Econ 522 – Lecture 22 (April 22 2009)
HW3 due next Thursday (promptly at 1)
Room set for final exam: Soc Sci 5206
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The last two lectures, we discussed the legal process itself – its goals, and some of
its details
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Today, we turn to criminal law
o Next Tuesday: a bit more criminal law, and revisiting efficiency
o Next Thursday: tying it all together/recap/review
o That will finish up the core material for the course
o Tuesday May 5: some interesting stuff not on the exam
o Thursday May 7: no lecture – probably a review session by Chao?
o Week before the final, I’ll hold extra office hours
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Much of today’s lecture comes from chapter 15 of the Friedman book, Law’s
Order, which I’ve put online as a digital reserve (there’s a link on the syllabus)
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As with the legal process for civil law, the economic goal of criminal law is to
minimize total social cost, which includes
o the social cost of crimes, and
o the resources that are spent on enforcing the system (detecting and
punishing offenses)
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Everything we’ve done so far this semester has been about civil cases
o In civil cases, a suit is brought by an individual who was harmed
o In most cases, if the plaintiff prevails, the remedy is meant to compensate
him for the harm that occurred
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Criminal law differs from civil law in a number of ways:
o The criminal intended to do wrong. (In many civil cases, the harm was
accidental.)
o The case is brought by the government, not by an individual
o The harm done tends to be public as well as private.
o The standard of proof is higher than in a civil suit
o If found guilty, the defendant will be punished
The first distinction is that a criminal conviction requires intent
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The legal term is mens rea, “a guilty mind”
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Tort law considered harms that happened accidentally
o An injurer might cause an accident while taking precautions, and still been
liable under a strict liability rule
o An injurer might cause an accident while not taking sufficient precautions,
and been liable under a negligence rule
o An injurer might cause an accident while being reckless, and been liable
for punitive damages on top of compensatory damages
o But in any of these cases, the injurer did not intend for the harm to occur.
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There are circumstances where the line of intent gets blurred
o If someone is in a position of responsibility for someone else’s safety and,
through a pattern of negligence, causes that person’s death, they can be
charged with “criminally negligent homicide” even though they did not
intend for the person to die
o (If you’re hired as a lifeguard and are drunk while on duty and someone
drowns, you’re in trouble)
o The flip side of this: sometimes intent alone is enough, as when people are
charged with attempted murder even though no actual harm occurred.
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The next difference is who initiates the case
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In civil law, a case is brought by the victim
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In criminal law, a case is brought by the state
o Recall that in tort cases involving accidental death, the victim could never
receive damages; his family and friends could only sue for lost
companionship or lost wages, not the lost life
o On the other hand, criminal cases do not require a living victim.
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This also allows prosecution of “victimless crimes” – that is, crimes which do not
cause any clear harm to any individual, such as gambling, prostitution, and drug
sales
o The theory here is that all crimes harm the public
o That is, the breakdown of law and order in society is a public bad
o So the public (represented by the state) brings criminal actions, not the
victim.
Next is standard of proof
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We mentioned Tuesday, in most civil cases, the standard of proof is a
preponderance of the evidence
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To award punitive damages, the standard is often higher, such as clear and
convincing evidence
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Criminal cases have a much higher standard of proof: the prosecution has to prove
its case beyond a reasonable doubt
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We’ll come back to this.
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The final difference is the distinction between civil remedies and “punishment”
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In nuisance law, contract law, and tort law, damages serve two purposes
o They compensate the victim
o And they cause the injurer to internalize the cost of the harm
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When the injurer internalizes the harm, we get pollution, or breach of contract, or
accidents, to happen only when they are efficient, that is, when they are less
costly than preventing them
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In criminal law, punishment is not meant to compensate the victim directly
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And in criminal law, punishment is meant to deter crimes – that is, to prevent
them altogether, not just to prevent the inefficient ones
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And so punishment need not be limited to the magnitude of the harm done
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Civil remedies generally transfer resources from one party to another, without
destroying anything
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Criminal punishments, such as prison time and execution, often destroy resources
o That is, they are designed to make the criminal worse off without
necessarily making anyone else better off.
