Simple rules and gaming the system

Are sim­ple, easy-​​to-​​administer rules ruin­ing America? There’s a clas­sic debate over whether laws and reg­u­la­tions should be sim­ple rules or com­plex stan­dards. Systems with sim­ple rules are eas­ier to admin­ster, but they get results wrong some of the time. Standards get the right result more often, but they are expen­sive to admin­ster. A fan­ci­ful exam­ple: speed lim­its. A sin­gle speed limit—60 m.p.h.—may be gen­er­ally OK, but still often wrong because it’s too high in bad weather or at night, or too low when there’s no one on the road or for dri­vers rush­ing to the hos­pi­tal. A stan­dard would get it right, but be harder for cops to admin­is­ter on the spot. (Yes, I know dri­vers are sup­posed to change their speed based on con­di­tions, but this is just for illus­tra­tion.) Cheap sim­ple rules are should be pre­ferred when error costs (the fre­quency and sever­ity of wrong results) are low, but stan­dards should be used when the error costs are high enough. But is it pos­si­ble that using sim­ple rules gen­er­ally will cre­ate a cal­loused pub­lic that will seek to game the sys­tem more and make the sim­ple rules less efficient?

That ques­tion pop­poed into my mind when I read Frank Bruni’s op-​​ed cas­ti­gat­ing Tim Ferriss for sug­gest­ing that trav­el­ers place unloaded starter guns in their checked bags. (Ferriss says this will guar­an­tee close scrutiny, and reduce the risk of your bag being lost.) Bruni says that there’s an epi­demic of self­ish­ness in the country:

While I doubt there will be a rush on starter pis­tols by air­line pas­sen­gers — it’s just too much trou­ble, and too bizarre — his over­ar­ch­ing inter­est in gam­ing the sys­tem at hand is mir­rored in other Americans’ behav­ior. So is his empha­sis on per­sonal advan­tage over the pub­lic good, which would be under­mined if every trav­eler did as he coun­seled. There’d be bed­lam in air­port secu­rity oper­a­tions and a ludi­crous num­ber of peo­ple car­ry­ing around what could be mis­taken for lethal weapons.

Selfishness run amok is a national dis­ease (and, to judge by Greece, Italy and a few other European coun­tries, an inter­na­tional epi­demic). Too many peo­ple behave as if they live in a civic vac­uum, no broader impli­ca­tions to their indi­vid­ual behavior.

Is a sys­tem of sim­ple rules encour­ag­ing this? Perhaps if the sys­tem weren’t so easy to game, peo­ple would do it less? If peo­ple didn’t feel like oth­ers were tak­ing advan­tage of loop­holes, they wouldn’t try to do the same? If TSA agents could exer­cise judg­ment to punish—or make things harder—for folks like Ferriss, per­haps every­one would just fol­low the rules and every­thing would go more smoothely?

But con­sider also this Planet Money episode, where econ­o­mist Luigi Zingales argues that America is becom­ing more like Italy: a place where con­nec­tions and money deter­mine pub­lic pol­icy, instead of the gen­eral wel­fare. He argues that we need sim­pler rules, not more nuanced stan­dards. As he sees it, the more nuanced a rule is, the more likely it is to be read only by the rich (or their employ­ees) seek­ing to take advan­tage of the nuanced sub-​​clauses. These nuances are often inten­tional give­aways to favored groups or busi­nesses. And this looks a lot like Italy, in Zingales’ telling.

In Italy, post-​​World War II com­mu­nist gov­ern­ments needed to con­vince busi­nesses that they weren’t about to have their prop­erty and money con­fis­cated by the gov­ern­ment. So the gov­ern­ment offered sweet­heart deals and guar­an­tees to busi­nesses. But when bribes (or sweet con­tracts) first start being used, they become nec­es­sary. This raises prices for every­one, from infra­struc­ture projects to pro­duce. And it’s not just money: it’s trust. When he arrived here, Zingales was shocked when Americans paid atten­tion to local lead­ers’ warn­ings about a severe storm. He thought that the direc­tion to tape up win­dows meant someone’s brother owned a tape fac­tory. In Italy, as Zingales describes it, it was a good idea to find out what the gov­ern­ment wants you to do—then do the oppo­site. If peo­ple can’t trust their lead­ers, the costs of effec­tively han­dling crises and day-​​to-​​day gov­ern­ment activ­i­ties become enormous.

But maybe here the issue isn’t that the rules are too sim­ple: it’s that they’re too com­plex. Getting on a plane is a mas­sive ordeal. And appar­ently it’s OK to pack an unloaded starter gun in checked lug­gage. (Are oth­ers for­bid­den?) Perhaps if it were sim­pler to get on a plane (and to check lug­gage), every­one wouldn’t feel so shafted, and Bruni’s “self­ish­ness” wouldn’t be such a problem.