Criminal Law

1
Criminal Law

• The difference between criminal and civil
• Theory of optimal punishment
• How do we decide how many criminals to catch
• And what to do to them?
• Why benefits to criminals count
• Should the rich pay higher fines?
• The inefficiency of efficient punishment
• Why not replace all jail sentences
• With probabilistic execution?
• Same deterrence, no need for expensive prisons

2
Criminal Law vs Civil Law

• All crimes are crimes against the state
• If someone mugs me, Im just a witness
• The state of California is the victim, legally
  speaking
• And the state decides whether to prosecute,
  controls prosecution, settles, collects any fine
• Torts are offenses against the real victim
• Who decides whether to sue
• Prosecutes, settles if he wants
• And collects damages
• The discussion of why is another chapter

3
Whats wrong with theft?

• Someone picks my pocket
• He is 100 better off
• I am 100 worse off
• We judge outcomes by summed benefits
• So whats the problem?
• Suppose picking pockets earns on net 10/hr,
  alternative work 5/hr
• People shift into the more attractive profession
• Driving down its return
• Until the marginal pickpocket gives up a 5/hr
  job to make 5.01 picking pockets
• I still lose 100, but he makes about zero
• There will be inframarginal pickpockets
• Especially good at picking pockets or especially
  bad at doing anything else
• Who do somewhat better than that
• But there are also additional costs
• To protect myself I keep most of my money in my
  shoe--and get a sore foot
• Or spend all my time watching out for pickpockets
• The argument generalizes

4
Rent Seeking

• Krugers example
• Exchange controls and exchange permits
• Competition to get valuable permits competes away
  their value
• Homesteading example--already discussed
• Rent seeking and litigation
• A legal procedure, such as a tort suit, to
  transfer costs, sets off rent seeking
• Justified only if there is some indirect benefit,
  such as
• Deterrence.
• Hence let the cost lie where it falls makes
  sense in many cases.

5
Efficient and inefficient offenses

• Terminology
• Murder is a crime, burglary is a crime
• A particular murder or burglary is an offense
• Most offenses benefit the criminal less than they
  harm the victim
• If your car was worth more to me than to you
• I wouldnt have to steal it--I could buy it
• And the opportunity for me to steal from you
• Gives me an incentive to spend time and effort
  stealing
• You to spend time and effort defending
• All of which is a net loss
• So most offenses are inefficient, better if they
  do not occur

6
But

• Consider
• The speeder with his wife giving birth in the
  back seat
• The lost hunter breaking into an empty cabin
• These are efficient offenses Benefitgtdamage done
• We want a legal system that permits these, but
  deters offenses that are inefficient
• In considering how to do it, I will assume
• The only purpose of punishment is to deter
• One could make the analysis more complicated
• By allowing for incapacitation--being in prison
  or dead limits your ability to commit more crimes
• And rehabilitation, if you think punishment can
  be used to change people in ways that make them
  less likely to commit future crimes
• But not today
• And I will also assume rationality, as usual

7
Optimal Punishment

• How do we deter all and only inefficient
  offenses?
• Special case efficient offenses?
• Traffic cop looks in back seat, waves you ahead
• Hunter gets off under the doctrine of necessity
• But what if the court cant tell if the offense
  is efficient?
• Speeding to get to a very important meeting
• Criminal punishment as a Pigouvian tax
• We punish with some probability p of having to
  pay a fine F
• Set pF damage done
• This assumes risk neutral criminal for simplicity
• To generalize, set certainty equivalent equal to
  damage done
• Crime is then only committed if value to
  criminalgtdamage

Does that explain why we dont deter all murders?
8
What I have left out

• I have left out the cost of catching and
  punishing criminals
• Deterring an offense isnt worth doing
• If it costs more than the net damage the offense
  does
• Consider an offense that
• Costs the victim 1000
• Benefits the criminal by 900
• For a net loss of 100
• We can deter it by either by
• Having more police, making it more likely the
  criminal is caught
• Or punishing it more severely, or both
• But police and punishment are costly
• If the extra cost is 200, deterring it makes us
  worse off!
• How do the costs depend on probability and
  punishment?
• And how do we include them in our calculation?