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So civil penalties are designed to make injurers internalize the costs of their
harms, so that these harms only occur when they are efficient; but criminal
punishments are designed to deter crimes, to discourage their commission in all
situations.
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This does beg an interesting question: are crimes ever efficient?
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Cooter and Ulen don’t seem to take much of a stand.
o They ask the question, “which acts should be treated as crimes?”
o Then they give the rather unsatisfactory answer, “an act should be treated
as a crime if doing so increases social welfare.”
Friedman clearly believes that some crimes may be efficient
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Clearly, most are not
o In order to steal my laptop out of my car, someone might have to break my
window
o My laptop has lots of personal stuff on it – papers I’m working on,
pictures of my friends – it’s probably worth more to me than to him
o Plus, my window got broken
o So the cost to me is likely larger than the benefit to the thief.
o Similarly, stolen cars are worth much less than legally-owned cars
o If someone steals my car, he’ll probably sell it for much less than it will
cost me to replace it
o Plus, he may have to reduce the value of the car to steal it – by breaking a
window, jamming a screwdriver in the ignition, etc.
o Again, the crime is inefficient.
o And if a crime were efficient – say, someone stealing my car because they
value it much more than me – there is often a legal alternative – offering
to buy the car from me.
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However, Friedman gives a couple of examples of efficient crimes
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One is a situation we saw earlier: a hiker is lost in the woods, on the brink of
starvation, and stumbles on a cabin with nobody home. He breaks into the cabin
and steals some food.
o (In this case, we have a legal doctrine to deal with the problem: private
necessity. Rather than paying the penalty for trespass, breaking and
entering, and theft, the “criminal” would likely just be liable for the
damage done.)
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Friedman follows this with a much creepier example: efficient murder
o A very rich man decides he would derive a huge amount of pleasure from
hunting and killing a human being
o He finds ten people who all agree that he can pay them each $1,000,000,
they’ll draw straws, and he can hunt and kill whoever draws the shortest
straw
o Since the transaction is voluntary, it seems like it must be efficient.
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In fact, there’s a recent case that sounds more like this than you’d expect
 In 2001, a German man, Armin Meiwes, posted an ad online “looking for a wellbuilt 18-to-30-year-old to be slaughtered and consumed.”
 Seriously.
 And someone answered
 The two met, discussed it, and agreed that Meiwes would kill and eat the guy.
(This would fulfill various sexual fantasies that both men had.)
 So he did. And videotaped it.
 Some of the details of the story are gruesome, I won’t share them.
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In 2002, Meiwes was arrested, and admitted to what he had done
At the time, cannibalism was not a crime in Germany
So the question was primarily whether someone could be guilty of murdering
someone who had consented to be murdered.
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In 2004, Meiwes was convicted of manslaughter and sentenced to 8 and a half
years in prison
In 2005, he was ordered retried, and in 2006, convicted of murder and sentenced
to life in prison.
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So again, if the rich guy and his ten greedy friends all consent to the hunting
contract, or Meiwes and his victim agree that he should be killed and eaten, are
these crimes efficient?
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The answer depends on how much you buy into the argument of public bads
o One view is that certain actions are so repugnant they harm others just by
their stench
o That is, everyone is somehow made worse off just by “living in a world
where this type of thing is allowed to happen”
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We’ll come back to the question of efficient crimes in a bit
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For the most part, though, it’s probably safe to assume most crimes are inefficient
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Next question: why not just use tort law to cover crimes too?
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We saw that tort law can create an incentive to avoid certain harms
If tort law worked perfectly, there might be no need for separate criminal law.
The book offers three reasons why tort law is inadequate to deal with certain types
of offenses.
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First, tort law depends on perfect compensation; but perfect compensation may be
impossible, as in cases of the loss of a life or a crippling injury.
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Second, even if perfect compensation is possible in principle, it may be
impossible in practice
o A court has no good way to figure out how much money would make me
indifferent about losing my left arm
o There’s no clear market substitute
o If they ask me, I have an incentive to lie.
