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Counting offenders’ gains? Economic and moral considerations in the determination of criminality

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Abstract

The question of whether or not offenders’ gains should be counted in social welfare began with Stigler’s original critique of the Becker model, but that debate has been carried out solely within the context of law enforcement while taking the content of law as given. This paper extends the discussion to the question of what acts should be made criminal. It does this by viewing the Becker model of crime through the lens of the Coase–Calabresi–Melamed framework for assigning and protecting legal entitlements in conflicting-use situations. The analysis shows that the economic model cannot uniquely determine criminality, even when some allowance is made for a divergence between private and social values, provided that sanctions are optimally set. The content of law must therefore be imposed exogenously based on moral or other considerations.

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Notes

  1. Also see Sunstein (1996), Cooter (1998), Kahan (1998), Shavell (2004, Chapter 27), and Miceli (2019, Chapter 8).

  2. This conclusion, that optimal sanctions are maximal, has proven to be one of the most robust results of the Becker model (see, for example, Polinsky and Shavell (2007)). However, it is also one of the points of greatest departure of the model’s prescriptions from actual criminal justice policy. See, for example, Miceli (2019, pp. 38–43).

  3. Stigler argued that yet another explanation for bounds on punishment is the need to maintain marginal deterrence, an observation that has itself generated a large literature. See, for example, Polinsky and Shavell (2007, pp. 432–434).

  4. See, for example, Becker (2005).

  5. In particular, it would lead to greater enforcement and/or more severe punishment. See, for example, Shavell (1985) and Polinsky and Shavell (2007). Curry and Doyle (2016) take a different perspective. Following up on Posner’s (1985) argument that criminal law is aimed at preventing market bypass, they show that when offenders have a legal option for obtaining the benefits that they can also get from crime, welfare maximization becomes equivalent to minimizing the costs of crime, as is the case when offenders’ gains are not counted. Still, criminal gains are counted in their model in the sense that they are afforded status in social welfare. (Also see Hylton (2005).) Their approach, however, would seem inapplicable to many of the acts that Stigler noted should not be accorded social value. Langlais and Obidzinski (2017) examine law enforcement in a model where the enforcer is elected, and since all citizens, including potential criminals vote, candidates seeking to maximize their chances of winning would rationally take account of all benefits and costs of crime. Their approach closely mirrors the rent-seeking model of Garoupa and Klerman (2002).

  6. According to Shavell (2004, p. 548), the moral theory of law is “the major alternative explanation for criminal law…” Also see Posner (1985, p. 1194), who notes that “the pervasive evidence placed in the criminal law on … the moral character rather than the consequences of behavior, suggests a decidedly noneconomic perspective.” Both argue, however, that an economic approach is superior because of its greater explanatory power. See Friedman (2000, Chapter 18) and Mungan (2012) specifically on the distinction between crimes and torts.

  7. On the Lockean social contract and its relation to law, see Adelstein (2017, pp. 9–15). The argument about shifting majorities was initially set forth by Madison in Federalist No. 10 (Hamilton, Jay, and Madison, 2008).

  8. One of the problems with simple majority rule, of course, is that it does not allow voters to express their intensity of preference. Violating the law is one way that individuals can demonstrate that intensity.

  9. See Rawls (1971, pp. 364–367) and Thoreau (1965 [1849]).

  10. See Cooter (1984) and Lewin and Trumbull (1990) on the distinction between prices and sanctions.

  11. This in fact seems to motivate the definition of property rights espoused by Alchian (1965, p. 818). But what if the cattle ranch were there first? This perspective, which reflects the common law doctrine of “coming to the nuisance,” is exemplified by the famous case of Spur v. Del E. Webb Development Co. (494 P.2d 701, Ariz. 1972), which is often cited as epitomizing the Calabresi and Melamed framework. (See Cooter and Ulen (1988, pp. 181–185).) The case involved a developer who encroached on a pre-existing cattle feed lot and sued to have it shut down. The court granted the request, but in recognition of the feedlot’s temporal priority, it ordered the developer to pay the lot’s relocation costs, thereby effectively awarding the legal entitlement to the feedlot—and consequently labeling the developer as the “cause” of the harm—protected by a liability rule.

  12. See Demsetz (1972) for a general discussion of the question of when the assignment of liability matters for efficiency. Also see Posner (1985) and Hylton (2005) for discussion of a model of criminal law which interprets it, not as a pricing system, but as a means of punishing those who seek to substitute non-consensual transfers of rights for consensual (market) transfers. This so-called “market bypass” theory is an alternative to the Becker model.

  13. See, for example, Shavell (2004, pp. 189–190), discussing a concept that originated with Calabresi’s (1970) analysis of accident law.

  14. In the Becker-Polinsky-Shavell model of crime, the distribution of b represents varying gains from distinct acts by different offenders, but it could also represent varying benefits of multiple acts by a single offender.

