Law EnforcementIn this section we consider the theory of public enforcement of law — the use of hired agents (inspectors, tax auditors, police) to detect violators of legal rules and to impose sanctions. Outside the scope of our discussion are many other factors that affect compliance with the law, including public programs (such as job training for low-income individuals, which affects their opportunity cost of crime) and private behavior (such as the carrying of guns and the use of locks to prevent theft).
We begin by noting the justification for using public law enforcement rather than relying exclusively on private suits. Then, we analyze basic issues concerning the optimal probability, magnitude, and form of sanctions and the rule of liability. Next, we examine a variety of extensions of the central theory, including accidental harms, error, marginal deterrence, repeat offenders, self-reporting, and incapacitation. Finally, we briefly discuss criminal law in the light of the theory.
Before proceeding, we observe that economically-oriented analysis of public law enforcement dates from the eighteenth century contributions of Montesquieu (1748), Beccaria (1770), and, especially, Bentham (1789), whose investigation of deterrence was sophisticated and expansive. But, curiously, after Bentham (1789), the subject of law enforcement lay essentially dormant in economic scholarship until the late 1960s, when Gary Becker (1968) published a highly influential article, which has led to a voluminous literature.
Rationale for Public Enforcement A basic question is why there is a need for public enforcement of law in the light of the availability of private suits brought by victims. The answer depends very much on the locus of information about the identity of injurers. When victims of harm naturally possess knowledge of the identity of injurers, allowing private suits for damages will motivate victims to sue and thus harness the information they have for purposes of law enforcement. This may help to explain why the enforcement of contractual obligations and of accident law is primarily private.
When victims do not know who caused harm and penalizing wrongdoing is difficult, society tends to rely instead on public investigation and prosecution; this is broadly true of crimes and of many violations of environmental and safety regulations. Even in contexts where sanctioning violators is difficult, however, we should ask why society cannot rely on inducements to private parties — rewards of some type — to supply information or otherwise to help in sanctioning. One difficulty with such private enforcement is that if a reward is available to anyone, there might be wasteful effort devoted to finding violators (akin to excessive fishing activity).
Another problem is that the best technologies for finding liable parties often require coordination of many individuals, sometimes on a vast scale. Additionally, it may be advantageous for expensive information systems (fingerprint records, data banks on offenders) to be developed and maintained, even though their benefits would be hard for the private sector to capture fully; such enforcement technologies may constitute natural monopolies. An additional obstacle to private enforcement is that force (or the threat of it) may be needed to gather information, capture violators, and prevent reprisal, yet the state for various reasons may not want to permit private parties to use force. Thus, there appear to exist arguments favoring public enforcement when effort is required to identify and sanction violators.
Basic Theory of Enforcement
Suppose that an individual (or a firm) chooses whether to commit an act that causes harm with certainty (see section 6.3.1 on uncertain harm). If he commits the act, he obtains some gain and also faces the risk of being caught, found liable, and sanctioned. The rule of liability could be either strict — under which the individual is definitely sanctioned — or fault-based — under which he is sanctioned only if his behavior fell below a fault standard.167 The sanction that he suffers could be a monetary fine, a prison term, or a combination of the two.
Whether an individual commits a harmful act is determined by an expected utility calculation.
He will commit the act if that would raise his expected utility, taking into account the gain he would derive and the probability, form, and level of sanction that he would then face.168 We will usually first examine the case in which individuals are risk neutral with respect to sanctions, but we will also consider other possibilities. We assume, as is conventional, that fines are socially costless to employ because they are mere transfers of money, whereas imprisonment involves positive social costs because of the expense associated with the operation of prisons and the disutility due to imprisonment (which is not naturally balanced by gains to others).169 We also assume that the higher is the probability of detecting and sanctioning violators, the more resources the state must devote to enforcement.170 Social welfare generally is presumed to equal the sum of individuals’ expected utilities. An individual’s expected utility depends on whether he commits a harmful act, on whether he is sanctioned, on whether he is a victim of someone else’s harmful act, and on his tax payment, which will reflect the costs of law enforcement, less any fine revenue collected. If individuals are risk neutral, social welfare can be expressed simply as the gains individuals obtain from committing their acts, less the harms caused, and less the costs of law enforcement. (The assumption that individuals’ gains are always credited in social welfare could be relaxed without affecting most of our conclusions. The principal difference that altering the assumption would make is that more acts would be treated as socially undesirable and that optimal sanctions and enforcement effort would thus be higher.) The enforcement authority’s problem is to maximize social welfare by choosing enforcement expenditures, or, equivalently, a probability of detection, and also the level of sanctions, their form (a fine, prison term, or combination), and the rule of liability (strict or fault-based). 6.2.1. Optimal enforcement given the probability of detection.