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(Recall a long time back, when we distinguished between injunction/property
protection and damages/liability protection
We can recast this as the distinction between protecting a right and protecting an
interest
If someone is free to cut off my arm, provided they pay me for it, then my
interest in that arm is protected; but my right to have that arm is not
The book tries to make the case that in certain instances, it is better to protect
rights than interests.)
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Third, if the probability of getting caught and convicted is less than one, then to
deter the act, the punishment must be more severe than the benefit received
We made this argument when we talked about punitive damages
But the problem is even greater with deliberate acts.
(If anyone caught stealing money was simply required to return it, we would
expect this to lead to an awful lot of theft.)
Plus, even if we could make the penalty more severe, criminals might be
judgment-proof – unable to pay large enough damages – and the system would
break down
So in cases where perfect compensation is impossible, where being caught is unlikely,
and where defendants might be judgment-proof, tort law might not work too well, and
there is room for criminal law.
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Cooter and Ulen argue that an economic theory of crime and punishment must answer
two questions:
 which acts should be punished?
 how should they be punished?
They answer the first question:
 acts should be punished when the aim is deterrence, acts should be priced when
the aim is internalization
 and the aim should be deterrence when perfect compensation is impossible, when
people want law to protect rights instead of interests, or when enforcement errors
undermine liability.
I’m not wild about the treatment in chapter 11 of the textbook – it feels like they
introduce a bunch of math for the sake of the math, in a way that doesn’t give any
additional insight. The rest of today is basically the treatment in the Friedman book.
The basic economic model of crime and punishment makes the following key
assumption: rational criminals.
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That is, we assume that potential criminals consider the costs of a crime – the
chance of getting caught, and the severity of punishment – and weigh it against
the benefits they get
If enforcement were free, we could hire so many police that nearly all crimes
were detected, and punish them severely; this would lead to nobody rational ever
committing any crime
The reason we don’t do this is enforcement costs.
In order to deter crime, we have to do two things: catch offenders, and punish them.
Catching a higher fraction of criminals is more costly: it takes more police officers, more
detectives, and so on.
More severe punishment also tends to be more expensive.
 The most common punishments are fines and imprisonment
 Fines aren’t costly at all – the offender pays $1000, the state receives $1000, the
total social cost of the punishment is 0
 However, fines don’t always work, because not everyone can pay them
 Suppose there was a crime we wanted to deter by imposing a punishment equal to
a $100,000 fine
 A lot of the people who commit the crime may not have $100,000, so they would
not face a sufficient deterrent.
 (this is the problem of “judgment-proofness” we discussed in tort law)
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So when fines are not sufficient, we have to turn to less efficient means of punishment,
such as imprisonment
 This clearly has a social cost: going to jail makes the offender worse off (as
planned), but it also makes the state worse off, since it has to build the jail, staff it,
and so on
 So imprisonment is inefficient
 Most punishments (aside from fines) are inefficient.
There’s a famous paper by Gary Becker, on the syllabus, that launched the modern
economic literature on criminal law
 Suppose we had a crime that was punished by a 20% chance of being caught and
convicted and a punishment equivalent to $20,000
 What would happen if we fired half the police and judges, so the chance of being
caught and convicted dropped to 10%; but we raised the punishment to $40,000
 Punishing someone to the extent of $40,000 might be more costly than punishing
them to the extent of $20,000. But it wouldn’t be more than twice as costly
 And there’d be half as many people we needed to punish
 So the costs of punishment would be the same or lower
 On the other hand, we’d save money on detection/apprehension
 So we’d get the same expected punishment – and therefore the same deterrence
effect – at a lower cost
 Repeating the same argument over and over, Becker concluded that the optimal
criminal system was an infinitely low probability of an infinitely severe
punishment.
For a bit, think only about expected punishment, that is, probability X punishment.
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We argued before that increasing the expected punishment of a crime – by
increasing the chance of being caught, or the severity of punishment – is more
costly on a per-crime basis
However, as we increase the expected punishment, this creates a stronger
deterrence effect, which decreases the number of offenders we have to detect and
punish.
Which means that the total cost of administering this punishment might go down.