  15. I assume for simplicity that b and h are independently distributed.

  16. Since s is a fine, it is obviously bounded by the ability of the offender to pay. However, the approach I will employ here, which assumes certain apprehension, will result in a finite optimum for s in all cases.

  17. This is in contrast to property-rule protection, under which an entitlement holder can seek injunctive relief from an infringement, possibly as a prelude to Coasian bargaining.

  18. I will, however, continue to assume certain enforcement throughout in order to keep the analysis simple.

  19. This solution reflects optimal specific enforcement in Shavell’s (1991) sense; that is, optimal enforcement within the category of acts imposing a particular level of harm per crime.

  20. We are ruling out a situation in which neither the imposition of crop damage nor killing cattle is considered a crime, as such a scenario is fundamentally inconsistent with an externality involving incompatible uses. As Calabresi and Melamed (1972) observe, “When the state is presented with the conflicting interests of two or more people, or two or more groups of people, it must decide which side to favor. Absent such a decision, access to goods, services, and life itself will be decided on the basis of ‘might makes right’—whoever is stronger or shrewder will win” (p. 1090). In other words, some form of “self-help” solution will emerge, usually based on force or vengeance, and there would be no guarantee of an efficient outcome arising. (See Nozick (1974) and Parisi and Dari-Mattiacci (2004) on the transition from such an anarchical state of nature to one in which that state acquires a monopoly on enforcement.) Conversely, we are also ruling out the case where both acts are considered crimes. While such a scenario would achieve an efficient outcome provided sanctions are optimally set, it would constitute a redundant pricing scheme. Which “crime” would end up being sanctioned under such a regime would presumably depend on which activity happened first. In the farmer-rancher dispute, for example, since no harm would occur until cattle stray, ranchers would be sanctioned first, resulting in efficient crimes occurring up to the point where b = s = h. Farmers would also be liable for sanctions if they then choose to kill any of the straying cattle, but with s = b ≥ h for those cattle that ranchers have actually allowed to stray, they would be deterred from committing any such acts. The outcome under this regime is therefore observationally equivalent to one in which only crop damage is criminalized. I thank a referee for suggesting this scenario.

  21. See Adelstein (2017), especially Chapters 8 and 9, on the interpretation of crime as an “exchange relationship.” The fact that transaction costs are high is what makes “market bypass” by means of a criminal exchange efficient, assuming efficient “pricing.” In other words, an efficiently-priced liability rule replaces a property rule (Kaplow and Shavell, 1996, pp. 724–725).

  22. This is the form of an optimal monetary sanction as first derived by Becker (1968, p. 192).

  23. This conclusion echoes corollaries to the Coase Theorem in the presence of positive transaction costs. See, for example, Cooter (1982, p. 14), who notes that when transaction costs are high, “the structure of law should be chosen so that transaction costs are minimized, because this will conserve resources used up by the bargaining process.” Fischel (1985) describes a similar standard for achieving efficient land use in the presence of externalities. He specifically proposes a “normal behavior standard” for defining the entitlement point, such that any landowner who fails to adhere to that standard would be subject to a sanction. That structure is efficient, he argues, because it minimizes the transaction costs of inducing people to conform “to prevailing social standards of acceptable behavior” (p. 159).

  24. See Shavell (2002) on the relationship between law and morality. Also see Cosgel and Miceli (2019), who examine the emergence of law within a “partially” moral society.

  25. In this vein, see Dharmapala and Garoupa (2004), who attach weights to offenders’ gains to account for the lower social value associated with crimes motivated by bias against a certain group (hate crimes). Polinsky and Rubinfeld (1991) likewise assume that some criminal gains are “illicit” and hence shouldn’t count in welfare. Garoupa and Klerman (2002), by contrast, discount the harm from crimes in the objective function of rent-seeking enforcers, who in their model care mainly about the revenue from fines.

  26. I assume neither would be given a social weight exceeding the private weight.

  27. See Nozick (1974), Parisi and Dari-Mattiacci (2004), and Cosgel and Miceli (2019).

  28. Calabresi and Melamed (1972) point to the difficulty of attaching a monetary value to the external costs—what they call “moralisms”—that arise in these sorts of situations. Mostly, these costs are not sufficiently harmful to rise to the level of crimes and so are tolerated as part of the unavoidable friction of living in a free society. The recent phenomenon known as “cancel-culture,” however, has resulted in calls for public regulation of many of these types of cost spillovers, thereby challenging previously-protected freedoms.

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Acknowledgements

I acknowledge the comments of three referees, which have greatly improved both the content and clarity of this paper.

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Miceli, T.J. Counting offenders’ gains? Economic and moral considerations in the determination of criminality. Eur J Law Econ 54, 475–496 (2022). https://doi.org/10.1007/s10657-022-09744-7

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