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Sunday, March 1, 2009

Beijing meets Chicago: the law and economics of speeding tickets in China

My pal Matt Forney, a wonderful guitar player who used to pick up a few bucks on the side as the head of Time's Beijing bureau, recently had an interesting piece in the Washington Post about traffic law violations in Beijing. Although one might quarrel with his metaphor for the malleability of law in China - a fiberglass bumper (a fiberglass bumper isn't all that malleable) - the piece nevertheless offers an interesting window into the nitty-gritty of law enforcement.

Essentially, the police in Beijing have established a system of tradeable speeding permits; if you've got the money, you can buy the right to break the speed limit from others who value that right less. Matt discovered this when he went to renew his car registration and was told that he (or his Italian wife; he gallantly blames her) had racked up enough speeding violations to warrant losing their licenses several times over. (They hadn't been informed of these violations or of the mounting penalty points; you only find out when you go to renew your vehicle license every year unless you know enough to log on to a particular web site and check your record periodically. This police practice, aimed at maximizing revenue from fines, became a minor scandal a few years ago. I blogged about it here and here; the police promised in 2005 to start notifying motorists, but apparently still aren't doing so.)

When Matt asked plaintively what, if anything, could be done, a bored police officer eventually suggested that he do what everyone else does: "Just find other drivers with clean licenses to clear your points for you." Matt went online and found a used Volkswagen dealer who washed his record clean for $7 a point. He writes in the same article about a friend of his who owns a trucking company and used his truckers' points (until they were exhausted) to get away with going 125 mph on Beijing's airport expressway.

In case anyone thinks this is no different from the system of tradeable pollution rights, it is. In the theory of tradeable pollution rights, society makes a decision about how much pollution it is going to put up with, but it doesn't matter who is doing the polluting provided the ceiling is not exceeded. If you want a ceiling of 100 units of pollution, you don't care if A provides 10 units and B provides 90, or if each provides 50. By contrast, if 50 mph is the socially desirable speed limit, there is not an equal social danger presented by (1) A going 10 mph and B going 90 (or more simply A staying under and B going over), and (2) each going 50 mph. The first scenario is worse.

What I can't figure out is why the police permit this. It can't happen without the police cooperating in shifting points off one person's record and onto another's, and doing it on (presumably) a one-for-one basis. Do they charge a fee for doing it? (Since Matt did his trade through a third party, the issue didn't arise for him personally.) If so, it would then make sense; the police make no money from taking away your license, so it makes sense for them to figure out a way for you to keep it provided they can get a fee out of the deal.

This resembles environmental law enforcement in some ways, as described in a great book: Xiaoying Ma & Leonard Ortolano, Environmental Regulation in China: Institutions, Enforcement, and Compliance (2000). In that book they describe how local environmental protection agencies would rather see fineable violations than unpunishable compliance or, at the other extreme, a complete shutdown. I've always liked this book because the authors, in setting out to write a specialized book about environmental regulation in China, accidentally (I think) ended up writing a very insightful book about the Chinese legal system as a whole.

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This is amazing and this is the first I have heard of it. Wish we could do this out here in WA as it would have saved me hundreds of dollars in increased insurance costs.....

Posted by: Dam | Mar 1, 2009 4:21:32 PM

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