(Or might go up.)
So the marginal cost of deterring another crime could be either positive or
negative!
(For an example of how this works, suppose that at some cost, we could come up
with a punishment so severe that nobody would ever commit the crime. Then we
would never have to impose the punishment, and never have to solve any crimes,
so the cost of deterrence would be very low.)
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This brings us to a rather elegant theory of optimal punishment.
Friedman motivates it with an example.
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Suppose there is some crime for which the expected punishment is set at $900
That is, every time the crime occurs, the offender is subject to a “lottery” – a
chance of being caught, and a punishment if convicted – which he values as much
as a $900 fine imposed with certainty
Suppose we figured out that raising the expected punishment from $900 to $901
would deter one more crime. Should we do it?
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That depends on whether the social cost of raising the expected punishment from
$900 to $901 is greater or less than the social cost of that marginal crime.
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Suppose that raising the expected punishment from $900 to $901 costs $50 more.
(We argued that it could increase or decrease total costs; suppose here that it
increases them.)
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And suppose that the marginal crime does $1000 worth of damage to people
besides the offender.
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Since we want to consider total social costs, we also have to consider the benefit
the offender got from the crime. (This may sound funny – we’ll come back to it
in a bit.)
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How much value does the offender get from the marginal crime?
o The crime we’re deterring is the one that would have been committed
when the expected punishment was $900, but will not be committed when
the expected punishment is $901
o So the value of this crime to the criminal must be between $900 and $901.
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So in this case, the social cost of the marginal crime is $1000 – 900 = 100, and the
cost of deterring it is $50 – we can prevent a net loss of $100 at a cost of $50, so
we should do it.
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Now, more generally, if we are deterring the optimal amount of crime, it must be true that
the net damage of one more crime is equal to the marginal cost to deter one more crime:
Cost of deterring one more crime = Net damage
By definition, net damage is the damage to the victim, minus the benefit to the offender,
so
Cost of deterring one more crime = Damage to Victim – Benefit to Offender
We said that on the margin, the last crime we deter will be the one whose benefit to the
offender is exactly equal to the expected punishment, so
Cost of deterring one more crime = Damage to Victim – Expected Punishment
Rearranging,
Expected Punishment = Damage to Victim – Marginal Cost of Deterrence
So this tells us three things:
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When deterrence is free, expected punishment should equal damage to victim
o this causes the offender to internalize the costs of his actions
o this leads to only efficient crimes, just like in civil cases
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When the marginal cost of deterrence is positive – when raising expected
punishment to deter one more crime is costly – expected punishment should be
less than damage to victim
o That is, when preventing the marginal crime is costly, we allow all
efficient crimes
o And we allow some slightly inefficient crimes, because preventing them
would cost too much
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When the marginal cost of deterrence is negative – when raising expected
punishment lowers costs, since there are fewer crimes to punish – expected
punishment should be greater than damage to victim
o That is, when preventing the marginal crime saves money, we aim to deter
all inefficient crimes
o And we deter some efficient crimes too, because deterring them is cheaper
than having to punish them
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It might seem odd that we continue to count the criminal’s costs and benefits when
calculating social costs
 That is, we said that fines cost nothing – they make the offender worse off, and
the state the same amount better off – rather than saying, screw the offender, fines
generate revenue for the state
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Similarly, in calculating the social cost of a crime, we included the benefit to the
offender, even allowing for the possibility of some crimes being efficient.
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You could argue that by committing certain acts, offenders basically give up their
right to be counted.
But Friedman argues it this way:
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We’re looking for an economic theory of why things like murder and
embezzlement should be treated differently than things like nuisances, breach of
contract, and torts
If we start out by assuming they’re morally different – that someone breaching a
good-faith contract remains a part of society, but someone embezzling his
employer’s money has crossed a line and no longer counts – then we’re basically
assuming the answer to our question
If we can avoid making assumptions like that, just start with the idea of economic
efficiency and still come up with arguments for why these actions should be
treated differently, then we’ve actually proven something.
