Some problems are so complex that you have to be highly intelligent and well informed just to be undecided about them. - Laurence J. Peter

Wednesday, November 26, 2008

Prediction Markets instead of Parole Boards

Parole boards determine whether prisoners may be released from their sentences before their sentence is complete. If my understanding is correct, the main consideration is the likelihood that the convict will commit another crime.

Parole boards do a terrible job. According to the Department of Justice, 49% of parolees abscond or are returned to prison. And of course there must be more who commit more crimes who aren't caught.

It is rumored that sex offenders, especially paedophiles, are much more likely to reoffend than non-sex offenders. The statistics support the opposite conclusion. But my understanding is that sex crimes, especially sex crimes against children, are very often not reported, and less often than that are resolved. So I guess we don't know what the true recidivism rate is.

One strategy some states have adopted to combat the threat of sex offence recidivists is to maintain a sex offenders register - a public list that sex offenders are placed on (with photo and address available online) - so that citizens can be aware of any paedophiles in their neighborhood. In some states, the sex offenders aren't allowed to live within 1000 feet of where children congregate, such as schools and day care centers.

When Wendy Whitaker was 17, she fellated a 15-year-old. 12 years later, the 29-year-old must vacate her home in case she molests the children at a nearby church daycare center.

The obvious explanation is that Whitaker is being crushed in the cogs of the gigantic machine that is government bureaucracy. But if we take this at face value - the government is genuinely unsure whether Whitaker is a threat to the children, and is willing to let her out of prison but not off the sex offender list just in case - then what we're dealing with is a question of how to predict the future. Will Wendy Whitaker fellate any more 15-year-olds?

When you have a future prediction problem, the best solution available is (in most cases, when some normal conditions like liquidity hold) prediction markets. I propose replacing parole boards with prediction markets on the likelihood of recidivism for each convict. The result should be less crime and less injustice for people like Wendy Whitaker (and Genarlow Wilson, etc.)


Blogger Patri Friedman said...

I don't think there would be the liquidity to do individual prediction markets on prisons. But your general point is still well-taken - when it comes to prediction, the way to make good ones is to have a bet involved.

In this case, some kind of insurance scheme should do. Allow insurance companies to sponsor prisoners for parole. Those whose prisoners commit crimes are charged, with the money going to those whose prisoners don't commit crimes. To make the system positive-sum (so that insurance companies wish to participate), charge the parolees.

This is a great example of the problem with having criminal law instead of just civil law. With civil law, the whole thing obviously becomes an insurance problem. If you commit a crime, your future defense agency rates go up - and how much they go up depends on your chance of recidivism. If you committed a crime and were uninsured and are now in debt, whether you are in prison (not working), in prison working, or out working depends on the relative income you can earn in those situations, and the recidivism rate that whoever takes responsibility for you (your defense agency) expects.

All this stuff gets easier if everything is a tort.

7:23 PM

Blogger Michael said...

Your objection about prediction markets lacking liquidity is well taken. I like your proposal better.

Maybe one day there will be a way to try innovative legal/government systems in practice...

5:34 AM

Blogger Peter McCluskey said...

The book Entrepreneurial Economics, edited by Alexander Tabarrok, has a chapter advocating private bonding for parole/probation that works like bail bonding does.
That's easier to implement than Prediction markets.

4:37 PM


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