
How Do You Stop Sea Captains From Killing Their Passengers? - RiderOfGiraffes
http://www.npr.org/blogs/money/2010/09/09/129757852/pop-quiz-how-do-you-stop-sea-captains-from-killing-their-passengers
======
randomwalker
It is easy to underestimate the difficulty of creating the right incentives.

 _In the 1940’s, the paleontologist von Koenigswald was searching for early
human remains on Java and decided to enlist the help of the locals in his
search by offering them “ten cents for every piece of hominid bone they could
come up with.” Unfortunately for von Koenigswald (and for his findings), he
discovered too late that the locals “had been enthusiastically smashing large
pieces into small ones to maximize their income.”_

From [http://freakonomics.blogs.nytimes.com/2009/10/20/when-
youre-...](http://freakonomics.blogs.nytimes.com/2009/10/20/when-youre-paying-
per-bone-fragment-expect-more-fragments/)

(The story is from the book _A Short History of Nearly Everything_ , which is
one of the best books I've ever read. The amazing thing about the book is that
it is in fact a short history of nearly everything.)

Combine the difficulty of getting incentives right with the inherent problems
of Government and a dangerous mix results. For example, every time a subsidy
is created, a special-interest group sprouts up dedicated to preserving the
subsidy in perpetuity, long after it has outlived its utility.

~~~
lionhearted
> It is easy to underestimate the difficulty of creating the right incentives.

My favorite "Incentives matter" story is FedEx - they were having a hell of a
time getting drivers to get packages shipped on time. They tried all sorts of
things - threatening, praising, performance reviews, training, etc.

None of it worked.

Then they changed their pay from "per hour" to "per shift" - you work a shift,
you get paid a certain amount. Go home when you complete your shift,
regardless of how long it takes you.

Right away, their on time rate went massively up - in fact, a lot of shifts
started being completed early at that point.

~~~
evgen
The danger of this sort of an incentive is that there may be some hidden
externalities that will be exposed. I wonder if the accident rate per shift
also increased when this system was established (c.f. Dominos delivery and
unintended liability...)

~~~
tezza
I was a driver for a big pizza firm. We were paid bonuses depending on how
fast we delivered.

Unfortunately for me, I wasn't close friends with the manager of the store. He
gave all the shortest runs to all his mates, making it nigh on impossible to
get a bonus unless you suffered his patronage.

------
jacoblyles
It's interesting that they tried the tactic of micro-regulating every aspect
of the ship captain's business and that didn't work as well as broad
incentives.

Today, this micro-regulation is politically popular as voters can more easily
comprehend the direct effects of regulation as opposed to the indirect effects
of broad incentives. For example, we force drug companies to perform very
extensive clinical trials for new drugs and this makes us feel safe. But
simply increasing the liability drug companies face for producing harmful
drugs may be more effective and would certainly be a lot cheaper (as much as
90% of the cost of a new drug is meeting FDA requirements). But I doubt voters
would feel as safe in a regime of broad incentives even if it worked better.

~~~
_delirium
It's also driven partly by a preference for that kind of regulation from the
companies themselves (though they would prefer less regulation overall).
Having to follow a bunch of rules on FDA trials is a manageable, mostly
predictable expense; large, nearly unlimited potential liability if a drug
turns out to have significant negative effects 10 years down the line is much
scarier to managers and stockholders.

