Murat C. Mungan

A Utilitarian Justification for Heightened Standards of Proof in Criminal Trials

This paper contributes to the interpretation of the standard of proof in criminal trials in two ways. First, it provides a purely utilitarian explanation as to why there are asymmetric costs associated with false convictions and acquittals. It relies on the fact that noncriminals may engage in precautionary activities in order to avoid false convictions. Second, it shows that this difference in the costs associated with false-conviction and -acquittal rates is under certain circumstances sufficient to justify heightened standards of proofs.

The Law and Economics of Fluctuating Criminal Tendencies and Incapacitation

Economic analyses of criminal law are frequently and heavily criticized for being unable to explain many criminal law rules and doctrines that people find intuitively just. Existing economic models cannot properly explain, for instance, why criminal law distinguishes between (i) repeat offenders and first-time offenders, (ii) murder and voluntary manslaughter, and (iii) remorseful and non-remorseful offenders. In this Article, I propose a new and richer economic theory of crime that captures the rationales behind these practices, and potentially behind many other important criminal law principles and doctrines. Unlike an overwhelming majority of previous economic analyses, my theory accounts not only for the deterrent effect of criminal punishment, but also for its incapacitative effect. Moreover, and perhaps more importantly, it acknowledges the fact that people have fluctuating, rather than constant, criminal tendencies. That is, it recognizes that some people who ordinarily would rarely if ever consider committing a wrongful act can, in rare circumstances, lapse into committing a crime. Surprisingly, these two simple but critical concepts have never been jointly considered in an economic analysis of crime even though their inclusion appears to be an obvious extension of the standard crime and deterrence model formalized almost half a century ago by Gary Becker.The threat of imprisonment deters crime, but even when deterrence fails and a crime is committed, imprisonment benefits society by preventing the criminal from committing further wrongs outside prison for the duration of the sentence. Because these incapacitative benefits exist only if the offender would commit more crimes if left at large, the more strongly we believe that a criminal is dangerous, the stronger the rationale for imprisonment. But since people have fluctuating criminal tendencies, the mere fact that a person committed a crime reveals imperfect information regarding his likelihood of recidivating. As such, the offender’s criminal history and the circumstances surrounding the crime reveal important pieces of information that can be used to update our beliefs concerning the offender’s expected dangerousness – that is, to distinguish those who have made an uncharacteristic mistake from the dangerous and reckless criminals. Capturing the interaction between the incapacitation function of imprisonment and potential offenders’ fluctuating criminal tendencies allows the model to supply specific, consequentialist justifications for repeat offender laws, voluntary manslaughter laws, and the treatment of remorse in criminal law. Going forward, this more nuanced approach will provide a clearer lens through which to view other pervasive elements of criminal law, such as the mens rea requirement, and to revisit the normative prescriptions of the previous generation of economic analyses.

Reducing False Guilty Pleas and Wrongful Convictions through Exoneree Compensation

A great concern with plea bargains is that they may induce innocent individuals to plead guilty to crimes they have not committed. In this article, we identify schemes that reduce the number of innocent pleas without affecting guilty individuals’ plea-bargaining incentives. Large compensations for exonerees reduce expected costs associated with wrongful determinations of guilt in trial and thereby reduce the number of innocent pleas. Any distortion in guilty individuals’ incentives to take plea bargains caused by these compensations can be offset by a small increase in the discounts offered for pleading guilty. Although there are many statutory-reform proposals for increasing exoneree compensation, no one has yet noted this desirable separating effect of compensations. We argue that such reforms are likely to achieve this result without causing losses in deterrence.

Discounting and Criminals’ Implied Risk Preferences

Conventional wisdom holds that potential offenders are more responsive to increases in the certainty than increases in the severity of punishment. In standard law enforcement models, this assumption implies that criminals are risk seeking. We add to the existing literature by showing that offenders who discount future monetary benefits can be more responsive to the certainty rather than the severity of punishment, even when they are risk averse, and even when their disutility from imprisonment rises proportionally (or more than proportionally) with the length of the sentence.

