Part F-I
The Economic Theory of Crime
and Punishment
Inadequacy of Tort Law
and the Necessity of Criminal Law
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Objectives
- distinguish between civil and criminal
prosecutions
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Inadequacy of Tort Law and the
Necessity of Criminal Law
Most crimes are also torts (someone gets injured in
some way)
If civil suits could cause the potential injurers
(potential criminals) to internalize the total social
cost of their actions, then criminal law might be
unnecessary.
Why civil suits cannot do this?
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1. Inherent limitations of ‘compensation’ - losing a
leg, being killed, being abused?
- we cannot really define a sum of money that
provides perfect compensation in many cases.
- in these cases civil compensation by courts
provides potential injurers with the incentives not
to take unreasonable risks
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- Similarly criminal punishment is intended to
‘deter intentional harms’ not compensate for it.
- How much would you accept to lose an eye, a
child, your dignity? This makes little sense.
- The victim cannot really considered these
questions in terms of a sum of money – perhaps
this is were ‘vengeance’ enters?
The problem of ‘preference revelation’.
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What would the ‘market for victims’ be like?
Who would commit more crime, the rich or the
poor?
Rich criminals – poor victims
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Bankruptcy problem
- the rich would be ‘judgment proof’ against
major crimes
- the poor would be ‘judgment proof’ against all
crimes
What about the ‘public’ portion of the harm?
- who gets compensated for this?
We would have all the usual problems of
determining perfect compensation under tort law
and more
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2. What about the wide range of crimes for which
perfect compensation is possible, can we
dispense with criminal law? NO.
Rights versus interests
Example: Law of trespass protects interests in
property but does not grant an absolute right to
property.
A person can trespass in an emergency but must
pay compensation.
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We can compensate for the harm caused by
infringing on ‘interest’ in property
At times we will want to protect ‘rights’ not
‘interests’ - life, liberty, the pursuit of happiness
- such ‘rights’ are inalienable by
commerce
The infringement of a ‘right’ diminishes liberty
Protecting ‘interests’ secures wealth but protecting
‘rights’ enhances liberty (inalienable by
commerce)
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3. Perfect compensation might not be able to deter
crime so that punishment becomes necessary.
Thief steals a $30,000 car gets caught five minutes
later and must return the car and pay $100 for
the victim’s time and out-of-pocket expenses perfect compensation
Not good enough, the victim is returned to her
former level of well-being, but the thief is not
deterred from committing further thefts.
Why not?
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Consider expected gain from theft
(1-PrCCP)*Take + PrCCP*(Take – Compensation)
Where: PrCCP is the probability of being caught, convicted
and punished
Take is the value of the theft
Compensation is the loss of the victim
The thief stole a $30,000 car got caught and was required to return
the car and pay $100 for the victim’s time and out-of-pocket
expenses - perfect compensation
But what if there was only an 80% chance that the thief would have
been caught? Expected value to the thief of stealing the car:
0.2($30,000) + 0.8($30,000 - $30,100) = $6,000 - $80 = $5,920
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Internalization for torts versus deterrence for crimes
If - perfect compensation not possible (in principle
or practice)
- we desire to protect rights (inalienable) not interests
- enforcement errors occur
then punishment is necessary as opposed to compensation.
Compensation would allow the criminal to ‘pay the price’ and
do whatever they want. Criminal law seeks to deter the
behaviour.
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Psychological commitment and punishment:
The stronger the psychological commitment to
the act the greater the required deterrence.
- deliberate act versus accident
- deliberate act versus spontaneous act (premeditation)
- repeated crime vs. first offence
This is not the case for simple internalization of the
costs of an act, the injurer’s state of mind does
not really matter, they will pay whatever is
required to compensate the victim.
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What acts should be ‘punished’ (be criminal)
Acts should be punished when the objective is
‘deterrence’
Acts should be priced (require compensation) when
the object is internalizing costs.
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