Then the optimal fine f is h/p, the harm divided by the probability of detection, for then the expected fine equals the harm. This fine is optimal because, when the expected fine equals the harm, an individual will commit a harmful act if, but only if, the gain he would derive from it exceeds the harm he would cause.
First, because risk-averse individuals are more easily deterred than
risk-neutral individuals, the fine does not need to be as high as before to achieve any desired degree of deterrence. Second, lowering the fine reduces the bearing of risk by individuals who commit the harmful act. However, lowering the fine also increases the number of individuals who commit the harmful act and hence bear risk.
Next assume that imprisonment is the form of sanction, so that social costs will be incurred in imposing sanctions. In this case, there is not a simple formula for the optimal imprisonment term. See Polinsky and Shavell (1984). The optimal term could be such that there is either underdeterrence or overdeterrence, compared to socially ideal behavior. On one hand, a relatively low imprisonment term, implying underdeterrence, might be socially desirable because it means that imprisonment costs are reduced for those individuals who commit harmful acts. On the other hand, a relatively high term, implying overdeterrence, might be socially desirable because it means that imprisonment costs are reduced due to fewer individuals committing harmful acts.
For reasons that we will discuss below and because of factors outside the model, our conjecture is that overdeterrence is unlikely to be optimal.)
Now consider the combined use of fines and imprisonment. Here, the main point is that fines should be employed to the maximum extent feasible before resort is made to imprisonment. In other words, it is not optimal to impose a positive imprisonment term unless the fine is maximal. (The maximal fine might be interpreted as the wealth of an individual.) The rationale for this conclusion is that fines are socially costless to impose, whereas imprisonment is socially costly, so deterrence should be achieved through the cheaper form of sanction first. This point is noted by Bentham (1789, p. 183) and Becker (1968); see also Polinsky and Shavell (1984).
Then deterrence and the amount of harm will be unchanged, but the cost of imposing the imprisonment sanction will fall, raising social welfare. Hence, it must be optimal for the fine to be maximal before imprisonment is used.173 (It can be shown that this argument holds regardless of individuals’ attitudes toward risk in either fines or imprisonment.) Fault-based liability. As we explained in section 2.4.1 on accident law, damages equal to harm, in excess of harm, or even somewhat less than harm, will be sufficient to induce optimal behavior under fault-based liability.
Optimal enforcement including the probability of detection. We now consider the optimal system of enforcement when expenditures on enforcement, and hence the probability of detection, are allowed to vary. Consideration of this issue originated with Becker (1968). Strict liability. Assume first that the sanction is a fine and that individuals are risk neutral. Then the optimal level of the fine is maximal, fm, and the optimal probability is low (in a sense to be described). The explanation is that if the fine were not maximal, society could save enforcement costs by simultaneously raising the fine and lowering the probability without affecting the level of deterrence: if f < fm, then raise the fine to fm and lower the probability from p to (f/fm)p; the expected fine is still pf, so that deterrence is maintained, but expenditures on enforcement are reduced, implying that social welfare rises. Becker (1968) suggested this result (although much of his analysis implicitly presumes that the fine is not maximal); Carr-Hill and Stern (1979) and Polinsky and Shavell (1979) note it explicitly. The optimal probability is low in that there is some underdeterrence: the optimal p is such that the expected fine pfm is less than the harm h. See Polinsky and Shavell (1984). The reason for this result is that if pfm equals h, behavior will be ideal, meaning that the individuals who are just deterred obtain gains just equal to the harm. These are the individuals who would be led to commit the harmful act if p were slightly reduced. Decreasing p, in turn, must be socially beneficial because these individuals cause no net social losses (because their gains essentially equal the harm), but reducing p saves enforcement costs.