That's one reason the health industry is currently lobbying to move it in
exactly the opposite direction of what you propose: they want _less_ broad
liability, and are willing to accept more FDA micromanagement in return if
that's what it takes. The proposed bargain is something like: the FDA should
tell us what to do, and if we follow their rules, we should be shielded from
all liability.

~~~
T_S_
Regulation = Barriers-to-Entry. Businesses accept (and secretly cheer on
regulators.) People get this connection, even though it is non-intuitive on
the face of it.

What is less studied are the regulators themselves. They rarely impose the
kind of regulation that opens industry actions to sunshine and converts them
to common knowledge.

There is a substantial body of theory that shows that the price system breaks
down in the face of informational asymmetry. But regulators don't go for it
since it does not make them more powerful. That's human nature. And it's fine
with businesses, who would prefer to answer to the One rather than the Many.
Preserves barriers to entry.

------
zurla
Charlie Munger: "One of my favorite cases about the power of incentives is the
Federal Express case. The heart and soul of the integrity of the system is
that all the packages have to be shifted rapidly in one central location each
night. And the system has no integrity if the whole shift can't be done fast.
And Federal Express had one hell of a time getting the thing to work. And they
tried moral suasion, they tried everything in the world, and finally somebody
got the happy thought that they were paying the night shift by the hour, and
that maybe if they paid them by the shift, the system would work better. And
lo and behold, that solution worked."

------
CWuestefeld
The Maersk Dubai incident is a real-world modern-day story of a captain
killing some stowaways:

 _On March 12 1996, two Romanian stowaways, Radu Danciu and Petre Sangeorzan,
were discovered on the container ship Maersk Dubai and ordered overboard on a
makeshift raft, approximately 70 kilometres off the coast of Gibraltar. On May
18 of the same year, en route to the Port of Halifax, another Romanian,
Gheorghe Mihoc, was found hiding in a large cargo container and forced
overboard at knife point by Captain Sheng Hsiu and four of his officers. A
fourth stowaway, Nicolae Pasca, was discovered by Filipino crew member
Rodolpho "Rudy" Miguel and kept hidden until the ship arrived at Halifax,
where eight Filipino crewmen (including Miguel) jumped ship and reported the
incident to the authorities._

 _Upon arrival in Halifax the Maersk Dubai was stormed by the Royal Canadian
Mounted Police (RCMP) and Captain Hsiu and his Taiwanese officers were
arrested and charged with first degree murder. The radio operator attempted to
escape by jumping into the Halifax harbour and was later arrested. Captain
Hsiu attempted to deny access to the ship under international shipping
laws..._

[https://secure.wikimedia.org/wikipedia/en/wiki/Maersk_Dubai_...](https://secure.wikimedia.org/wikipedia/en/wiki/Maersk_Dubai_incident)

I learned about this story because it's part of the theme of the concept album
_Magellan's Wake_ , by Savatage (which is largely the same as the more popular
"Trans-Siberian Orchestra")

------
rmorrison
It should be mandatory for any incoming politician to take a couple
introductory economics courses before serving. There are too many laws where
incentives are not aligned properly, fundamentally dooming the policy to
failure.

A good example of an incentive problem that's recently unfolded: now nearly
50% of US households have no federal income tax liability.

Edit: It's nearly 50%. It was 38% in 2007, 47% in 2009. Also, 40% of
households "make a profit from the federal income tax system, meaning they get
more money in tax credits than they would otherwise owe in taxes".

[http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-...](http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-
taxes_N.htm)

~~~
sigzero
Citation on that 50% please. I have never heard that.

~~~
maneesh
Well I just googled this: <http://www.msnbc.msn.com/id/36226444/>

Another way to escape federal tax liability (up to ~$90,000 income) is to live
outside the US 11 months / year

~~~
barmstrong
You are probably paying tax in the country you moved to though.

~~~
gyardley
Well, if the other country has income taxes. For example, in the British
Virgin Islands the income tax rate is zero.

I don't get why more Americans aren't enraged about the United States'
treatment of emigrants. For citizens of most other countries, if you don't
live there and you don't make money there, you don't pay taxes there.

~~~
_delirium
Why would Americans be enraged about that? The U.S. has a long history of
distrusting people who leave the country. Sticking it to emigrants (i.e.
people who "abandoned the USA") would be popular among both the left and
right, and among many social classes. Emigrants aren't very well liked among
populists in either the Republican or Democratic parties, sometimes even seen
as approaching a mild form of treason, whether they left for draft-dodging
reasons (Candada during Vietnam), tax-dodging reasons (BVI & co.), or
political reasons (communists who emigrated to Russia). People don't mean
"love it or leave it" in the sense that both are legitimate choices!

I say this as someone about to start a job in Europe myself; it's somewhat of
a sore point with many people ("America not good enough for you?"). The
current economy being bad is really the only thing that makes it relatively
easy to smooth over, because I can fall back on, "well nobody in the U.S. was
hiring in my area and this opportunity in Europe came up", and people sorta
understand because everyone's willing to believe that the U.S. job market is
bad right now.

