ECON2120 Lecture Notes - Lecture 6: Victimless Crime, Rent-Seeking, Marginal Cost
TOPIC 6 CRIMINAL LAW, PUBLIC LAW ENFORCEMENT AND PUNISHMENT.
- Nature of criminal law
- Enforcement is undertaken by the state,
- Puishet is etrated the state ad does’t go to the iti. Puishet iludes fie,
imprisonment, execution, stigma, torture, etc.
- Requires intent (mens rea)
- Is a deliberate act and may be concealed so the probability of being liable in a court is less than 1 and
need a fine greater than damage done (probability multiplier). Lack of willingness to compensate.
- Want to discourage those who form the intent to commit crime. Crime and tort is important. Crime
involves mens rea. Crime is net rent-seeking behaviour e.g. person spends time to steal.
- Terminology
- Murder is a crime, burglary is a crime
- A particular murder or burglary is an offence
Reasons for criminal law
- Why not do everything with tort law? Tort law may not work well when:
o A fine gives the right incentive, a damage payment the wrong incentive (for victim care and
activity). But does criminal law result in excessive victim care?
o E.g. victim takes precautions against crimes. Can impose both negative and positive
externalities. Precautions involve rent-seeking → wasteful expenditure from societal point of
view.
o When externalities are widespread, diffuse victims e.g. double parking, inalienability and
victimless crimes (drug dealing), fear of crime
o Effort must be expended to identify or to apprehend violators.
- Cries do daage to the soiet as ell as the iti
- Low probability of conviction and judgement-proof offenders that there is little incentive to sue.
- Society requires criminal law in order to constrain certain behaviour that would not otherwise be
adequately controlled – that cause substantial harm and cannot be appropriately discourage by the
threat of monetary sanctions alone.
- Criminal law is intended to impose moral stigma, shape preferences
- Distinguish coercive behaviour from accidents – to discourage rent-seeking and encourage the market
substitute. Does the act have social utility?
- To enforce property rules and discourage involuntary transfers. We want to deter coercive transfers
(encourages rent-seeking behaviour) and encourage market transactions.
Economic approach to crime
- Modern analysis started with Becker
- Crime is determined by the rationality of criminals, moral and ethical considerations, financial rewars,
likelihood of apprehention and conviction, economic and social environment created by public policy
including jobs available etc.
- Assumes criminals are rations
- Assumes criminality is purposeful behaviour. Vast majority of cases law breakers act like other human
beings. Criminalist attribute crime to social reasons.
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- Economic theory recognises the moral state of criminals. Criminals choose to commit offences.
Believes people will be deterred from crime if the economic benefits > economic costs. Penalty
convicted by the criminal system is influenced by punishment when one is convicted. Criminologists
believe crime is caused by dispositions.
- A risk neutral criminal will commit a crime if
o siBi > Ci + piKi or siBi – Ci = Gi > piKi
- people who choose to commit crimes receive benefit Bi, (for person i) if their crimes succeed (with
probability si). Bi may be tangible or intangible.
- They pay costs Ci whether caught or not (out of pocket expenses, opportunity cost of time)
- Gi is net gain to criminal from offence.
- If caught must pay costs Ki.
- Probability of being caught is pi.
- The expected penalty piKi is not the penalty an offender would receive if convicted, but the penalty he
would receive if convicted times the probability of being convicted.
- Do criminals respond to expected punishment?
- There is an intensive and extensive margin.
o Fewer crimes per criminal
o And fewer criminals.
- General deterrence incentives may have a weak effect on particular individuals, yet may have a large
impact on the entry and exist of marginal offenders.
- Economic approach suggest we use expected penalties to deter crime.
- Is ultimately an empirical question.
- Differentiating between correlation and causality is critical when analysing the impact of crime policies.
o Expected penalties deter some individuals.
- Levitt studies
- Deterrence or incapacitation?
12.1
- Why fines should be maximal?
- Why fines should not be maximal?
- What determines optimal length of prison sentence?
- What is the optimal level of punishment for crimes?
- Do criminals respond to expected punishment?
- There is an intensive and extensive margin.
- General deterrence incentives may have a weak effect on particular individuals, yet may have a large
impact on the entry and exit of marginal offenders
- Is ultimately an empirical question
- Differentiating between correlation and causality is critical when analysing the impact of crime policies
- Levitt studies → children are deterred by the threat of incapacitation
- Deterrence or incapacitation?
o Sentence enhances if it was your second offence.
o For property crime deterrence is more important than incapacitation.
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Efficient crime
- Why benefits to criminals count. Must add up the benefits to all society including criminals.
- Wat to geerate a theor to soethig e do’t ko the aser to
- Consider
o The speed with is wife giving birth in the back seat
o The lost hunter breaking into an empty cabin
o Efficient crime if benefits > costs
- How might we arrange to have efficient and only efficient crimes?
o One solution is to special case them – make them legal (defence of necessity)
o The other solution is to punish them – but set the punishment equal to the damage done to
the rie’s iti
o So if my benefit is greater, I will still commit the crime (crime punishment as a Pigouvian tax)
- The harmful act gives a net gain with money value of $G, for person i. (It may be money or extra utility).
- Harm caused by each harmful act is H.
- These costs are very high and beyond the expenses of the legal system, victim losses, and crime-
prevention agencies. The burden of crime encompasses the opportuit ost of itis’, riials’, ad
prisoners’ tie; the fear of eig itiized; and the cost of deterrence
- But for most crimes, the harm caued is much greater than the benefit to the criminal, we would like to
deter.
- Two intuitions for punishment: punish to eliminate inefficient offences or enough to deter. Will come
back to this issue.
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Document Summary
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