If individuals are risk averse, the optimal fine may well be less than maximal, as shown in Polinsky and Shavell (1979). This is because the use of a very high fine would impose a substantial risk-bearing cost on individuals who commit harmful acts.174 For further discussion of the optimal fine when individuals are risk-averse, see Kaplow (1992b).
174A more particular explanation involves reconsidering the argument that we used in the risk-neutral case. If the fine f is less than fm, it is still true that f can be raised to fm and p lowered so that prospective violators’ expected utilityremains constant; hence, everyone’s behavior will be unchanged. However, because of risk aversion, this adjustment implies that pf falls, meaning that fine revenue falls. (The reduction in fine revenue reflects the disutility caused by imposing greater risk on risk-averse individuals.) If individuals are sufficiently risk averse, the decline in fine revenue associated with greater risk-bearing could more than offset the savings in enforcement expenditures from reducing the probability of detection, implying that taxes would have to rise to make up the shortfall; accordingly, social welfare would be lower.175Another reason that optimal fines may not be maximal is that higher sanctions may induce violators to expend additional resources to avoid punishment. See Malik (1990). Further reasons are discussed below.
Next, assume that the sanction is imprisonment and that individuals are risk neutral in imprisonment, that is, the disutility of a year of imprisonment is the same for each additional year.176 Then the optimal imprisonment term is maximal for essentially familiar reasons: if the imprisonment term is raised and the probability of detection lowered so as to keep the expected sanction constant, neither individual behavior nor the costs of imposing imprisonment are affected (by construction, the expected prison term is the same), but enforcement expenditures fall. See Shavell (1991b). Thus, not only are there greater savings in enforcement expenditures, but also the social costs of imposing imprisonment sanctions decline because the expected prison term falls. See Polinsky and Shavell (1999a).
Last, suppose that individuals are risk preferring in imprisonment (the disutility of each year of imprisonment falls with the number of years in prison). This possibility seems particularly important: the first years of imprisonment may create special disutility, due to brutalization of the prisoner or due to the stigma of having been imprisoned at all, and potential offenders may have unusually high discount rates. In this case, the optimal sanction may well be less than maximal: if the sanction were raised, the probability that maintains deterrence could not be lowered proportionally, implying that the expected prison term would rise. See Polinsky and Shavell (1999a).
Now consider the situation when both fines and imprisonment are employed as sanctions. Recall that under the optimal enforcement policy, the fine must be maximal, for otherwise it cannot be desirable to employ imprisonment. The main point we wish to add is that, unlike when imprisonment is used alone, the optimal imprisonment term may not be maximal even if individuals are risk neutral or risk averse in imprisonment. The basic reason is that, if the imprisonment term is raised and the probability of detection is lowered so as to keep deterrence constant, there will be relatively greater reliance on imprisonment than on fines, which is more
socially costly.177 fault-based liability. The least expensive way to accomplish compliance with the fault standard is to use the highest possible sanction and, given this sanction, the lowest probability of detection that deters individuals who would be at fault. The reason is that, if all individuals who would be at fault are deterred, the only cost incurred is associated with the setting of the probability; this cost is minimized by using the maximal sanction and a correspondingly low probability.
