Econ 522 – Lecture 22 (Dec 2 2008)
HW3 due Thursday
Before Thanksgiving…
· we declared the goal of a legal system to be minimizing the sum of administrative costs and error costs
· we talked about the legal process itself – peoples’ decisions to sue or not sue, to settle out of court or go to trial, etc
· and the effects that the details of the legal process can have on this, and therefore on administrative costs and error costs
· we talked about some specific aspects of trials and appeals, mostly under the U.S. common law system.
· and we talked a bit about some empirical facts about crime in the U.S. and the U.S. criminal law system
· (if you weren’t here last Tuesday, notes are online, take a look)
The plan:
· today, much more on crime and criminal law
· much of today’s lecture comes from chapter 15 of the Friedman book, Law’s Order, which I’ve put online as a digital reserve (there’s a link on the syllabus)
· Thursday, we’ll return to the question of efficiency, and look at arguments why the common law might (or might not) naturally evolve toward being more efficient
· that will wrap up the new material for this course
· (we’ll also do course evaluations on Thursday)
· next Tuesday, I’ll do a recap/review of the whole semester
· next Thursday, I’ll cover some interesting material that’s outside the scope of the course – won’t be on the final, but still interesting – much of it on behavioral law and econ
· I expect Chao will schedule a review session or two during finals week
· final exam is December 19
Like I said, much of today’s lecture comes from chapter 15 of the Friedman book – I like his treatment of criminal law more than C&U.
· As with the legal process for civil law, the economic goal of criminal law is to minimize the total social cost of crimes, plus the resources that are spent on enforcing the system (detecting and punishing offenses).
· Everything we’ve done so far has been about civil cases. In civil cases, a suit is brought by an individual who was harmed; in most cases, if the plaintiff prevails, the remedy is meant to compensate him for the harm that occurred.
· Criminal law differs from civil law in a number of ways:
o The criminal intended to do wrong. (In many civil cases, the harm was accidental.)
o The case is brought by the government, not by an individual
o The harm done tends to be public as well as private.
o The standard of proof is higher than in a civil suit
o If found guilty, the defendant will be punished
The first distinction is that a criminal conviction requires intent.
· The legal term is mens rea, “a guilty mind”
· In tort law, we considered harms that happened accidentally
o An injurer might cause an accident while taking precautions, and still been liable under a strict liability rule
o An injurer might cause an accident while not taking sufficient precautions, and been liable under a negligence rule
o An injurer might cause an accident while being reckless, and been liable for punitive damages on top of compensatory damages
o But in any of these cases, the injurer did not intend for the harm to occur.
· There are circumstances where the line of intent gets blurred
o If someone is in a position of responsibility for someone else’s safety and, through a pattern of negligence, causes that person’s death, they can be charged with “criminally negligent homicide” even though they did not intend for the person to die
o (If you’re hired as a lifeguard and are drunk while on duty and someone drowns, you’re in trouble)
o The flip side of this: sometimes intent alone is enough, as when people are charged with attempted murder even though no actual harm occurred.
The next difference is who initiates the case
· In civil law, a case is brought by the victim
· In criminal law, a case is brought by the state
· Recall that in tort cases involving accidental death, the victim could never receive damages; his family and friends could only sue for lost companionship or lost wages, not the lost life
· On the other hand, criminal cases do not require a living victim.
· This also allows prosecution of “victimless crimes” – that is, crimes which do not cause any clear harm, such as gambling, prostitution, and drug sales.
· The theory here is that all crimes harm the public
o that is, the breakdown of law and order in society is a public bad
o thus, the public (represented by the state) brings criminal actions, not the victim.
Next is standard of proof
· We’ve mentioned earlier, in most civil cases, the standard of proof is a preponderance of the evidence
· To award punitive damages, the standard is often higher, such as clear and convincing evidence
· Criminal cases have a much higher standard of proof: the prosecution has to prove its case beyond a reasonable doubt
· We’ll come back to this.
The final difference is the distinction between civil remedies and “punishment”
· In nuisance law, contract law, and tort law, damages are paid both to compensate the victim and to cause the injurer to internalize the cost of the harm
· that is, we want pollution, or breach of contract, or accidents, to happen only when they are efficient, that is, when they are less costly than preventing them.
· In criminal law, punishment is not meant to compensate the victim directly
· And in criminal law, punishment is meant to deter crimes – that is, to prevent them altogether, not just to prevent the inefficient ones
· And so punishment need not be limited to the magnitude of the harm done
· Civil remedies generally transfer resources from one party to another, without destroying anything
· Criminal punishments, such as prison time and execution, often destroy resources
o that is, they are designed to make the criminal worse off without necessarily making anyone else better off.
· So civil penalties are designed to make injurers internalize the costs of their harms, so that these harms only occur when they are efficient; but criminal punishments are designed to deter crimes, to discourage their commission in all situations.
This does beg an interesting question: are crimes ever efficient?
· Cooter and Ulen don’t seem to take much of a stand.
· (They ask the question, “which acts should be treated as crimes?” and give the rather unsatisfactory answer, “an act should be treated as a crime if doing so increases social welfare.”)
