1,720,964 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 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
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.
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.
Controlling Avoidance: Ex Ante Regulation Versus Ex Post Punishment
No full textEfforts to avoid punishment are socially wasteful. Not only do they limit the deterrent effect of punishment, but they may actually lead to the paradoxical result that more severe punishment for crime induces more crime. The law has therefore constantly attempted to deter avoidance efforts and has designed various enforcement measures for this purpose. This paper examines the effects of such measures on avoidance and crime. It distinguishes between two general policy tools: ex ante regulation (e.g., Pigouvian taxes) and ex post punishment of avoidance. The main results of this paper are that (1) ex ante regulation, if feasible, reduces the incentives to engage in avoidance and consequently in crime; whereas (2) ex post punishment of avoidance may induce more avoidance and more crime. The intuitive reason for the latter result is twofold: ex post punishment of avoidance increases not only the costs but also the benefits of avoidance; and avoidance and crime are generally complements. As the control of avoidance through regulation or punishment can be designed into the legal system, the results of this paper can guide policymaking. They suggest, for example, that recent trends to stiffen penalties for substantially obstructive acts might be counter productive, while imposing liability for avoidance efforts on third, economically-related parties such as lawyers and accountants may be productive in curtailing avoidance, since it acts as an ex ante regulation for the principal offender.
Deterrence and tax treatment of monetary sanctions and litigation costs
No full textThe tax treatment of monetary sanctions and litigation expenditures varies across legal jurisdictions and time. The effects of these different tax regimes - particularly, on crime deterrence - have not been fully explored. Instead, legal intuitions in court decisions and legislative reforms are found. This paper explores the effects of these tax regimes. It shows that our common intuitions are sometimes misguided, since we tend to ignore cross-effects between crime and litigation. For example, contrary to commonly held views, it is shown that non-deductibility of monetary sanctions may increase the level of crime, if litigation expenses are deductible. In addition, if deductibility of legal expenses depends only on a successful trial outcome, this may also increase amounts spent on litigation and time allocated to crime. As this paper shows, however, a complete deductibility regime, under which both monetary sanctions and litigation expenditures are deductible, maintains the pre-tax levels of crime and litigation expenditures for risk-neutral offenders. The paper further explores the effects of different tax reforms.Deterrence Crime Monetary sanctions Litigation expenditures Taxation Deductibility
The Robustness Case for Proportional Liability
Full text linkIn important areas like medical malpractice and environmental torts, injurers are potentially insolvent and courts may make errors in determining liability (e.g. due to hindsight bias). We show that proportional liability, which holds a negligent injurer liable for harm discounted with the probability that the harm was caused by the injurer's negligence, is less susceptible to these imperfections and therefore socially preferable to all other liability rules currently contemplated by courts. We also provide a result which might be useful to regulators when calculating minimum capital requirements or minimum mandatory insurance for different industries
Deterrence and avoidance
No full textThis paper explores the effects of public enforcement, in general, and punishment, in particular, on crime levels if offenders can engage in avoidance activities. Avoidance reduces the probability or magnitude of punishment. In general, offenders can reduce their expected punishment either by substituting legal activities for criminal activities (the deterrence effect) or by increasing avoidance activities. This paper shows that increasing the direct costs of crime - by either increasing punishment or enforcement efforts - does not necessarily deter criminal activity and may actually trigger increased crime if avoidance is possible. Furthermore, this paper shows that increasing the opportunity costs of crime (e.g. by subsidizing legal alternatives or through educational and vocational programs) reduces both crime and avoidance and thus, in this respect, is advantageous. The conditions for these outcomes are identified, the economic mechanisms are explained, and an underlying intuitive approach for these results is proposed.Crime Punishment Enforcement Avoidance
A revised model of unilateral accidents
No full textThis paper suggests and justifies a revised formulation of the unilateral accident model based on relaxing two assumptions of the standard model: the precaution function and the harm function. The revised model is, therefore, more general and corresponds better to various situations. A resulting trait of the generalized model is its account for the interaction between the injurer's care and activity levels, which was implicitly assumed away so far. The revised model is examined using a few standard issues in tort and the analysis brings new results and insights for the unilateral accident case. For example, the view that, under a negligence regime, due care can be defined regardless of the optimal level of activity holds under very restrictive assumptions. In general, due care must be defined simultaneously with the optimal activity level. In addition, the common view suggests that underestimation of the level of actual damages under strict liability would induce injurers to take insufficient care and to engage excessively in a risky activity (and vice versa, for overestimation). This paper shows that underestimation of actual damages may counter-intuitively lead to insufficient activity or excessive care levels. Similarly, the results of underestimating harm under a negligence regime prove to be different than commonly thought. In addition, the revised model questions the intuitive similarity between the underestimation of harm and the judgment-proof problem, and provides some new results for the latter problem.Tort Negligence Strict liability Unilateral accident model Damages Judgment proof
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