Edited by Gerrit De Geest
[In: Volume 3, Nuno Garoupa (ed) Criminal Law and Economics]
The application of economic analysis to criminal law is based on the proposition that economic efficiency is useful for examining and designing rules and institutions. Criminal law is a fundamental area of public law concerned with certain acts (labeled as criminal) that are subjected to punishment. There is no simple definition of what a criminal act is, but as far as our economic analysis goes, there are two elements of a criminal act that make it distinct. First, a criminal act is intended to do substantial harm. For example, murder, rape, robbery are considered to be criminal acts. Tort wrongdoings also cause harm, but the nature of the harm is private, whereas with crimes the harm is overwhelmingly public. This difference is reinforced by the fact that a tort suit is brought by the victim (the plaintiff), whereas criminal prosecution is brought by the state.
A second important characteristic of a criminal act from an economic perspective is criminal intent or guilty mind (mens rea). There are gradations in criminal intent (which are relevant to guilt and punishment), but the intent to harm is a necessary part in a typical case involving personal injury. Whereas civil wrongs are concerned with harm caused by negligent or reckless behavior, criminal wrongs are necessarily the product of intentional, eventually cruel, behavior.
Criminal acts are subjected to punishment. The person who commits a crime exposes himself to the risk of punishment. Punishment can take several forms: a fine in excess of compensation, imprisonment and other forms of curtailing the criminal’s freedom, execution in some jurisdictions. Whereas compensation in torts generally aims to make the victim (the plaintiff) better off at the expense of the injurer, punishment in criminal law makes the injurer worse off without usually directly benefiting the victim. Due to the fact that compensation and punishment have different objectives, they can be independent and punishment may be imposed on top of compensation (notwithstanding general principles of law such as double jeopardy or Non bis in idem or Ne bis in idem in civil law).
Another important element of punishing criminal acts is the standard of proof required by law. In a tort suit, the plaintiff must prove his case by the preponderance of the evidence, whereas in a criminal action the prosecutor must prove her case beyond a reasonable doubt. It is the case that proof beyond a reasonable doubt is a much higher standard than just showing that the plaintiff’s case is more believable than his opponent’s. As a consequence, rules in criminal procedure are significantly different from civil procedure.
p. viiiHaving distinguished a criminal act from other acts (criminal intent and public injury) and the legal consequences (punishment and a beyond a reasonable doubt standard of proof), we should understand the economic approach to criminal law as an effort to explain criminal behavior and the principles of criminal law from an economic viewpoint. There are two important venues in this approach.
Potential criminals are economically rational. They compare the gain from committing a crime with the expected cost, including the risk of punishment, the possibility of social stigma, and eventual psychological costs. A criminal is an individual for whom the gain from committing a crime more than compensates the expected cost. On the modeling of criminal behavior, the economic approach has faced the usual criticism of using the expected utility framework, in particular the usefulness of economic rationality. It assumes that individuals respond significantly to the incentives created by the criminal justice system. Nevertheless, there is some recent literature on behavioral criminal law and economics as we will note later. Overall, it seems crime rates are responsive to changes in punishment.
A criminal act is efficient if the criminal could compensate the victims and remain better off. However, economic efficiency does not say that a criminal act is fair or desirable. Non-efficiency-based criteria in relation to criminal issues are important and should not be disregarded. The advantage of an economic approach to crime is that it avoids interpersonal assessments and is more neutral in its analysis. Efficient criminal law has the capacity to make everyone better off (even though the distribution of wealth could be more unequal). Fairness criteria are usually difficult to define, and non-efficiency-based criteria of criminal justice are sometimes the expression of the preferences of a group of people. Policy makers and legal professionals should not forget that usually there is a trade-off between economic efficiency and other goals.
