fewer sales? • Perfect competition • Monopoly