David R. Henderson  

ICE's Flawed Cost-Benefit Analysis

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As a general rule, if total liabilities and costs incurred in seizing a real property or business exceed the value of the property, the property should not be seized.
This is from Ryan Devereaux and Spencer Woodman, "Leaked ICE Guide Offers Unprecedented View of Agency's Asset Forfeiture Tactics," The Intercept, October 13, 2017.

This is actually not a bad criterion for a cost/benefit analysis. But what makes it flawed is that, I'm willing to bet dollars to doughnuts, they mismeasure the value of the property and badly mismeasure the cost. The value is the value in its current use. If that were not the value, it would be in a different use. And so the value will typically be above the market price. But their big, big mistake is in not counting the cost right. They say they want "total costs and liabilities." Total costs include the loss to the person from whom the asset was seized. That is, the total cost includes the value to the owner. So with even a penny of transactions cost, the total liabilities and costs will exceed the value of the property. By ICE's own standards, therefore, it should never seize property.


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COMMENTS (12 to date)
drobviousso writes:

You assume that ICE is concerned with some conception of the public good. A cynical reading of the passage suggests they are concerned with maximizing ICE's operating budget (I assume seized assets are added to ICE's budget).

They don't account for the cost to the public because they are not concerned about how their actions impact the public. They account for the impact on ICE because they are concerned about ICE.

David R Henderson writes:

@drobviousso,
You assume that ICE is concerned with some conception of the public good.
No, I don’t. I just take language seriously and I know what the term “total costs” means.
A cynical reading of the passage suggests they are concerned with maximizing ICE's operating budget (I assume seized assets are added to ICE's budget).
That’s my understanding too.
They don't account for the cost to the public because they are not concerned about how their actions impact the public. They account for the impact on ICE because they are concerned about ICE.
Yes.

James Broughel writes:

You are right if the seizure is considered a transfer. But typically in benefit-cost analysis, the benefits and costs to criminals from engaging in illegal activity aren’t counted. So to the extent property is seized that was stolen or otherwise involved in a crime, there are no costs to the criminal from seizing the asset.

Jon Murphy writes:

@James Broughel

But typically in benefit-cost analysis, the benefits and costs to criminals from engaging in illegal activity aren’t counted.

If this is correct, then the person who is performing the cost-benefit analysis is incorrectly doing so (see Steven Landsburg: The Armchair Economist, especially Chapter 10). To do a proper cost-benefit analysis, you need to include all the benefits and all the costs, not just the ones you agree with.

[spelling corrected—Econlib Ed.]

Vivian Darkbloom writes:

" Total costs include the loss to the person from whom the asset was seized."

It appears to me that under this logic and limited analysis the government should also not fine anyone for similar offences. I assume that it costs money to assess and collect a fine, and if the cost to the person fined is equal to the fine collected, the "costs" would always exceed the "benefits".

It is entirely possible that there are other public benefits to both fines and confiscation of property used in crime, e.g., specific and general deterrence, etc. And, to the extent there are such other public benefits, the ICE policy, as quoted, is flawed for that reason.

I'm not a proponent of confiscation, but this is more out of due process concerns (also a "cost" to the public) rather than any cost-benefit concern, per se. Determination of guilt and appropriate punishment should be within the provence of the judicial system following legislative guidelines and well-established procedures, not law enforcement.

Procrustes writes:

James, I realise that you have put a lot of caveats around your comment but a lot of civil asset forfeiture is from people who have not been charged with anything, let alone been found guilty. These people should have economic standing in any CBA.


Jon Murphy writes:

@Vivian Darkbloom

It appears to me that under this logic and limited analysis the government should also not fine anyone for similar offenses.

If the only reason to fine someone is cost-benefit analysis, then yes I'd agree. But, as you rightfully note, there are other reasons to do so (eg, deterrence), then the government can fine for similar offenses.

Dr. Henderson was just pointing out the mistake ICE was making in their statement.

David R Henderson writes:

@James Broughei,
You are right if the seizure is considered a transfer. But typically in benefit-cost analysis, the benefits and costs to criminals from engaging in illegal activity aren’t counted. So to the extent property is seized that was stolen or otherwise involved in a crime, there are no costs to the criminal from seizing the asset.
Procrustes has answered this well.
I would add that in a civilized society losses to even known criminals should have some weight. If they didn’t, then one would have trouble arguing against capital punishment even for less serious crimes. I understand that another argument against capital punishment for less serious crimes is that we can’t be sure the person did it. But even if we could be sure, I don’t think many people would argue for capital punishment in those cases. So most people are counting losses to criminals.

David R Henderson writes:

@Vivian Darkbloom,
See Jon Murphy’s response.

Vivian Darkbloom writes:

@Jon Murphy

Maybe, but he concludes:

"So with even a penny of transactions cost, the total liabilities and costs will exceed the value of the property. *By ICE's own standards*, therefore, it should never seize property."

I think it was a bit misleading (and maybe unfair?) to make a (limited) change to ICE's policy statement, then call the result *with the change* "ICE's own standards" (!) and then conclude according to those "own standards" it should never seize property.

Also, I note that the policy is stated as a "general rule" which seems to allow some discretion. Thus, the conclusion they should "never" seize property seems an exaggeration even with the Henderson addition to the stated policy.

As noted, I'm not a fan of the general policy of seizure/confiscation as it is currently used, but I'm also somewhat critical of Henderson's critique, for the reasons stated.

I'm also curious--does the standard "cost-benefit analysis" as used by economists exclude the other less tangible benefits I cited which may be present or, as you suggest, are they "additional factors" which are outside the formal analysis?

Vivian Darkbloom writes:

@David Henderson

I didn't see your response before I posted mine to Jon Murphy, so the failure to address you as well was not intentional.

Jon Murphy writes:

@Vivian Darkbloom:

I think it was a bit misleading (and maybe unfair?) to make a (limited) change to ICE's policy statement, then call the result *with the change* "ICE's own standards" (!) and then conclude according to those "own standards" it should never seize property.

Prof. Henderson is not making any change to ICE's policy statement. He's taking the policy as given and showing that, with even one penny of transaction cost, their policy says they should not seize property.

I'd like to reiterate that there may be reasons to punish criminals aside from the fact that a cost-benefit analysis. In fact, one could make the argument that to act as a successful deterrent, the costs need to exceed the benefits. But that is not ICE's position from this policy statement.

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