The Crime/Tort Puzzle

1. The Crime/Tort Puzzle We have two legal systems to do the same work I do something bad to you The legal systems take action Something bad happens to me A reason not to do bad things to each other Using different mechanisms Tort: Claim belongs to, is prosecuted by, victim Criminal: Claim belongs to, is prosecutedby, state Is there a good reason to Have both systems Sort offenses as torts, crimes or both as we do Have the differing legal rules we do in the two systems?

2. Should we abolish the criminal law? • We know a legal system can work without it • Saga period Iceland a clear example • But would it be unworkable for us? • Or clearly inferior • What problems might require criminal system to deal with? • Victim can’t afford a lawyer • Diffuse injury with many small victims • Judgment proof offender • Efficient private system impossible? (L&P) • Can these be solved • For all sorts of cases • And what new problems might the solution raise

3. A doctor discovered a cure for which there was no disease He caught the cure and died

4. Some Solutions • Poor victim: Make claim marketable • Diffuse victims • Either current class action, or … • Marketable claims plus • Middlemen to accumulate and rebundle • Buy all claims for less than $200 • From ten million people • Sell ten million claims for damages from X to entrepreneurial attorney • Judgment proof defendant • Tort backstopped by imprisonment+bounty • Tort with criminal penalty if you don’t pay • Tort with broader ways of collecting • Work it off: Penal slavery • Forfeit organs?

5. Landes&Posner Argument • Imagine a private enforcement system • Firms buy claims from victims • Catch, prosecute, sometimes convict • Collect a fine • Whose amount is set by the state • An efficient system imposes • The right level of expected punishment • Via the right combination of punishment and probability • But the fine set by the state is both • The reward to the enforcer, which determines • how hard he tries to catch offenders • Hence probability of being caught and convicted • And the punishment imposed • So you cannot, save by chance, find a fine that gives the right value of both p and P.

6. Solution • State sets <P>=pP, not fine F • Private enforcement firm can • Catch lots of offenders, impose a low P • Catch few, impose a high P • Private firm wants to maximize profit • Punishment is measured by effect on offender • Firm’s revenue is what it can collect • Punishment cost is the difference • High p, low P, can collect fines--but spend lots catching criminals • Low p, high P more criminals can’t pay fine--but don’t need as many private cops • Precisely the tradeoff that went into calculating the optimal p,P pair a few chapters back • Enforcement cost+punishment cost are a subtraction from firm profit • So firm picks p,P to minimize the sum • Which means the efficient combination!

7. Negative Price Offenses • Suppose, at the optimal p,P, it costs • More, on average, to catch and convict • Than you can collect from the convicted offender • So the value to the enforcer of the right to impose p,P on an offender is negative • So he will “buy” offenses only at a negative price • Solution: Deterrence as a private good • “Sell” offenses against you in advance • Notify potential offenders that you have done so • I.e. pay enforcement firm to agree to catch and punish those who offend against you • Thus buying deterrence • Problem • What if the potential offender can’t find out • If the potential victim has precommitted • “Anonymous victim” offenses • Such as the judgment proof dangerous driver

8. So the private system • Can work for offenders who can pay • Enough to make it worth catching them • As with the current tort system • Can work for offenders who cannot, if … • Deterrence can be made a private good • I.e. offenders know if victim is pre-committed • For judgment proof offenders+anonymous victims • Works poorly unless backstopped by • Bounty+criminal punishment • Organ forfeiture … • But “works poorly for a subset of offenses” • Might still be better than the criminal law alternative • Since no good mechanism to make it choose to be efficient

9. Sorting offenses • L&P: Torts are offenses easy to detect • So p always about 1 • So their p,P problem with private enforcement vanishes • But tort damages are the reward for winning the case • So the incentive to spend money litigating • Why should the optimal incentive to litigate • Equal the optimal fine to the loser • So their problem reappears • Implies that the tort system cannot be efficient for torts!