Extensions of the Basic Theory
We initially assumed that individuals consider committing acts that cause harm with certainty. In many circumstances, however, individuals cause harms only by accident — harm occurs only with a probability. For instance, if someone drives while intoxicated, he only creates a likelihood of a collision; or if a firm stores toxic chemicals in a substandard tank, the firm only creates the probability of a harmful spill. Essentially all that we have said above applies in a straightforward manner when harms are accidental. There is, however, an additional issue that arises when harm is uncertain: a sanction can be imposed either on the basis of the commission of a dangerous act that increases the chance of harm — storing chemicals in a substandard tank — or on the basis of the actual occurrence of harm — only if the tank ruptures and results in a spill. In principle, either approach can achieve optimal deterrence: when individuals are risk-neutral, the sanction for committing a dangerous act would equal the expected harm, and the sanction for causing harm would simply equal the magnitude of the harm itself.
Several factors are relevant to the choice between act-based and harm-based sanctions. See Shavell (1993a). First, act-based sanctions, being based only on expected harm, need not be as high to accomplish a given level of deterrence, and thus offer an underlying advantage over harm-based sanctions because of limitations in parties’ assets. See section 2.6. Such lower sanctions will also be beneficial when parties are risk averse. Second, act-based sanctions and harm-based sanctions may differ in the ease with which they can be applied. In some circumstances, act-based sanctions may be simpler to impose (it might be easier to determine whether an oil shipper properly maintains its vessels’ holding tanks than to detect whether one of the vessels leaked oil into the ocean). In other circumstances, harm-based sanctions may be
more readily applied (it may be easy to identify that a truck exploded but may be difficult to detect a truck illegally carrying explosives). Third, calculation of the appropriate sanction may be less difficult in one context or the other: actual harm may be apparent when it occurs, whereas the probability may be difficult to assess at the time of an act; or expected harm may be statistically determinable but identifying actual harm (for example, tracing particular pollutants to particular victims) may be nearly impossible. 6.3.2. Level of activity. We have been assuming that the sole decision that an individual makes is whether to act in a way that causes harm when engaging in some activity. In many contexts, however, an individual also chooses whether to engage in that activity, or, more generally, at what level to do so. Thus, as we discussed in section 2.1.3 on liability for accidents, individuals decide both how carefully to drive and how much to drive. Similarly, firms decide on a pollution technology and a level of production. And, as we observed previously, even parties who act with appropriate care may impose harm; hence, their activity levels will tend to be optimal only if they bear the cost of that residual harm. Thus, under strict
liability, choices about activity levels tend to be correct, but under fault-based liability, parties generally will participate in activities to a socially excessive extent. An important application of this point concerns safety and environmental regulation. Such regulation is typically framed in terms of standards that have to be met, but which, if met, free regulated parties from liability. Under such regulation, levels of regulated activities tend to be excessive. 6.3.3. Enforcement error. Errors of the two classic types can occur in law enforcement: an individual who should be found liable might mistakenly not be found liable, and an individual who should not be found liable might mistakenly be found liable. Let the probabilities of these errors be å1 and å2, respectively, for an individual who has been detected. Thus, an individual will commit the wrongful act when his gain g net of his expected fine if he does commit it leaves him better off than paying the expected fine if he does not commit it, namely, when g – p(1 – å1)f > -på2f, or, equivalently, when g > (1 – å1 – å2)pf. The first point to note is that, as emphasized in Png (1986), both types of error reduce deterrence: the term (1 – å1 – å2)pf is declining in both å1 and å2. The first type of error diminishes deterrence because it lowers the expected fine if an individual violates the law. The second type of error, when an individual is mistakenly found liable, also lowers deterrence because it reduces the marginal benefit of complying with the law. Because errors dilute deterrence, they reduce social welfare. Specifically, to achieve any level of deterrence, the probability p must be higher to offset the effect of errors. Also, when sanctions are socially costly, greater sanctioning costs may be incurred to achieve a given level of deterrence.178 See generally Kaplow and Shavell (1994a). Now consider the optimal choice of the fine. Given any probability of detection, the dilution in deterrence caused by errors requires a higher fine to restore deterrence. If the probability and the fine are variable, then, as before, the optimal fine is maximal for the now familiar reason.
