Economic Analysis of Crime: Rethinking Punishment

1. Part F-I The Economic Theory of Crime and Punishment Introduction Traditional Theory of Criminal Law Crime_A

2. Objectives There are two fundamental questions: 1. What acts should the state punish? 2. To what extent should a given act be punished? Crime_A

3. Introduction We are now considering an area of Public Law Why are these issues not simply handled as part of tort law? Historically they were included as part of the ‘common law of crimes’ Crime_A

4. ‘Common law of crimes’ has been replaced by ‘criminal statutes’ - criminal law has been codified Both the common law of crimes and the more recent criminal statutes are premised on the traditional theory of criminal law embodied in legal tradition and scholarship Crime_A

5. Traditional Theory of Criminal Law 1. Intended wrongs (crimes) versus accidental wrongs (torts) 2. Public nature of harm (in addition to the private tort) 3. The plaintiff is the state not a private individual 4. The standard of proof is higher in a criminal matter as opposed to civil action 5. A guilty defendant is punished, as opposed to simply making restitution (making the victim whole) Crime_A

6. Broadly, the traditional theory is based on the simple notion: ‘if someone does something wrong and they are found guilty, they should be punished and they should be punished in proportion to the seriousness of their crime’ The traditional theory focuses on the individual and the act. Crime_A

7. This is not a good starting point for the economic analysis of crime. Economic theory focuses on societal welfare (takes the perspective of society as a whole Very simply economic analysis of crime starts with: An act should be made a criminal act if doing so enhances ‘social welfare’. An act should be punished to the extent that deterring that act maximizes ‘social welfare’. Crime_A

8. Criminal Intent Accidental harm vs. intentional harm mens rea ‘a guilty mind’ - Scale of Culpability thoughtful thoughtless mens res careful negligent reckless intentional cruel 0 1 blameless at fault guilty Legal standard of precaution Civil wrong vs. criminal wrong Crime_A

9. Public Nature Property, contract and tort law generally deal with private harm imposed by one individual on another In criminal law more of the harm is of a public nature. - a murderer kills his/her victim but also causes a general increase in fear and a loss of a sense of security for all members of society. Three points: Crime_A

10. 1. This ‘public’ nature of a criminal act is why in criminal law the plaintiff is the ‘the crown’ (the government) as opposed to the specific person harmed in the criminal act (victim). In civil law the ‘victim’ is always the plaintiff Traditionally the victim had very little, or no role in the prosecution or punishment of the crime (mostly as a witness). More recently the victim might be consulted on charges to be laid and might a give ‘victim impact’ statement at sentencing – might even be compensated Crime_A

11. 2. The notion that criminal acts harm the general public allows for the possibility of ‘victimless crimes’ (drugs, gambling, prostitution). - parties to these transactions enjoy mutual gains (economic theory would find no basis for such acts being classified as crimes) - traditional theory of crime argues that there are victims (‘society as a whole’) whose peace and security is threatened (morality, public health, social welfare costs) Crime_A

12. 3. What if someone ‘attempts’ to harm another but fails. - there is no loss, no actual injury, no basis for a tort - but traditional criminal theory argues that the ‘attempt’ to harm causes a fear and loss of security - the attempt should be punished, even if it failed Crime_A

13. Standard of Proof Standards of proof Civil case – ‘preponderance of the evidence’ (plaintiff is more convincing than the defendant - just tips the scales of justice) - 51% Criminal case – ‘beyond a reasonable doubt’ (clear and convincing evidence) -95%/99% Why the difference? Crime_A

14. Traditional Theory of Criminal Law– Standard of Proof 1. Convicting an innocent person seems worse than letting a guilty person go free (Type I vs. Type II error). Hypothesis (H): Mr. X is guilty Accept H Reject H (convict) (don’t convict) H is true Correct verdict Type I error (guilty) H is false Type II error Correct verdict (not guilty) Crime_A

15. The higher the standard of proof, the smaller the likelihood of committing a Type II error (convicting an innocent person) but the greater the likelihood of committing a Type I error (letting a guilty person go). Society’s standards in this respect vary over time Crime_A

16. 2. The prosecution in a criminal matter can bring the full force of the state (prosecutor/police/etc.) and all its resources down on the defendant - heavier burden of proof helps to offset this advantage Note that at times private individuals can bring considerable resources to the court room Crime_A

17. Traditional Theory of Criminal Law– Punishment Punishment: - Incarceration (jail) - Restriction of movements (bail terms, house arrest, etc.) could be almost anything – no alcohol, no computers - Fines - Corporal punishment - beatings, mutilation, death Crime_A

18. Compensation in civil law aims to restore the victim to his/her previous level of well-being. Punishment in criminal law is intended to harm the injurer but without making the victim better off. (There is some very slow movement in this area.) In principle, punishment and compensation might be substitutes or both could be imposed. Crime_A

19. Perfect compensation: a sum of money that makes the victim indifferent as to having suffered the injury or not having suffered the injury. Consider: Perfect disgorgement: a sum of money that makes the injurer indifferent to having caused the injury or not having caused the injury. Crime_A

20. In criminal law, monetary punishment (fines) are intended to be a sum of money that makes the potential criminal prefer to not commit the crime - intended to remove whatever incentive the potential criminal has to commit the crime Aside: given the above, does a schedule of fixed fines ever make sense? Speeding ticket of $200 or - 1% of income - 5% of the value of your car Crime_A

21. Traditional Theory of Criminal Law– Some Problems Traditional legal theory of crime: - does not provide a model of predictive behaviour (it aims to control behaviour but does not explain the behaviour itself) - does not provide a clear objective for criminal law – ‘stop people from doing bad things’ (no guidance as to what should be criminal) In what follows we will try to: - distinguish between civil and criminal prosecutions - develop a predictive model of criminal behaviour - propose a clear objective for criminal law (Surprise Surprise - minimize the social costs of crime). Crime_A