9
Taking account of costs

• We deter offenses by some probability p of
  punishment P
• The cost of probability p Enforcement cost
• Cost of Police, courts, etc. Costs more to catch
  more offenders
• Also, we could convict more criminals if we
  lowered our standards of proof
• At the cost of convicting more people who are
  innocent
• The cost of punishment P--punishment cost
• Cost to criminal of being punished--costs to
  criminals count too
• Plus the cost to us of punishing him
• For example
• A Fine we get what the criminal loses
• Net cost zero
• Not counting administrative costs of collecting
  the fine
• Imprisonment
• Criminal loses a year of freedom
• We must pay for a year of imprisonment
• Net cost gt amount of punishment.
• Execution
• Criminal loses a life, we dont get one
• Net cost is one life, equal to the amount of
  punishment

10
From Production Function to Total Cost Curve

• Step 1 Find the efficient punishment/probability
  combination.
• Out of all pairs p,P that are equivalent to the
  criminal
• And so give the same level of deterrence
• Find the one with the lowest enforcementpunishmen
  t cost
• Think of that as the cost of imposing expected
  punishment ltPgt
• ltPgt pF for a risk neutral criminal paying a fine
• More complicated in the general case
• So we now know the minimum cost of any level of
  deterrence
• We have just derived the total cost curve for
  deterrence from the production function.
• p and P are the (costly) inputs, deterrence the
  output
• We are finding the least costly input bundle for
  each level of output

11
Find the optimal expected punishment

• Buy the level of deterrence at which marginal
  cost of deterrence equals the benefit of
  deterring the marginal offense.
• More than that would deter some crimes not worth
  the cost of deterring
• Less would fail to deter some crimes that are
  worth the cost of deterring
• Benefit of marginal offense to offender equals
  ltPgt
• Because he commits only offenses worth more than
  that
• So the one that he would commit if punishment was
  a little less has benefitexpected punishment
• Benefit of deterring is (damage done) - (benefit
  to criminal) D - ltPgt
• Set that equal to marginal cost of deterrence
  D-ltPgtMC
• So ltPgtD-MC
• Optimal ltPgt damage done by one offense - cost
  of deterring one more offense.
• Note that MC might be negative
• Raising ltPgt increases the cost per offense
• But reduces the number of offenses
• If he is deterred, you dont have to catch him
  and punish him

12
Implication

• For crimes that are hard to deter
• Increasing expected punishment a lot
• Only decreases number of offenses a little
• Which increases the enforcement cost/offense
• So cost increases, so MC of deterrence gt0
• So the expected punishment should be less than
  damage done
• We let some inefficient crimes happen
• Because deterring them costs more than it is
  worth
• Murder, for instance
• For crimes that are easy to deter
• Increasing ltPgt a little decreases offenses a lot
• So cost decreases, so MC of deterrence is
  negative
• So ltPgt should be more than damage done
• Deter all inefficient crimes and some mildly
  efficient ones
• To save the cost of apprehending and punishing
  them

13
Efficient offense has two senses

• By committing the offense, does the criminal make
  us, on net, better or worse off?
• If benefit to the criminalltcost to the victim
• The offense is inefficient
• By deterring the offense, does the legal system
  make us on net better or worse off?
• The criminal can simply choose not to commit the
  offense
• We can prevent the offense only with more
  enforcement, which may be costly
• So it may be inefficient to deter an offense
• Even though it does net damage
• And efficient to deter an offense that does net
  good!

14
Stigma as Punishment

• After conviction for embezzling, hard to get a
  job as a corporate treasurer
• Suppose you apply, offer to take a cut in pay?
• The fact that you cant make an offer that will
  be accepted
• Is evidence that your gain from the job is less
  than their loss
• Which means that the stigma helps them more than
  it hurts you
• Which makes stigma the one punishment with
  negative punishment cost

15
Why Benefits to Criminals Count

• In all our calculations, gains and losses to
  criminals
• Count just like gains and losses to other people
• Why not ignore them, since criminals are bad
  people?
• One reason is it leads to a circular argument
• Thieves are bad, so their gains don't count
• So theft is inefficient
• Which explains why thieves are bad
• We are trying to figure out what the law should
  be, not start knowing the answer from our moral
  beliefs
• Another is that we want to generate a theory
• Sufficiently general to answer questions we don't
  know the answer to
• And lots of what we want to know our moral
  intuition doesn't give us
• Finally, if we can derive results that fit our
  moral intuition
• Without first assuming anything more than a goal
  of efficiency
• That might tell us something interesting about
  our moral intuition

16
Should the Rich Pay Higher Fines?

• A 100 speeding ticket is nothing to Bill Gates
• Intuition scale it up to get deterrence
• Economics, first pass
• If his gain from speeding is more than our loss
• Then it is efficient to let him speed
• And since he pays the damage, we have no net
  loss--not an issue of transfers between rich and
  poor
• Economics, second pass
• This assumes the Pigouvian world of zero
  enforcement cost, punishmentdamage
• We have just seen that optimal punishment also
  depends in part on how much it deters
• And Gates has a different supply curve for
  offenses than I do
• So a different optimal level of punishment

17
Intuition vs Economics

• Two kinds of offenses
• Payoff in utility
• Time saved by speeding
• Satisfaction of slugging a guy you dont like
• Payoff in money
• Supply curve for rich vs poor
• If the payoff is in money
• The same fine should deter rich and poor
• The dollars of payoff are worth less to the rich
  too
• If the payoff is in utility, it takes a higher
  fine to deter the richer offender
• The intuition is half right
• Sometimes the optimal fine is higher for the rich
• Because it takes a higher fine to deter
• Sometimes it is lower, because
• Deterring the rich criminal costs more than it is
  worth