Next, consider the possible risk aversion of individuals. As we emphasized, the optimal fine under strict liability may well be less than maximal when individuals are risk averse, in part because lowering the fine from the maximum level reduces the bearing of risk. Introducing the possibility of errors may do not violate the law are subject to the risk of having to pay a fine.179 Indeed, because the number of persons who do not violate the law often would far exceed the number who do, the desire to avoid imposing risk on the former group can lead to a substantial reduction in the optimal fine. The possibility of error has analogous effects on our analysis of nonmonetary sanctions.
The effect of error on the performance of fault-based liability was already noted in section 6.2.1. Finally, observe that, although we have treated the probabilities of error as fixed, they can be influenced by procedural choices: generally, increasing resources devoted to investigation and adjudication tends to decrease errors, and adjusting the burden of proof affects the tradeoff between the two types of errors. Because both types of error reduce deterrence and increase the imposition of socially costly sanctions for a given level of deterrence, expenditures made to reduce errors may be socially beneficial.
See Kaplow and Shavell (1994a). 6.3.4. General enforcement. Enforcement sometimes is general in the sense that several different types of violations will be detected by an enforcement agent’s activity. For example, a police officer waiting at the roadside may notice a driver who litters as well as one who goes through a red light or who speeds, and a tax auditor may detect a variety of infractions when he examines a tax return.
To analyze such situations, suppose that a single probability of detection applies uniformly to all harmful acts, regardless of the magnitude of the harm. (The contrasting assumption is that enforcement is specific, meaning that the probability is chosen independently for each type of harmful act.180) The main point that we want to make is that in contexts in which enforcement is general, the optimal sanction rises with the severity of the harm and is maximal only for relatively high harms. See Shavell (1991b); Mookherjee and Png (1992) is closely related. To explain, assume that liability is strict, the sanction is a fine, and injurers are risk neutral. Let f(h) be the fine given harm h. Then, for any given general probability of detection p, the optimal fine schedule is h/p, provided that h/p is feasible; otherwise — for high h (all h such that h/p > fm) — the optimal fine is maximal. This schedule is obviously optimal given p because it implies that the expected fine equals harm, thereby inducing ideal behavior, whenever that is possible. The question remains whether it would be desirable to lower p and raise fines to the maximal level for the range of relatively low-harm acts for which h/p is less than maximal. The answer is that if p is reduced for the relatively low-harm acts (and the fine raised for them), then p, being general, is also reduced for the high-harm acts for which the fine is already maximal, which raises the extent of underdeterrence of these acts. The decline in deterrence of high-harm acts may cause a greater social loss than the savings in enforcement costs from lowering p. To express this point differently, p must be sufficiently high to avoid significant underdeterrence of high-harm acts (for which fines are maximal).
But since this p also applies to less harmful acts, the fines for them do not need to be maximal in order to deter them appropriately. 6.3.5. Marginal deterrence. Sometimes a person may consider which of several harmful acts to commit, for example, whether to release only a small amount of a pollutant into a river or a large amount, or whether to kidnap a person or also to kill the kidnap victim. In such contexts, the threat of sanctions influences not only whether individuals are deterred from committing harmful acts but also, for those who are not deterred, which harmful acts they will choose to commit. Notably, undeterred individuals will have a reason to commit less harmful rather than more harmful acts if expected sanctions rise with harm — a phenomenon that is sometimes referred to as marginal deterrence, named by Stigler (1970). The benefits of achieving marginal deterrence were noted long ago by Beccaria (1770, p. 32) and Bentham (1789, p. 171). There are, however, costs of accomplishing marginal deterrence: for sanctions to rise with the magnitude of harm it may be necessary to apply lower sanctions to less harmful acts, which will reduce the deterrence of such acts. Two additional observations should be made about marginal deterrence. First, marginal deterrence can be promoted by adjusting the probability of detection as well as the magnitude of sanctions. (Thus, rather than achieving marginal deterrence by lowering the sanction for the less harmful act, the state can lower the probability of detection for that act; this accomplishes the same result with regard to deterrence and saves enforcement resources.)181 Second, marginal deterrence is naturally accomplished if the expected sanction equals harm for all levels of harm; for instance, if a polluter’s expected fine would rise from $100 to $500 if he dumps five gallons instead of one gallon of waste into a lake, where each gallon causes $100 of harm, his marginal incentives to pollute will be correct. For formal analyses of marginal deterrence, see Friedman and Sjostrom (1993), Mookherjee and Png (1994), Shavell (1992), and Wilde (1992).
