1,720,973 research outputs found
The complementary role of distributive and criminal equity
Full text linkWe conduct a theoretical analysis to explore how the distribution of wealth in society impacts the social costs of crime and law enforcement. We show that a reduction in inequality reduces these costs when enforcement and nonmonetary punishment are equitable, that is, they do not discriminate among offenders based on their wealth. However, when enforcement or nonmonetary punishment is discriminatory, a reduction in inequality may increase the social costs of crime and law enforcement, in particular when it occurs among poorer individuals. Thus, there is a complementarity between equity in criminal justice and distributional equity
The Optimal Use of Fines and Imprisonment Revisited
No full textWe study the optimal use of fines and imprisonment when wealth varies across individuals and may be observable or not. When wealth is observable, the optimal total sanction includes the maximum fine and either zero or maximum imprisonment. Imprisonment often complements the fine, therefore the total sanction increases with wealth. However, with unobservable wealth, total sanctions must weakly
decrease with wealth to satisfy incentive compatibility constraints. The total sanction for low-wealth individuals may include maximum imprisonment, while high-wealth individuals may face no imprisonment and often less than maximum fines. The inability to observe wealth aligns policy prescriptions with actual enforcement policy and lowers social welfare
The complementary role of liability and safety regulation
Full text linkThis article deals with the control of hazardous activities in situations where potential victims can affect their exposure to risk. Economists have generally considered ex ante regulation (safety standards) to be a substitute for ex post policies (exposure to tort liability) in order to control externalities. We show that when the victim's compensation is partial (e.g., due to death or serious bodily injury) there are inefficiencies associated with the exclusive use of negligence liability and that an optimal policy may involve the combined use of ex-ante regulation and ex-post liability. A noteworthy feature of our explanation is that regulation is complementary to liability, in the sense that it may facilitate a higher and more efficient standard of negligence. In that case, it is efficient to set the regulatory safety standard below the standard of negligence, which is consistent with the legal doctrines of negligence per se and the (non) regulatory compliance defense
Judgment-Contingent Penalties: Signaling in Negative-Expected-Value Suits
No full textThis paper explores judgment-contingent commitments as a signaling device in settings that implicate negative-expected-value (NEV) cases. We present two signaling options in which the informed party promises, in case of a loss at trial, to incur some loss in addition to the judgment. In the first, the additional amount is not transferred to the rival litigant (for example, commitment to pay a charity conditional on losing at trial). In the second, the informed party commits to transfer the additional amount to the rival party. The first variation reduces the rate of trials, whereas the second achieves a fully separating equilibrium. We conclude that, in contrast to the positive-expected-value (PEV) setting, informed defendants in NEV cases can always signal by committing to a self-penalty, conditional on losing at trial, without demanding a side payment. We therefore predict that signaling should be more common in NEV settings than in PEV settings
Insolvency and Biased Standards--The Case for Proportional Liability
No full textWe analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused by an injurer's negligence, is preferable to other existing negligence-based rules. Moreover, proportional liability outperforms strict liability if the standard of due care is not set too low. Our analysis also suggests that courts should rely on statistical evidence and bar individualized causal claims that link the harm suffered by a plaintiff to the actions of the defendant. Finally, we provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.
Does a Rise in Maximal Fines Increase or Decrease the Optimal Level of Deterrence?
No full textThe economic literature on crime and law enforcement shows that the optimal level of deterrence increases when maximal fines rise. This paper shows that this view may be incorrect. In particular, if the gains from crime can be disgorged, as is usually the case in reality, then increasing the maximal fine may reduce the optimal level of deterrence. This may happen if offenders' wealth is less than the monetary value of the harm that offenders cause.
Judgment-Contingent Penalties: Signaling in Negative-Expected-Value Suits
No full textThis paper explores judgment-contingent commitments as a signaling device in settings that implicate negative-expected-value (NEV) cases. We present two signaling options in which the informed party promises, in case of a loss at trial, to incur some loss in addition to the judgment. In the first, the additional amount is not transferred to the rival litigant (for example, commitment to pay a charity conditional on losing at trial). In the second, the informed party commits to transfer the additional amount to the rival party. The first variation reduces the rate of trials, whereas the second achieves a fully separating equilibrium. We conclude that, in contrast to the positive-expected-value (PEV) setting, informed defendants in NEV cases can always signal by committing to a self-penalty, conditional on losing at trial, without demanding a side payment. We therefore predict that signaling should be more common in NEV settings than in PEV settings
Insolvency and Biased Standards - The Case for Proportional Liability
Full text linkWe analyze liability rules in a setting where injurers are potentially insolvent and where negligence standards may deviate from the socially optimal level. We show that proportional liability, which sets the measure of damages equal to the harm multiplied by the probability that it was caused by an injurer’s negligence, is preferable to other existing negligence-based rules. Moreover, proportional liability outperforms strict liability if the standard of due care is not set too low. Our analysis also suggests that courts should rely on statistical evidence and bar individualized causal claims that link the harm suffered by a plaintiff to the actions of the defendant. Finally, we provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries.judgment proof problem; uncertain causation; court error and misperception; proportional liability; disgorgement
Causation and Incentives to Choose Levels of Care and Activity Under the Negligence Rule
No full textStandard economic analysis of tort law shows that the causation requirement does not affect the operation of the negligence rule in a perfect world, but does so in an imperfect world. While the standard analysis has focused exclusively on care models, this paper analyzes the impact of the causation requirement in more realistic models of care and activity. This paper shows that in these settings the causation requirement is still of no consequence in a perfectly operating world; however, under imperfect conditions, the qualitative impact of the causation requirement depends on the type of the precautionary measure and its relationship to the activity level. If care and expected harm are linear in activity levels, then causation alters the basic results. For example, it is shown that if due care is set at incorrect levels (a reasonable person rather than an individualized standard), then causation is not necessarily socially desirable; and that it is socially detrimental under conditions of systematically mis-estimated harm. On the other hand, if the precautionary measure is perfectly durable i.e., its costs are independent of the activity level then the basic qualitative results are not changed. For example, setting due care slightly higher than first-best optimal care induces injurers to abide by the due care standard. In addition, slight errors in estimating damages do not affect injurers adherence to the due care standard.
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