10. Criminal law for the judgment proof? • Tort law for offenses likely to sell for a positive price • Criminal law for negative price offenses • Due to being costly to catch and prosecute • And/or requiring very large punishments • And/or committed by offenders with few assets • But note that negative price torts unlikely to be litigated under present arrangements • So we are observing a biased sample of torts • Which may make this explanation look better than it is

11. Further issues • On the other hand • Torts are often accidents, and accidents • Are anonymous victim offenses • Which makes it harder to use private enforcement • So perhaps we have it backwards! • False conviction problem • Private enforcement via positive price offenses • Requires that conviction is profitable • Which raises risk of fraudulent conviction • Back to the efficiency of inefficient punishments • So perhaps criminal law should be for • Offenses it is easy to frame people for? • But that has its own risks--framing by the state • Is this why tort law doesn’t include probability multipliers? • “Make the victim whole” means he cannot gain by being a victim • Which eliminates one class of frauds • Where the damage is real, but arranged by the victim

12. Bundling legal rules

13. Does it make sense? • Same actor controls prosecution, collects fines • Fine provides an incentive to prosecute • Which can be a feature, or … • A bug--too much incentive, bogus prosecutions • Consider the recent Duke case • Also, if the two are separate • Controller can settle out of court • And so steal the fine from collector • Victim as owner/prosecutor in tort • Combines deterrence and fine incentives • But the victim is often the chief witness • And his evidence becomes less credible • The more he has to gain by conviction • Old problem with rewards in 18th c. England • Current with testimony in exchange for lenient treatment

14. Punishments • Tort uses efficient, criminal inefficient • Makes sense in terms of incentive to prosecute • Efficient punishment makes it more likely • That the enforcer collects enough • To pay the cost of enforcement • Making it a positive price offense • Higher standard of proof in criminal • Fits the use of less efficient punishments • But … efficient punishments give risk of fraud • Problem when the enforcer pockets the fine • And when the standard of proof is low • I.e. tort law

15. Probability multipliers? • In criminal but not tort system • Tort rule: Make the victim whole • Criminal punishment can be >> damage done • Because? • Probability higher in tort, less need for a multiplier? • But arguably private needs multiplier for incentive • But … high punishment harder to collect • And multiplier->risk of fraud • Arguably a problem with punitive damages • And class actions today • Are there efficient offenses? • Tort, often, so use Pigouvian rule to control • Criminal, intentional • So could choose not to commit • Could buy the car instead of stealing it • Makes it more likely that we want to deter all offenses • If doing so doesn’t cost us too much • Which is an argument for higher punishments--not just probability multiplier

16. Other differences • Intent • Intentional more likely to be concealed • So costly apprehension, lower p • Both arguments for criminal • Intentional more likely to have market substitute • Hence the crime version less likely to be efficient • So don’t need Pigouian rule to limit punishment • Right to a jury trial • Criminal in the Anglo-American system • Civil only in the U.S. • Perhaps because in a criminal trial • Everyone but the victim is a state employee • Raising the risk of a corrupt system • If you don’t have a jury to limit state power

17. Stigma • Criminal use, tort usually no • Does not provide an incentive to prosecute • Since the gain goes to other people using the information • Not, like a fine, to the prosecutor • Does provide a substitute for expensive punishments • Private prosecutor has an incentive to • Out of court settlement with facts kept secret • I.e. accept bribe from defendant to suppress stigma • Since its benefit goes to other people • Makes sense if the law can control stigma • But if stigma consists of individuals using information • In their own interest • Then it is the nature of information that determines whether it gives stigma • Mainly whether it implies that voluntary association with the offender is costly

18. Victim’s incentives • Tort compensates the victim • Which reduces his incentive not to be a victim • Which might be a feature or a bug • What we want is the right (efficient) level of incentive • Efficient incentive means that • Victim’s gain from acts to prevent offense • Equals net social gain • Buys prevention if and only if worth the cost

19. World of Costless Enforcement • To focus on just that issue, imagine • That offenders caught and punished at 0 cost • Steal my car? Caught, pay the car’s value • To me under a tort system • To the state under a criminal system • How hard should I try to protect my car? • Not at all. • You only steal if the car is worth more to you • In which case it is efficient • Just as the grocery store shouldn’t glue the groceries to the shelf • So tort system gives the right incentive, criminal wrong • How careful should I be not to be run into by a drunk driver? • Here my loss isn’t his gain • So an incentive for me to prevent it is useful • Which we get with criminal but not with tort • At least in that world, theft should be a tort, auto accidents criminal! • If we consider only the one issue • Of the victim’s incentive to prevent the offense

20. The point being • That the tort/crime choice affects • Many things relevant to sorting offenses • Some of which may be reasons to make X a tort • Others reasons to make it a crime • Many things relevant to sorting rules • Some of which may be reasons why a rule should be associated with (say) tort la • And others why it should not be • Making this a hard problem