Repeat offenders
In practice, the law often sanctions repeat offenders more severely than first-time offenders. We discuss here when such a policy might be socially desirable. Note first that sanctioning repeat offenders more severely cannot be socially advantageous if deterrence always induces first-best behavior.182 Thus, it is only when there is underdeterrence (which is often optimal even when acts are always undesirable, as with many crimes) that it might be optimal to punish repeat offenders more severely.
The main justification for a greater sanction for repeat offenders is that repeat offenders may reveal themselves to be different in some manner that bears on the optimal sanction.183 Another reason to raise sanctions is if additional imprisonment has less deterrent effect per unit, as discussed in section 6.2.2. We also note that sanctions for repeat offenders not only deter repeat offenses but also initial offenses.
Self-reporting
We have thus far assumed that individuals are subject to sanctions only if they are detected by an enforcement agent, but in fact parties sometimes disclose their own violations to enforcement authorities. For example, firms often are required to, and do, report violations of environmental and safety regulations, individuals sometimes notify police of their involvement in traffic accidents, and even criminals occasionally turn themselves in. We explain here why it is generally socially desirable for the structure of enforcement to be such as to encourage self-reporting. See Kaplow and Shavell (1994b) and Malik (1993). Self-reporting can be induced by lowering the sanction for individuals who disclose their own infractions. Moreover, the reward for self-reporting can be made small enough that deterrence is only negligibly reduced. To amplify, assume for simplicity that the sanction is a fine f, that the probability of detection is p, and that individuals are risk neutral. If an individual commits a violation and does not self report, his expected fine is pf. Suppose the fine if an individual selfreports is set just below pf, say at pf – e, where e > 0 is arbitrarily small. Given that self-reporting can be induced, essentially without compromising deterrence, why is self-reporting socially advantageous? One reason is that self-reporting reduces enforcement costs: when a party self-reports, the enforcement authority does not have to identify and prove who the violator was; if a polluter or a burglar turns himself in, investigatory resources are saved.184 Second, self-reporting reduces risk, and thus is advantageous if injurers are risk averse. Drivers bear less risk because they know that if they cause an accident, they can (and will be led to) report this to the police and suffer a lower and certain sanction, rather than face a substantially higher sanction (for hit and run driving) imposed only with some probability. Third, the magnitude of harm sometimes will be mitigated as a consequence of self-reporting; for example, when firms are induced to report leaks of toxic substances when they occur, prompt remediation is more likely to take place.
Plea bargaining
Plea bargaining refers to settlement negotiations between a public prosecutor and a criminal defendant. We examined this subject in section 5.4.9. Plea bargaining in particular has received some attention in the economics literature. See, for example, Froeb (1993), Grossman and Katz (1983), Reinganum (1988), Kobayashi and Lott (1996), and Miceli (1996). 6.3.9. Corruption of law enforcement agents. An enforcement agent and a potentiall violator might well find it mutually profitable to make an agreement under which the violator pays the agent to keep silent. This problem of corruption would seem to be worse the larger is the sanction faced by a violator. To combat corruption and the undermining of deterrence that it brings about, two general approaches can be employed. One is to raise the overall level of sanctions, so that bargained-for payments will also rise. This, however, is a gross strategy, and also suffers from the limit on the magnitude of sanctions that can actually be imposed. The second approach is to attempt to control corruption by use of sanctions against those who participate in it. This, however, is expensive and involves the issues of enforcement that we have discussed generally here.186 6.3.10. Principal-agent relationship. Although we have assumed that an injurer is a single actor, the injurer is often an agent of some principal. For example, the agent could be an employee of a firm, or the agent could be a subcontractor working for a contractor.