Reverse Payments, Perverse Incentives

Issuing and enforcing prescription drug patents requires courts and legislatures to strike a delicate balance. A patent gives drug manufacturers a legal, if temporary, monopoly on sales of a drug; this encourages manufacturers to engage in costly research and development of new medicines. But not all patents issued by the Patent Office are ultimately deemed valid – generic drug manufacturers can infringe the patent, and, when sued, attack its validity in court on a variety of grounds, including obviousness. In recent years, patent holders have begun to settle these suits (which they initiated) by paying the alleged infringer. Not surprisingly, these reverse payment settlements (“RPSs”) have been challenged on antitrust grounds. The federal courts of appeals split over whether this practice is presumptively an illegal restraint of trade, and in December 2012 the Supreme Court agreed to decide the issue, granting a writ of certiorari in FTC v. Watson Pharmaceuticals. In light of the importance of the issue to both drug consumers and manufacturers, it is crucial to understand the economic effects of RPSs. Many courts, including the Second Circuit and the Eleventh Circuit, commentators and scholars have suggested that restricting RPSs would necessarily retard technological progress, by reducing the expected returns of becoming a patentee. In this Article, I show, with the help of a game-theoretical model, that this conclusion is unwarranted. Restricting RPSs has the effect of chilling generic entry when – and only when – the underlying patent is strong, or likely to be held valid and infringed. Therefore, restricting RPSs increases the expected returns of holding a strong patent by eliminating potential payments to generic entrants, while at the same time eliminating the possibility of monopoly profit-splitting between branded and generic manufacturers when the patent is weak. This reward shifting effect implies that restricting the use of RPSs is likely to foster more revolutionary innovations, which lead to stronger patents, while lowering R&D towards relatively obvious inventions, which lead to weaker patents. This reward shifting effect of restrictive rules on RPSs, to the best of my knowledge, has gone unnoticed in the past, and it should play an important role in the Supreme Court’s cost benefit analysis.

Over-Incarceration and Disenfranchisement with Population Growth

Disenfranchisement laws in many states prohibit convicted felons from voting. The removal of ex-convicts from the pool of eligible voters reduces the pressure politicians may otherwise face to protect the interests of this group. In particular, disenfranchisement laws may cause the political process to push the sentences for criminal offenses upwards. In this article, I construct a simple model with elected law enforcers who propose sentences to maximize their likelihood of election. I show, with the help of the median voter theorem, that even without disenfranchisement, elections typically generate over-incarceration, i.e. longer than optimal sentences. Disenfranchisement further widens the gap between the optimal sentence and the equilibrium sentence, and thereby exacerbates the problem of over-incarceration. Moreover, this result is valid even when voter turnout is negatively correlated with peoples criminal tendencies, i.e. when criminals vote less frequently than non-criminals.

The Scope of Criminal Law

Jeremy Bentham and Gary Becker established the tradition of analyzing criminal law in utilitarian and economic terms. This seminal book continues that tradition with specially commissioned, original papers that span the philosophical foundations of the use of economics in criminal law, both traditional economic perspectives and behavioral and experimental approaches to the discipline.

Optimal Preventive Law Enforcement and Stopping Standards

Preventive law enforcement increases social welfare by hindering the infliction of criminal harm, but produces inconvenience costs to the general public, because it requires interfering with the acts of innocents as well as attempters. The optimal amount of investment in preventive enforcement is greater than that which maximizes deterrence, but, smaller than that which minimizes criminal harm. Thus, ignoring preventive benefits and/or inconvenience costs results in an inefficient investment portfolio over enforcement methods, and in a predictable manner. Stopping standards, which determine the threshold suspicion required to trigger a stop, are tools that can be used to optimally trade-off the costs and benefits associated with preventive enforcement. The optimal stopping standard is weaker than its analogs in the trial context, namely standards of proof, which generally require preponderance of the evidence in civil trials and proof beyond a reasonable doubt in criminal trials. Finally, suspicionless stops can be optimal in a variety of circumstances, and are more likely optimal when enforcers perform poorly in forming suspicions; inconvenience costs are small; the population is unresponsive to deterrence measures; and the attempt rate is high.

The Certainty versus the Severity of Punishment, Repeat Offenders, and Stigmatization

There is a widely held presumption among criminologists that the certainty of punishment p is a greater deterrent than the severity of punishment (s). This presumption is at odds with recent experimental work as well as the implications of simple law enforcement models. This article shows that when offenses may be committed repeatedly, p may have a greater deterrent effect than s, even when each individual offender is more responsive to sthan p. This resolves the discrepancy between experimental results and the common belief held among criminologists.

Less Protection, More Innovation?

Reward theory, which represents the conventional economic view, suggests that the optimal strength of patents depends on a use-creation trade-off; the inevitable production of dead-weight losses in the ex post market for the invention for the purpose of fostering technological progress. This paper demonstrates a caveat in this approach by using game theory. Strong patents increase the value of becoming an inventor. Therefore, more firms are attracted to R&D. However, each firm rationally discounts the probability that it will be the first to obtain a patent, and may therefore reduce or abandon its R&D investment. This leads to a lower invention probability per R&D firm, which in turn may lead to a lower aggregate invention probability. In such cases, weaker patent protections can simultaneously foster innovation and eliminate dead-weight losses in the ex post market for the invention. Hence, contrary to the conventional view, the use-creation trade-off does not exist globally.