Mostly I can't think of the constituency that would support lowering taxes on
emigrants. Republicans are usually the enthusiastic tax-cutters, but emigrants
are even less popular among Republicans than among Democrats, partly due to
heartland-patriotism type of culture, and partly because the expat vote is
skewed Democratic.

------
greatgoof
Sorry for this off topic comment but it's related(kind of): I've always
wondered how a crime committed on a ship can be caught. For example, the crew
of a ship mutinies against their captain and throws him overboard. When they
get back to port, they claim that their captain was swept overboard during a
storm. The crew, as one man, sticks to their story. Will anybody ever be able
to prove otherwise?

This approaches being the perfect crime as the number of crew members go down,
doesn't it?

How is this handled?

~~~
Tycho
I suppose the investigators would look for inconsistencies in 'the story' as
told by different parties. If 'the story' is true then additional detail will
be forthcoming and generally non-contradictory between accounts. If its all a
cover-up then individual suspects will invent different details and give
themselves away. 'We know at least _one_ of you is lying.' At which point
someone will betray the conspiracy for favourable terms, and the police will
have a real witness. Maybe also this is the reason for a 'captain's log' - if
that went missing too then there'd be even more suspicion.

~~~
greatgoof
True, but the lesser the number of crew members, the more chances that they'd
have a consistent story.

But good point about the 'captain's log' though.

------
mahmud
What is stopping the "captain" from taking a little detour to the English
country side, better yet, New Zealand, and kidnapping a few farmers?

~~~
pavel_lishin
I imagine it's pretty risky, since the local farmers would presumably have
weapons, and know the land better than the captain.

~~~
cullenking
Eh, lookup the term shanghaied - be good at buying people drinks and voila,
free money!

------
Jinzang
I once worked with a guy whose grandparents sailed from Portugal to
California. The captain of the ship held food back from the passengers to sell
when he got to California. When they arrived in California, the passengers
found out and hung the captain. Which is a different kind of incentive.

------
devmonk
I totally agree that incentives are great, but sometimes laziness beats
incentives. I was told by someone that they paid workers in a 3rd world
country by the amount they did, thinking they would do more, but instead they
did the same amount in less time and then sat around for the rest of the day.

------
Estragon
There's no denying that incentives matter, but the key difference between the
regulations they tried and the financial incentive they finally adopted is
accountability. It was easy to hold the captain of a ship accountable for the
number of prisoners who walked off a ship in good health, and impossible to
enforce regulations about what should happen on the ship itself. The fact that
they tied that accountability to a financial incentive is a red herring. They
could have just as easily tied it to a regulatory penalty, with similar
results.

It's depressing that a professor is using such sophistry to justify his
existence to his students.

------
guelo
This story seems too cute and oversimplified. Did it really take an economist
to figure that out? I'd like to see the real story, does anyone know have a
reference?

~~~
pessimizer
It really does. It's as if I was paying UPS to pick up my packages, but it
only delivered 2/3 of them. I wouldn't be wracking my brain very long to come
up with the same solution.

My guess is that the problem was that there were no incentives for politicians
to think of this as a problem, and seeing as it survived a "scandal," probably
some incentives not to care. I'd like to know who was getting the contracts,
and who their connections were.

I also wonder if there was some faction screaming about not imposing crushing
regulation on the noble businessmen who were providing a crucial and critical
function to protect our civilization, and if they overlapped with the
connections:)

EDIT: Also, this is a simple matter of paying for what you want. If you want
people to get rid of the prisoners, pay them to haul them away. If you want
prisoners _delivered_ somewhere, pay them for what they _deliver_.

------
Mz
I'm wondering if folks here have any "best practices" they can share for
creating the right incentives? (Or should that be a new thread?)

This was something I was very good at figuring out for raising my sons. Thus,
issues related to this at my job really get on my nerves (because I am
convinced it can be done better). So I am wondering what people know about
solving this issue for corporate culture -- or even on the start-up scene.

------
pixcavator
One party (the government) was paying another party (the captain) for their
services and then they figured out the best way to do it to get what they
wanted. This is not an example of governmental regulation.