When harm is caused by the behavior of principals and their agents, many of the conclusions of our prior analysis carry over to the sanctioning of principals. Notably, if a riskneutral principal faces an expected fine equal to harm done, he will in effect be in the same position vis-à-vis his agent as society is vis-à-vis a single potential violator of law. See Newman and Wright (1990). Consequently, the principal will behave socially optimally in controlling his agents and, in particular, will contract with them and monitor them in ways that will give the agents socially appropriate incentives to reduce harm.187 A question about enforcement that arises when there are principals and agents is the allocation of financial sanctions between the two parties.188 It is apparent, however, that the particular allocation of sanctions does not matter when, as would be the natural presumption, the parties can reallocate the sanctions through their own contract.
For example, if the agent finds that he faces the risk of a large fine but is more risk averse than the principal, the principal can assume the risk; conversely, if the risk of the fine is imposed on the principal, he will retain it. Thus, the post-contract sanctions that the agent bears are not affected by the particular division of sanctions initially selected by the enforcement authority. The allocation of monetary sanctions between principals and agents does matter if some allocations allow the pair to reduce their total burden.
An important example is when a fine is imposed only on the agent and he is unable to pay it because his assets are less than the fine; see Kornhauser (1982) and Sykes (1981). Then, he and the principal (who often would have higher assets) would jointly escape part of the fine, diluting deterrence. Imposing the fine on the principal rather than on the agent avoids this problem.189 A closely related point is that the imposition of imprisonment sanctions on agents may be desirable when their assets are less than the harm that they can cause, even if the principal’s assets are sufficient to pay the optimal fine. See Polinsky and Shavell (1993). The fact that an agent’s assets are limited means that the principal may be unable to control him adequately through use of contractually-determined penalties. For example, a firm may not be able, despite Pitchford .
Incapacitation
Our discussion of public enforcement has focused on the deterrent effect of sanctions. However, a different way for society to reduce harm is by imposing sanctions that remove parties from positions in which they are able to cause harm — that is, by incapacitating them. Imprisonment is the primary incapacitative sanction, although there are other examples: individuals can lose their drivers’ licenses; businesses can lose their right to operate in certain domains, and the like. Here, we consider imprisonment, but what we say applies to incapacitative sanctions generally. On the economic theory of incapacitation, see Shavell (1987c). To better understand the role of public enforcement when sanctions are incapacitative, suppose that the sole function of sanctions is to incapacitate; that is, sanctions do not deter. In this case, continued imprisonment will be desirable as long as the reduction in crime from incapacitation exceeds the total costs of imprisonment. Observe that this condition could hold for a long period, even for offenses that are not the most serious.
Several comments may be made on the relationship between optimal enforcement when incapacitation is the goal versus when deterrence is the goal. First, when incapacitation is the goal, the optimal magnitude of the sanction is independent of the probability of apprehension, which contrasts with the case when deterrence is the goal. Second, when deterrence is the goal, the probability and magnitude of sanctions depend on the ability to deter, and if this ability is limited (as, for instance, with the insane), a low expected sanction may be optimal, whereas a high sanction still might be called for to incapacitate.
6.3.12. Empirical evidence on law enforcement. There has been a great deal of empirical work on deterrence of crime and incapacitation of criminals. See, for example, Blumstein et al. (1978), DiIulio and Piehl (1991), Ehrlich (1973, 1975), Eide (1994, 1998), Grogger (1991), Kessler and Levitt (1998), Levitt (1996, 1997a, 1998a, 1998b), Nagin (1978),
Pyle (1983), Tauchen, et al. (1994), Viscusi (1986b), and Witte (1980). Much of this literature, however, does not distinguish between deterrence and incapacitation as the source of any reduction in crime following from greater law enforcement. Another issue in the literature is the simultaneity problem. Notably, when greater law enforcement is not associated with a significant reduction in crime, the explanation could be either that deterrence and incapacitation are unimportant or else that their importance is masked because enforcement effort and sanctions are increased in response to higher crime rates.