Abstract
Enforcement and innovation are both usually associated with development and deemed desirable. Relationship between them is, however, less than smooth and peaceful. Some enforcement issues, although general, show particularly critical when facing innovation. Law and regulation usually take into account only a limited set of features of human activities and their products to trigger enforcement mechanisms. Herein, they are called anchor properties. If the option is cheap, there are strong incentives for interested parties to manipulate them. Result of these actions, being privately beneficial, is socially detrimental. The term deflection is used in this work to name that effect. Actions intended to deflect enforcement can be illegal, as the ones included within the doctrine of evasion in Anglo-Saxon systems (in France, fraude à la loi, in Spain, fraude de ley, in Germany, Rechtswidrige Umgehung eines Gesetzes) or even legal. Rationally turning into judgment proof is an emblematic instance of this behavior and a good benchmark to model their effects. Innovation can, and usually does, alter present relations between levels of activity/care and levels of harm, as well as correspondence between those levels and anchor properties taken as representative of them. That dynamics gives place to enforcement problems and, in special, peculiar instances of deflection. Deflection increases social costs by several ways. On the one hand, by weaken deterrence. On the other, and related to innovation, deflecting enforcement of schemes designed to promote innovation distorts competition between present and new technologies. Both, increase social cost. Moreover, some usual strategies intuitively intended to cut down chances of deflection (second-order enforcement strategies and rising the amount of sanctions) can be less efficient than rival frameworks, because they disregard some non-obvious costs.
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Notes
- 1.
See Sect. 7.
- 2.
This usage of the term is not shared by scholars who reject the idea of pre-legal rights as a notion relevant for legal theory (broadly speaking legal positivists). Those who admit the natural or spontaneous origin of rights can and usually do, use the term enforcement in the second meaning too, in different contexts.
- 3.
This conceptual branch may be, in turn, split into one in which the fine is imposed and collected, and other wherein it is not. The latter is a good part of the following development.
- 4.
i.e., Argentina and Brazil. As it is known, there is a variety of schemes on the matter depending on the state organization.
- 5.
And some entanglement of Humean realms of ought and is that the previous statement conveys.
- 6.
A set of instances of conduct of the same class, i.e. car speeding, can be described as a range of conducts.
- 7.
The same applies to any alternative aim perused by the institutional framework. For simplicity’s sake, hereinafter I will refer only to efficiency aims.
- 8.
Level of harm is also a dependent variable, but is not under control of policy makers.
- 9.
Anyway, a system of this kind could be even a good option in social terms. The social cost of under-deterrence could be less than the gains in reduction of monitoring cost.
- 10.
For simplicity’s sake I am disregarding reputation costs, symbolic effect et cetera.
- 11.
Homestead Declaration refers to a form filed with the county recorder’s office to put on record one’s right to a homestead exemption. A homestead declaration protects a person’s home from being seized and sold in the event a money judgment is entered against him/her by a court.
- 12.
Law number 14432, 2012.
- 13.
Demsetz and Alchian say “…What is owned are rights to use resources, including one’s body and mind, and these rights are always circumscribed, often by the prohibition of certain actions…The strength with which rights are owned can be defined by the extent to which an owner’s decision about how a resource will be used actually determines the use. If the probability is “1” that an owner's choice of how a particular right should be exercised actually dominates the decision process that governs actual use, then that owner can be said to own absolutely the particular right under consideration…..” (Demsetz and Alchian 1973). It is easy to see that while the first statement pertains to the field of “ought” statements, probability statements, as the second one, are of the kind of “is” statements in Hume’s taxonomy.
- 14.
It can be a monetary benefit as in the case of the benefit of a firm or a simple increase in utility, even mere pleasure and not a rise in money in the case of an individual.
- 15.
The level of precaution is expressed in money units, so can be exchanged by precaution cost.
- 16.
As it is known, the expression unilateral accidents, assumes that causation of harm depends only on the tortfeasor. In a previous work, it was suggested that unilateral causation would be more precise to denote the same case. Indeed, the opposite (bilateral accidents) might not be clear. According to the common usage of words, either cases in which two agents cause harm each other or those where there is only a victim, but his or her harm is caused partly by him or herself and partly by the injurer, could be deemed bilateral. The apparent paradox to common sense is that the usual usage of the term addresses only the latter, being the former (probably the most “bilateral” in usual terms) a case of two unilateral accidents.
- 17.
The value of those assets, indeed; \(h\) also stands for harm’s value.
- 18.
For the sake of brevity, this model includes some implicit assumptions. Sometimes, precaution cost is non-monetary. On the contrary, if it is explicitly monetary, executable assets would be only \(y - x\). Additionally, it is also assumed that the benefit is either non-monetary or may be hidden at no cost. Otherwise, executable assets will be \(y + g\).
- 19.
For a complete review of the relevant literature, see (Ganuza and Gomez 2004).
- 20.
This can be seen by comparing the first order conditions of this issue with the first order condition previously shown.
- 21.
Ancient highest court decisions as Gregory v. Helvering, 293 U.S. 465 (1935), by creating the “substance over form doctrine” in taxation, can be appreciated as increasing private deflection cost, as herein defined, and then, tending to fix this source of inefficiency. A brief discussion on the rival instruments to deal with this effect will be sketched in further paragraphs.
- 22.
European Council Directive of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products (85/374/EEC), 7.
- 23.
There would be also incentives for some firms to cartelize under certain conditions, what is outside the scope of this work.
- 24.
Only for simplicity reasons I am intentionally omitting probability of detection of harm and other refinements.
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Acciarri, H.A. (2016). Enforcement Deflection and Innovation. In: Bellantuono, G., Lara, F. (eds) Law, Development and Innovation. SxI - Springer for Innovation / SxI - Springer per l'Innovazione, vol 13. Springer, Cham. https://doi.org/10.1007/978-3-319-13311-9_4
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