· Friedman clearly believes that some crimes may be efficient
· Clearly, most are not
o In order to steal my laptop out of my car, someone might have to break my window
o My laptop has lots of personal stuff on it – papers I’m working on, pictures of my friends – it’s probably worth more to me than to him
o Plus, my window got broken
o So the cost to me is likely larger than the benefit to the thief.
o Similarly, stolen cars are worth much less than legally-owned cars
o If someone steals my car, he’ll probably sell it for much less than it will cost me to replace it
o Plus, he may have to reduce the value of the car to steal it – by breaking a window, jamming a screwdriver in the ignition, etc.
o Again, the crime is inefficient.
o And if a crime were efficient – say, someone stealing my car because they value it much more than me – there is often a legal alternative – offering to buy the car from me.
· However, Friedman gives a couple of examples of efficient crimes
· One is a situation we saw earlier: a hiker is lost in the woods, on the brink of starvation, and stumbles on a cabin with nobody home. He breaks into the cabin and steals some food.
o (In this case, we have a legal doctrine to deal with the problem: private necessity. Rather than paying the penalty for trespass, breaking and entering, and theft, the “criminal” would likely just be liable for the damage done.)
· Friedman follows this with a much creepier example: efficient murder
o A very rich man decides he would derive a huge amount of pleasure from hunting and killing a human being
o He finds ten people who all agree that he can pay them each $1,000,000, they’ll draw straws, and he can hunt and kill whoever draws the shortest straw
o Since the transaction is voluntary, it seems like it must be efficient.
In fact, there’s a recent case that sounds more like this than you’d expect
· In 2001, a German man, Armin Meiwes, posted an ad online “looking for a well-built 18-to-30-year-old to be slaughtered and consumed.”
· Seriously.
· And someone answered
· The two met, discussed it, and agreed that Meiwes would kill and eat the guy. (This would fulfill various fantasies that both men had.)
· So he did. And videotaped it.
· Some of the details of the story are gruesome, I won’t share them.
· In 2002, Meiwes was arrested, and admitted to what he had done
· At the time, cannibalism was not a crime in Germany, so the question was primarily whether someone could be guilty of murdering someone who had consented to be murdered.
· In 2004, Meiwes was convicted of manslaughter and sentenced to 8 and a half years in prison
· In 2005, he was ordered retried, and in 2006, convicted of murder and sentenced to life in prison.
· So again, if the rich guy and his ten greedy friends all consent to the hunting contract, or Meiwes and his victim agree that he should be killed and eaten, are these crimes efficient?
· It depends on how much you buy into the externalities idea – that certain actions are so repugnant they harm others just by their stench.
· We’ll come back to the question of efficient crimes in a bit. For the most part, though, it’s probably safe to assume most crimes are inefficient.
· We saw that tort law can create an incentive to avoid certain harms
· If tort law worked perfectly, there might be no need for separate criminal law.
· The book offers three reasons that tort law is inadequate to deal with certain types of offenses.
· First, tort law depends on perfect compensation; but perfect compensation may be impossible, as in cases of the loss of a life or a crippling injury.
· Second, even if perfect compensation is possible in principle, it may be impossible in practice
o A court has no good way to figure out how much money would make me indifferent about losing my left arm
o There’s no clear market substitute
o If they ask me, I have an incentive to lie.
· (Recall a long time back, when we distinguished between injunction/property protection and damages/liability protection
· We can recast this as the distinction between protecting a right and protecting an interest
· If someone is free to cut off my arm, provided they pay me for it, then my interest in that arm is protected; but my right to have that arm is not
· The book tries to make the case that in certain instances, it is better to protect rights than interests.)
· Third, if the probability of getting caught and convicted is less than one, then to deter the act, the punishment must be more severe than the benefit received
· We made this argument when we talked about punitive damages
· But the problem is even greater with deliberate acts.
· (If anyone caught stealing money was simply required to return it, we would expect this to lead to an awful lot of theft.)
Cooter and Ulen argue that an economic theory of crime and punishment must answer two questions:
· which acts should be punished?
· how should they be punished?
They answer the first question:
· acts should be punished when the aim is deterrence, acts should be priced when the aim is internalization
· and the aim should be deterrence when perfect compensation is impossible, when people want law to protect rights instead of interests, or when enforcement errors undermine liability.
I’m not wild about the treatment in chapter 11 of the textbook – it feels like they introduce a bunch of math for the sake of the math, in a way that doesn’t give any additional insight. The rest of today is basically the treatment in the Friedman book.
The basic economic model of crime and punishment makes the following key assumption: rational criminals.
That is, we assume that potential criminals consider the costs of a crime – the chance of getting caught, and the severity of punishment – and weigh it against the benefits they get.
If enforcement were free, we could hire so many police that nearly all crimes were detected, and punish them severely; this would lead to nobody rational ever committing any crime. Obviously, the reason we don’t do this is enforcement costs.
In order to deter crime, we have to do two things: catch offenders, and punish them.
Catching a higher fraction of criminals is more costly: it takes more police officers, more detectives, and so on.
More severe punishment also tends to be more expensive.
· The most common punishments are fines and imprisonment
· Fines aren’t costly at all – the offender pays $1000, the state receives $1000, the total social cost of the punishment is 0
· However, fines don’t always work, because not everyone can pay them
· Suppose there was a crime we wanted to deter by imposing a punishment equal to a $100,000 fine
· A lot of the people who commit the crime may not have $100,000, so they would not face a sufficient deterrent.