This volume draws together sixteen chapters, by leading scholars in the field, summarizing the theoretical and empirical work that has been done to date on criminal law and economics. The book opens with a chapter on the public enforcement of law by the founding fathers, A. Mitchell Polinsky and Steven Shavell. This chapter provides an overview of the field, starting with the Beckerian model of the late 1960s before moving on to more recent developments, including activity level; errors; the costs of imposing fines; general enforcement; marginal deterrence; the principal-agent relationship; settlements; self-reporting; repeat offenders; imperfect knowledge about the probability and magnitude of sanctions; corruption; incapacitation; costly observation of wealth; social norms; and the fairness of sanctions. It is an updated summary of the current state of the art in criminal law and economics with a view to future developments.
p. ixThe following chapter provides a similar overview, but looking at the private enforcement of law, by Reza Rajabiun. Private enforcement is to be understood as detection or punishment imposed by private persons or organizations as a sanction against violation of legal rules without consent or action by public enforcers (such as the police, public prosecutors or regulators). Private enforcement is widespread in certain areas of public law. From an economic perspective, it is of interest to consider the extent to which private enforcement should be used in criminal law either as substitute for or as complement to public enforcement.
The boundaries between criminal law and other areas of the law are of importance in any legal system. The blurred line between criminal law and regulation deserves attention from legal economists, as a leading expert, Anthony Ogus, explains in his chapter, in particular determining the key differences between the principles and procedures of criminal liability and the criminal justice process and regulation. The line between criminal law and torts has also been the object of economic analysis. In his chapter, Antony Dnes, explains the theory and empirical work concerning the overlap of criminal acts with tort wrongdoings.
While explaining criminal law is a matter of importance for law and economics, procedure is instrumental in understanding how criminal law enforcement operates. A leading scholar on the law and economics of criminal procedure, Thomas Miceli, summarizes the current understanding. Criminal procedure concerns the rules governing the treatment of criminal defendants from the time of their arrest up to the determination of a final verdict. From an economic perspective, the goal of this process is to achieve the most accurate determination of guilt at the lowest possible cost. The process encompasses plea bargaining, the bail system, rules regarding the determination of guilt at trial, and appeal. Criminal procedure also affects deterrence because it ultimately determines the expected punishment imposed on offenders. However, uncertainty in enforcement necessarily leads to a conflict between the goals of deterrence and error avoidance. In the following chapter, Oren Gazal-Ayal and Limor Riza, expand the discussion on plea-bargaining and the nature of public prosecution. The final chapter on procedure is by Keith Hylton and Vikramaditya Khanna. They explain criminal procedure from a political economy perspective, in particular, the extent to which procedural rules and practices are tailored to regulate rent seeking behavior in the criminal law enforcement process.
p. xJoanna Shepherd looks at capital punishment, a topic she has written about in some of the most relevant articles in the field. She reviews the empirical literature on the deterrence and brutalization effects of the death penalty, addressing the current controversies in this matter.
The following chapters of the book deal with particular areas within criminal law that deserve significant attention from legal economists. Wallace Mullin and Christopher M. Snyder look at corporate criminal liability, Vimal Kumar and Stergios Skaperdas discuss organized crime, Roger Bowles provides an overview of corruption and criminal law, Luigi Franzoni looks at tax evasion and avoidance, Michael Faure discusses environmental crime, Mark Cohen analyses the new cyber crimes, and Nuno Garoupa, Jonathan Klick and Francesco Parisi review terrorism from a criminal law perspective.
The volume concludes with a chapter by two leading experts on behavioral law and economics, Richard McAdams and Thomas Ulen. They discuss criminal law and economics in light of recent developments in the behavioral sciences.
The organization of the book allows different reading strategies. Those who look for a quick introduction should concentrate on the first chapters that discuss the economic model of criminal law and economics generally. Those who have a more concrete interest in a particular topic may find the more applied chapters of more interest. Furthermore, the authors go beyond providing an authoritative review of the current state of the art. They identify important gaps in the literature and discuss the new routes taken by recent research. This makes each chapter unique in condensing current knowledge with cutting-edge research, paving the way for future developments.