How comfortable you are counting the offender’s benefit may also depend on the
type of crime
You might be very willing to concede that if someone breaks your car window to
steal $50, the social cost of the crime is just the cost of the window
You might be less comfortable with the idea that the social cost of a crime like
murder or rape should include the utility the offender got from committing the act
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Stigma
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We said earlier that fines have no social cost, and most other punishments – jail,
execution – have significant social costs
Friedman points out one type of punishment that has a negative social cost, that is,
that actually creates value.
This punishment is the social stigma of having been convicted
Suppose you’re a pretty good corporate treasurer, and one day, you get caught
embezzling money from your employer
One consequence is you go to jail for a year
Another consequence is that when you get out, you find it hard to get another job
as a corporate treasurer
Your punishment consisted of both jail time and a stigma, that is, other peoples’
knowledge of your crime.
Friedman points out two empirical studies by John Lott
One studied white-collar criminals, and found that the lost income following
conviction was a significant fraction of the punishment
Another looked at corporations charged with cheating their customers, and found
that the drop in stock value was many times larger than whatever actual
punishment was imposed.
Friedman claims that stigma as a punishment actually has negative social cost
To show this, he proposes the following experiment
o First, get caught embezzling and go to jail
o Next, go interview for jobs
o Tell people that you’re well-qualified to be a corporate treasurer, but you
recognize they may be hesitant to hire a convicted embezzler, so you’re
willing to work for much less than the going rate
Friedman predicts that there’s no price at which most firms would knowingly
take on an embezzler as treasurer
That is, the cost to them of hiring you (at any wage) is greater than the value to
you of having the job
This means that you getting hired by that firm would be inefficient
Without the conviction, you might have gotten the job; with the conviction, you
don’t
So society is better off with you being known to be an embezzler
(Or, the information that you are the type of person who embezzles is valuable to
society.)
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Friedman points out that stigma has one other funny characteristic:
As a punishment, it’s efficient when applied to a guilty person, but very
inefficient when applied to an innocent person
o That is, if someone who’s not an embezzler gets convicted of
embezzlement, they won’t get any jobs in the future, but this is inefficient
This is one argument for why criminal cases, which tend to come with a social
stigma, should carry a higher standard of proof than civil cases, which don’t come
with the same stigma.
Going back to punishment by fines…
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Friedman describes a great back-and-forth between him and some of his students,
on the question of whether the rich should face higher fines than the poor for the
same offense.
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Friedman argued that fines should be the same for everyone
o A particular offense imposes some amount of external damage
o Setting punishment equal to damage leads to efficient choices, by both
rich and poor
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Friedman’s students, though, pointed out that there are two different types of
crimes: those with monetary benefits for the offender, and those with
nonmonetary benefits.
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First, consider stealing $100
o This has the same monetary benefit to someone rich or someone poor
o So a penalty with the same monetary equivalent – say, a $1000 fine –
would have the same deterrent effect on the rich or the poor.
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But second, consider the joy of punching someone in the face who looked at you
funny in a bar
o Suppose this has the same utility benefit for both the rich and the poor
o Because the rich have a lower marginal utility of money, it would take a
larger fine to have the same deterrent effect
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But in fact, things are more complicated than that
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Remember that with costly enforcement, the goal is not to deter all crimes, but to
deter most crimes – that is, deter crimes until it stops being worth it to deter the
next one
Friedman apparently had his students work through some examples
o They found that sometimes, it’s optimal to set fines to deter “most” poor
peoples’ crimes and “most” rich peoples’ crimes – which involves setting
higher fines for rich people
o But if deterring the rich is too costly, it’s sometimes optimal to deter poor
peoples’ crimes and accept that the rich will do what they want!
(Friedman gives two more complications, which could favor either higher or
lower punishments for rich people.)
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This also brings us to another important point:
Sometimes, society may have other goals in mind besides efficiency
We’ve been using efficiency as our proxy for goodness throughout this course
But it might be that in criminal cases, society puts a high value on treating
everyone the same, even if this doesn’t lead to the most efficient outcomes.
