Abstract
This chapter sets the stage for the remainder of the book by first describing the “punishment-as-price paradigm,” which underlies the economic approach to criminal justice. This concept is based on the idea that a crime is essentially a form of exchange, albeit involuntary, and criminal punishment is the price of that exchange, which an offender, once apprehended and convicted, must pay. The chapter emphasizes, by means of a simple law enforcement “game,” the sequential nature of crime and punishment, which necessarily raises questions about the credibility on the part of law enforcers regarding the imposition of punishment. This issue establishes a theme, referred to as the “paradox of punishment,” that runs throughout the book.
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- 1.
- 2.
Crime victims sometimes can, however, seek compensation for harm through the tort system—see Shavell (2004, Chap. 8).
- 3.
For purposes of this illustration, we will ignore fixed costs associated with law enforcement, as they must be incurred whether or not any crimes occur.
- 4.
It should be obvious that the enforcer would never rationally choose an s strictly between zero and $150 because it would not deter crime and would, therefore, involve unnecessary costs. Also, in this simple example, any s strictly greater than $150 would also result in complete deterrence and hence no realized cost.
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Such a game is therefore referred to as one of “imperfect information” (Gibbons 1992).
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These are the only two equilibria—there are no mixed strategy equilibria in this game.
- 7.
It may seem odd that we are including the benefit enjoyed by the offender as part of the social payoff here. That is a controversial aspect of the economic model of crime that will be discussed in depth in Chap. 2 and again in Chap. 8. However, even if we did not count the offenders gain, the basic insights of the current exercise would still be valid.
- 8.
This depiction of the game is referred to as the “extensive form,” as opposed to the payoff matrix in Table 1.1, which is referred to as the “normal form.”
- 9.
It is conventional to assume that when indifferent between two strategy choices, players will choose the one corresponding to an equilibrium.
- 10.
In the current context, this solution method coincides with the concept of “subgame perfection .”
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- 12.
The length of a “period” here is indeterminate—it depends on the perceived time interval over which the deterrent effect of current punishment influences the decisions of future offenders. Thus, it could be months or years.
- 13.
This example was based on only two periods, but the type of equilibrium described here is usually derived in the context of a game with an infinite number of periods, or at least with an unknown endpoint. This reflects the indefinitely repeated nature of the law enforcement game, and the fact the enforcer is always acting both before and after a sequence of different offenders. The indeterminate length also ensures that backwards induction from a known final period does not overturn the desired equilibrium.
References
Adelstein, Richard. 2017. The Exchange Order: Property and Liability as an Exchange System. New York: Oxford University Press.
Baker, Matthew, and Thomas J. Miceli. 2005. Credible Criminal Enforcement. European Journal of Law and Economics 20: 5–15.
Becker, Gary. 1968. Crime and Punishment: An Economic Approach. Journal of Political Economy 76: 169–217.
Gibbons, Robert. 1992. Game Theory for the Applied Economist. Princeton: Princeton University Press.
Hart, H.L.A. 1982. Punishment and Responsibility: Essays in the Philosophy and Law. Oxford: Oxford University Press.
Holmes, Oliver Wendell. 1881 [1963]. The Common Law. Boston: Little Brown.
Shavell, Steven. 2004. Foundations of Economic Analysis of Law. Cambridge, MA: Belknap Press.
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Miceli, T.J. (2019). Prologue: The Paradox of Punishment. In: The Paradox of Punishment. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-31695-2_1
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