Nuno Garoupa

The Theory of Optimal Law Enforcement

The economic literature on optimal law enforcement is very recent. Beckers seminal paper on crime and law enforcement dates from 1968 and most papers which are the focus of this survey have been published in the last ten years. The core result presented by Becker is the following: the probability and the severity of punishment deter crime. Therefore, the fine should be maximal since it is a costless transfer whereas the probability of detection and conviction is costly. Much of the recent work has attempted to show why Beckers result may not hold. Copyright 1997 by Blackwell Publishers Ltd

Casual police corruption and the economics of crime

We extend Beckers model of crime by allowing for collusion between an arresting officer and the criminal at the expense of the police department. The weakening in the deterrent power of a given set of criminal sanctions that results is explored in a perfect information setting. Applying a solution concept developed in related work by Cadot we derive optimal policies for each group. We show in particular that the well-established results from the Becker model do not all carry through. In particular we find that the maximal fine may no longer be optimal.

Optimal Law Enforcement and Criminal Organization

In this paper, we take an organizational view of organized crime. In particular, we study the organizational consequences of product illegality attending at the following characteristics: (i) contracts are not enforceable in court, (ii) all participants are subject to the risk of being punished, (iii) employees present a major threat to the entrepreneur having the most detailed knowledge concerning participation, (iv) separation between ownership and management is difficult because record-keeping and auditing augments criminal evidence.

Punitive Police? Agency Costs, Law Enforcement, and Criminal Procedure

Criminal law enforcement depends on the actions of public agents such as police officers, but the resulting agency problems have been neglected in the law and economics literature (especially outside the specific context of corruption). We develop an agency model of police behavior that emphasizes intrinsic motivation and self-selection. Drawing on experimental evidence on punishment preferences, in which subjects reveal a heterogeneous preference for punishing wrongdoers, our model identifies circumstances in which “punitive” individuals (with stronger-than-average punishment preferences) will self-select into law enforcement jobs that offer the opportunity to punish (or facilitate the punishment of) wrongdoers. Such “punitive” agents will accept a lower salary, but create agency costs associated with their excessive zeal (relative to the public’s preferences) in searching, seizing, and punishing suspects. In our framework, the public chooses (under reasonable assumptions) to hire punitive police agents, while providing suspects with strong criminal procedure protections, thereby empowering other agents (such as the judiciary) with average punishment preferences to limit the agency costs of excessive zeal. We thus argue that intrinsic motivation and self-selection provide a possible explanation for the bifurcated structure of criminal law enforcement in which courts constrain police with pro-defendant rules of criminal procedure. We also explore various other implications of this framework.

Optimal magnitude and probability of fines

The economic literature on crime and punishment focuses on the trade-off between probability and severity of punishment, and suggests that detection probability and fines are substitutes. In this paper it is shown that, in presence of substantial underdeterrence caused by costly detection and punishment, these instruments may become complements. When offenders are poor, the deterrent value of monetary sanctions is low. Thus, the government does not invest a lot in detection. If offenders are rich, however, the deterrent value of monetary sanctions is high, so it is more profitable to prosecute them.

Behavioral Economic Analysis of Crime: A Critical Review

Behavioral economic analysis of law is about bringing recent research about behavior and choice together with classical law and economics. In this essay we assess its relevance for the theory of optimal law enforcement. It is our view that criminal law is an area where behavioral analysis has a role to play. Notwithstanding the results so far provided by the behavioral approach are somehow disappointing.

A Strategic Interpretation of Legal Transplants

In this paper we provide a strategic explanation for the spontaneous convergence of legal rules that nevertheless, in many instances, falls short of unification across jurisdictions. We identify a free‐riding problem and discuss its implications for legal integration. We argue that countries hesitate to adapt their laws to those of another jurisdiction because they hope to free ride on efforts toward convergence. Unification (by transplant) and harmonization (by convention) of legal rules emerge as obvious corrective interventions to a coordination failure, thus solving the free‐riding problem. However, unification and harmonization could also be serious policy mistakes either because convergence is absent owing to very high costs of importing and adjustment or owing to agency costs.

Wrongful Convictions Do Lower Deterrence

The conventional result of the theory of the public enforcement of law is that wrongful convictions of innocents are detrimental to deterrence. This proposition has been challenged recently. In some cases, wrongful convictions do not jeopardize deterrence, because they influence equally the innocent and the guilty. Therefore deterrence does not change. We show that, in general, wrongful convictions do lower deterrence. We prove that wrongful convictions do not jeopardize deterrence only in very limited circumstances or under unlikely assumptions.

Corporate Criminal Law and Organization Incentives: A Managerial Perspective

Corporate criminal liability puts a serious challenge to the economic theory of enforcement. Are corporate crimes different from other crimes? Are these crimes best deterred by punishing individuals, punishing corporations, or both? What is optimal structure of sanctions? Should corporate liability be criminal or civil? This paper has two major contributions to the literature. First, it provides a common analytical framework to most results presented and largely discussed in the field. In second place, by making use of the framework, we provide new insights into how corporations should be punished for the offenses committed by their employees.

A note on private enforcement and type-I error

It is a common belief that private law enforcement leads to more nonoffenders being charged as a consequence of profit maximization. In this note we argue that monopolistic enforcement leads in many circumstances to underdetection and less accuracy. The use of a monetary sanction (subsidy) to penalize (compensate) the monopolistic enforcement agency when a charged individual is set free solves the problem.