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People might not object too heavily if rich people were charged higher fines than
poor people for similar crimes
People would probably object very strenuously if poor people were given more
severe punishments than rich people for similar offenses
That is, society might put a high value on “equality before the law,” and be
willing to sacrifice some efficiency to get it.
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One example of this: certain crimes are often punished by a choice between a fine
and jail time
These tend to put a fairly low dollar equivalent to time in jail – for instance, you
might be sentenced to a $5,000 fine or a year in jail
The disutility of a lost year is pretty large – the likely result of this is that
everyone who can afford the fine will pay it, and everyone who can’t, will go to
jail
But this means that rich offenders pay a small fine they can easily afford, and
poor offenders spend a year in jail, which may seem objectionable.
(In fact, since fines have a much smaller social cost than imprisonment, it may be
preferable to push people toward paying fines rather than jail time, so a rule like
this may make sense. But it still may seem objectionable to some people.)
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(Putting aside questions of equality, John Lott argued that equal punishments for
the same crime might be appropriate when the punishment is imprisonment:
o Most crimes are punished by imprisonment
o The rich value their time more highly than the poor, so imprisonment may
be a more severe punishment to the rich than to the poor
o This would suggest the rich could get shorter jail sentences and face the
same deterrent
o But on the other hand, the rich, on average, have better lawyers
o So they get convicted with lower probability
o The two effects might balance out, so the same punishments might be
appropriate.)
A few more things
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First of all, we said that imprisonment has a high social cost, because it’s costly to
the offender and costly to the state.
However, we overlooked one benefit: while someone is locked up, they can’t
commit more crimes
That is, if someone is a habitual offender, society benefits from having them
locked up
This is referred to as incapacitation.
In fact, this leads to a problem in much of the empirical literature on whether
stronger punishments actually deter crime:
it’s hard to separate the deterrence effect from the incapacitation effect
That is, if you catch more criminals and lock them up for longer
o it may deter crime because people are more afraid of getting caught
o and it also may lower crime because a bunch of criminals are already in
jail rather than on the street
and it’s sometimes hard to tell which is the dominant effect.
(Another argument for imprisonment is that it gives us a chance to rehabilitate
people, that is, to turn them from criminals back into productive members of
society. But this tends not to be an emphasis in reality.)
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marginal deterrence
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One simplification we’ve been making is that we’re only considering one crime at
a time.
But if different crimes are substitutes for each other, increasing the punishment on
one may push offenders into committing the other crime instead.
Take the example of armed robbery, and armed robbery plus murder
o You break into an isolated house, carrying a gun, intending to steal stuff
o Someone hears you and wakes up
o What do you do?
If the punishment for armed robbery is much less severe than the punishment for
murder, you might choose to run
o You take your chances on the owner calling the police and being able to
identify you
o And you know that at least the punishment won’t be that drastic if you’re
caught
If the punishment for armed robbery is very high, you might be better off shooting
the guy
o This reduces your chance of getting caught
o And you know that the punishment won’t be that different if you are
caught
This argument has been used to argue against “three strikes” rules, which mandate
long (20 years or more) prison terms for third convictions on certain types of
crimes.
If someone is about to get caught for a relatively minor offense, facing a very
severe punishment might make them more willing to kill someone to avoid being
caught.
(The logic is captured in the old proverb, “As well hang for a sheep as for a
lamb.” If stealing either animal is punishable by death, you might as well only
steal the more valuable one.)
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Not surprisingly, there is some empirical evidence that harsher expected
punishments do have some deterrent effect
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However, the results are interesting: on the margin, crime levels seem to respond
more to changes in the probability of getting caught, than to changes in the
severity of punishment once you’ve been caught
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That is, doubling the chance of being caught has more of an effect on crime rates
than doubling the fine or the prison term that convicted offenders will face.
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Friedman gives a simple argument for why this isn’t surprising: the total private
cost of being punished is actually different from the “apparent” sentence
o If someone is convicted and sentenced to 1 year in jail, they likely already
spent some time in jail awaiting trial, spent money on a lawyer, and will
have to live with the stigma of being a convicted criminal
o These additional penalties are similar in magnitude regardless of the
length of the prison sentence
o So
20% X (1 year + C) > 10% X (2 years + C)
not because 20% of 1 year is worse than 10% of two years, but because
20% of C is greater than 10% of C.

