The Millionaire’s Speeding Fine Explained With Economics

A multimillionaire businessman's staggering speeding fine can help explain Becker's rational model of crime and the role of deterrence in in shaping criminal decisions.

In a recent story that made waves around the world, a multimillionaire businessman in Finland was slapped with a jaw-dropping €121,000 speeding fine for driving 30 kilometers over the speed limit. What makes this penalty so intriguing is that in Finland, fines are calculated as a percentage of the offender's income. It's an approach that provides us with a unique opportunity to delve into Gary Becker's rational model of crime and unpack the factors influencing criminal decision-making.

To help us navigate the economic principles behind criminal behavior, we turn to the work of economist Gary Becker and his rational model of crime. According to this model, individuals weigh the potential benefits against the expected costs when contemplating criminal activities. But wait, benefits? Yes, even crime generates benefits for someone, whether it's the thrill of speeding or the time saved by flouting the rules. Becker highlighted this argument in his Nobel lecture:

I was not sympathetic to the assumption that criminals had radically different motivations from everyone else. I explored instead the theoretical and empirical implications of the assumption that criminal behavior is rational. ... Rationality implied that some individuals become criminals because of the financial rewards from crime compared to legal work, taking account of the likelihood of apprehension and conviction, and the severity of punishment.

The rational model of crime reveals that while the benefits of criminal behavior are immediate, the costs are hypothetical and contingent upon the probability of getting caught. And that's precisely where law enforcement and policymakers come into play. They must manipulate the punishment side of the equation to deter potential offenders efficiently.

So, how do societies set the desired expected punishment? There are two main variables: severity and certainty. Severity refers to the level of punishment, such as fines or prison time, while certainty focuses on the probability of being apprehended and convicted. These two factors work in tandem to shape a rational individual's perception of the expected costs of crime.

But here's the catch—punishment alone cannot eliminate crime. Some individuals will commit crimes regardless of the penalty. In fact, over-deterrence is a real concern. We couldn’t afford to live in a world where crime never happens. The socially optimal amount of crime in a society is likely positive, and diverting excessive resources to deterring minor offenses might come at the expense of other public projects like healthcare, education, and infrastructure.

Credit: Alamy via US Sun

Returning to our Finnish speeding fine story, we see the significance of deterrence in shaping individuals' behavior. Deterrence posits that individuals are less likely to commit crimes when the expected costs outweigh the potential benefits. In the case of the businessman's hefty penalty, it sends a powerful message that breaking traffic laws can result in severe financial consequences, acting as a deterrent for others considering similar actions.

But why base speeding fines on income? Couldn't a country simply set a high flat fine for everyone? Well, it turns out that approach raises a host of issues, including the fact that most people couldn't afford to pay such a hefty sum. Moreover, it could incentivize evading capture and potentially lead to corruption or strained police resources. Striking the right balance in deterrence measures requires a nuanced approach that accounts for various factors.

Bankrupting a citizen for a speeding violation seems excessive, doesn't it? And in the long run, it might actually cost the state more. Think about it—the speeder, burdened with insurmountable fines, may end up relying on public assistance programs such as welfare or food stamps. So, while the intention may be to deter crime, the unintended consequences could lead to a different kind of burden on the state's finances.

As the news of the Finnish system of income-based fines spreads around the world, we uncover a fascinating debate. Some critics might argue that excessive fines divert valuable resources toward deterring minor offenses, solely for the sake of generating revenue. They also raise concerns that a society overly focused on ticketing speeders could draw policing resources away from more serious crimes like murder and arson. In essence, they fear the creation of a society that operates as one giant speed trap.

On the other hand, if fines were set at lower levels for everyone, it might seem fair at first glance. After all, it creates equal expected costs for all individuals. However, the rational model of crime reminds us that not everyone responds in the same way to those costs. In fact, lower expected costs could inadvertently incentivize wealthy individuals to commit crimes because they can easily afford to pay the fines.

This raises an important question about fairness in the justice system. Some argue that the Finnish system, which bases fines on a driver's income, treats people differently in the eyes of the law. While fairness is a fundamental aspect of legal proceedings, it's worth noting that wealthier individuals already benefit from their access to resources that help them evade harsh punishments or convictions.

As we consider these nuances, it becomes clear that striking the right balance in developing an efficient punishment is no easy task. Policymakers must consider the efficient allocation of resources, the concept of fairness, and the behavioral incentives inherent in the rational model of crime. Once equity issues are added in, it’s not clear a single solution will solve everyone’s concerns.

• The largest speeding fine ever issued was a $290,000 (£180,000) ticket given to a Swiss millionaire who was caught driving 137 km/h (85 mph) in an 80 km/h (50 mph) zone [Guiness World Record]

• The Finnish GDP per capita in 2019 was $47,154 [Our World in Data]

• Becker received the Nobel Prize in 1992 "for having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior" [The Nobel Foundation]

• There are 1,085 fixed control points for automatic traffic surveillance in Finland, covering approximately 3,784 km of the road network [Police of Finland]