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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.
164
For surveys and references, see Garoupa (1997), Mookherjee (1997), and Polinsky and Shavell (1998b) (which
is similar to this section).
165
It may not be the case, however, that private incentives to bring suit are optimal, as we discussed in section 5.1.2.
166
The comparison between public and private enforcement has received modest attention in the literature. See
Becker and Stigler (1974), Landes and Posner (1975), and Polinsky (1980a); see also Friedman (1995) and Shavell (1993a).
167
Fault-based liability is often employed in accident law (the negligence rule) and in many regulatory schemes
(which penalize only parties that fail to meet regulatory standards). On reflection, criminal law may be seen to be fault-
- 67 -
based; it only punishes certain harmful acts whose characteristics make them almost always undesirable.
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. We consider here
6.2.1. Optimal enforcement given the probability of detection
optimal enforcement given the assumption that the probability of detection is fixed. Thus, we
ask about the optimal form and level of sanctions under strict and fault-based liability and about
how the two liability rules compare.
Strict liability. Assume initially that fines are the form of sanction and that individuals are
risk neutral. 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. Essentially this basic and fundamental formula was
noted by Bentham (1789, p. 173) and it has been observed by many others since.
168
We assume that the probability and magnitude of the sanction are known. See, however, Bebchuk and Kaplow
(1992) on the case where individuals misperceive the probability of sanctions, Kaplow (1990b) on the case where
individuals may make expenditures to acquire information about sanctions, and Sah (1991) on the process by which
individuals learn about actual levels of enforcement. For empirical evidence on offenders knowledge of expected sanctions,
see Wilson and Herrnstein (1985).
169
Imposing fines may, in fact, be costly, due to the need for adjudication and fine collection. Were we to take this
into account, the main effect on our conclusions would be that the optimal expected sanction would be higher because
harmful acts would cause not only direct harm but also, if detected, additional administrative costs. (Note, however, that any
legal costs borne by the actor are already included in his calculus, so they do not affect the optimal expected sanction.) See,
for example, Becker (1968), and Polinsky and Shavell (1992).
170
We note that when the method of enforcement involves investigating particular acts after they have been
committed (rather than auditing or monitoring, such as when police walk a beat), raising the probability of apprehension
may, in some ranges, involve lower costs on account of greater deterrence, which reduces the number of acts that need to be
investigated to maintain a given probability of detection. - 68 -
If individuals are risk averse, one might expect the optimal fine to be lower than in the risk-
neutral case for two reasons. 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.171
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 [ Pobierz całość w formacie PDF ]