But the fact that people respond more to the probability of getting caught than to
the sentence seems to suggest that Becker’s suggestion – very harsh punishments
with very low probabilities – wouldn’t work well in practice

(Also working against Becker is the fact that people might object to punishments
that are way out of proportion with offenses
o If the chance of being caught jaywalking is very small, we might have to
execute jaywalkers in order to deter jaywalking
o But do we really want to execute jaywalkers?
o And would juries really convict jaywalkers if the penalty was death?
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putting it all together
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We already discussed the fact that using fines as a punishment mechanism has
very little social cost, and are likely the most desirable punishment for offenders
who can afford to pay the fine.
For those who cannot, imprisonment is costly, but could be made less costly by
having prisoners do useful work
o This has happened in many places in the past – I remember hearing the
irony a long time ago that New Hampshire license plates are stamped by
prisoners, but bear the state motto, “Live Free or Die” – and still happens
in some places
Finally, given the excess demand for transplantable organs, execution could be
made less costly for society (maybe even given a negative cost) by taking
executed criminals’ organs for transplant
Pulling it all together, then, Friedman gives a somewhat disturbing hypothetical
vision of what an efficient criminal system might look like:
It would be designed to squeeze the largest possible fines out of convicted
criminals, using the threat of more unpleasant alternatives for those who failed to
pay.
If the fines that victims can pay, even under such threats, are inadequate, they are
supplemented by penal slavery for criminals who can produce more than it costs
to guard and feed them, execution with the organs forfeiting to the state for those
who cannot.
Any prisons that do exist and do not pay for themselves are as unpleasant as
possible, so as to produce as much punishment as possible per dollar of
imprisonment cost.
It is a consistent picture, and considerable parts of it can be found in the not very
distant past, but not a pretty one.
He considers a few counterarguments.
 Incapacitation and rehabilitation might argue for prison over fines, but would not
necessitate such unpleasant prisons
 Execution is very costly in the current system, due to extra legal protections,
which may seem necessary because of its irreversibility and the horror of
executing an innocent person
 And some elements of this may just seem wrong to people – forced labor, or
confiscation of body parts.
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Friedman, however, offers another argument against “efficient” punishments:
 As punishments get more efficient, this means the state gets greater and greater
benefits from punishing people
 (The punishment must hurt the people being punished, but have social cost close
to 0, which means the state must be getting a benefit)
 But this gives a large incentive for abuse
 Already, some people feel far too much police effort goes into drug cases – in
which forfeiture of dealers’ money and possessions is common – over other
crimes that do not come with this “bonus.”
 We’ve been pretending the “state” is some perfect, benevolent institution, but in
truth it consists of lots of individuals who respond to incentives; making
imprisonment and execution too profitable for the state would lead to very creepy
incentives.
 (Another example of this: on the syllabus, I put two links to news stories about
towns using traffic cameras to catch red light violations. Once the cameras are in
place, officials realize that catching people is profitable. This gives an incentive
to catch more people. The first article lists six cities caught shortening the length
of yellow lights beyond what is allowed by law, in order to “catch” more people
running red lights.)
Finally, Friedman argues that similar logic may explain criminal laws against some
“victimless” crimes – cannibalism (once someone is already dead), organ sales, etc.

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In a world where cannibalism is allowed, the private benefit of murder is higher;
so murder might be more common
Even more so with organ sales – once human organs become valuable
commodities, the value of killing someone becomes much higher, and may
outweigh the risk of punishment
Thus, it may make sense to outlaw certain practices that do no harm in and of
themselves, but encourage other harms.
(One might be able to make a similar case for illegal drugs, although I’m not sure
the case would be any stronger than with alcohol.)
Cooter and Ulen offer a model of “youthful indiscretion”-type crimes which are
committed during “lapses”, that is, temporary deviations from rationality which the
offender would later regret. Take a look if you like.
Cooter and Ulen also estimate the total social cost of crime to be on the order of $500
billion annually in the United States.
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