18
Why not hang them all?

• Suppose a crime is punished with 10 years in jail
• Careful research establishes that the criminals
• Are indifferent between that and 1/6 of an
  execution
• So we can get the same deterrence at lower cost
• Convict, roll a die, 1-5 turn him loose
• 6 hang him
• Clearly an improvement
• Criminals, ex ante, are no worse off
• Same deterrence, so victims no worse off
• And we no longer have to pay for prisons
• I'll ignore incapacitation, which makes the
  argument more complicated
• To save even more
• Fire enough cops, raise standard of proof, to
  lower p by a factor of six
• And hang everyone we convict
• More generally, we should never use a punishment
  if
• There is some higher punishment with lower
  cost/deterrence
• Since applying the higher punishment with lower
  probability
• Costs less in enforcement and punishment costs

19
For example

• Squeeze out money, since fines are an efficient
  punishment
• You can lower probability of execution by
• Paying a fine
• The more pay, the less likely you are to be
  executed
• Then labor if it produces net income
• 5 years or 50,000. You can stay in prison 5
  years
• Or accept an offer from a private prison
• You work, they pay your fine in less than five
  years
• Or execute, with organs forfeiting for transplant
• Or, if none of these produces positive return
• Either use execution or, if we want smaller
  punishments
• Flogging and the like
• Why don't we do it this way? Should we?

20
Rent seeking

• The problem
• If we want law enforced, enforcers must gain
• But a way in which I gain at your expense
• Is an invitation to rent seeking
• I get you convicted, not because you did
  something wrong
• But because I can profit by convicting you
• Which means both of us spend resources
• Me framing you, you defending yourself
• Examples
• Mencken story
• Niven story
• Punitive damages
• Civil forfeiture

21
Why we don't eat each other

• Burying dead people instead of cooking them
• Is a waste of good protein
• Which is scarce in lots of societies
• Yet routine cannibalism is very rare, if it
  exists at all
• See The Man Eating Myth for evidence against
• Why?

• The more the gain to killing someone
• The greater the rent seeking costs
• "Watch out, there's someone behind you with a
  knife"
• Consider the application to organ transplants
• The obvious solution to the shortage is a free
  market
• But how do you make sure the organs were donated?

22
Quick Review

• Criminal Law vs Civil Law
• Why do we have both?
• What are the differences? Why?
• What's wrong with theft anyway?
• Stealing what you wouldn't buy is inefficient
  (explain)
• And the opportunity to steal attracts resources
  Rent seeking
• so the marginal theft has no gain to balance
  victim's loss
• To first approximation, net cost of theftamount
  stolen
• Less than that because some thefts are
  inframarginal
• More than that because victim bears costs of
  defending his stuff

23
Permitting Efficient Crimes

• Efficient offenses Sense 1 Benefitgtcost
• We want them
• Can get them by special casing Defense of
  necessity. If their efficiency externally
  observable
• Or by a penalty that won't deter them
• First approximation Punishmentdamage done
• Probability of being caught and convicted x fines
• damage your offense does
• So you only do it if it's worth doing
• But this ignores the cost of deterrence
• It is costly to catch criminals
• And to punish them
• And only worth doing if the deterrence is worth
  its price

24
Second Approximation

• How much must we increase total cost
• of enforcement and punishment
• To deter one more offense
• If it's more than the net damage done, don't
• But increasing deterrence sometimes reduces cost
• Because you don't have to catch and punish
• Offenses that don't happen--because you deterred
  them
• So it may be worth deterring some efficient
  offenses
• To save the cost of prosecuting them.
• So we want average punishment (pF)
• ltdamage done for hard to deter crimes
• gtdamage done for easily deterred crimes
• Think it through and see if it makes sense

25
Other Points

• Stigma may be a punishment with negative cost
• Knowing you are a criminal helps me
• More than it hurts you
• So the knowledge both punishes and produces net
  benefit
• We count costs and benefits to criminals too
• Cost of execution includes the life lost
• Cost of a crime is net of the benefit to the
  criminal
• Which seems very odd, but makes sense
• If we are starting without morals and justice
• And trying to deduce them, or something similar
• From economic efficiency

26
The Efficiency of Inefficient Punishments

• Suppose you aimed for the least costly
  punishments
• Fines wherever possible
• Penal slavery if the defendant can't pay
• Or execution with organs forfeiting for
  transplant
• Wouldn't that get deterrence at a lower cost?
• Yes--if you trust the enforcers
• Easy ways of hurting people
• Or expropriating their property
• Or their organs
• Are a temptation to abuse
• Again rent seeking
• How can we prevent abuse of the enforcement
  system?