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Are Fines and Prison Terms Used Efficiently? Evidence on Federal Fraud Offenders

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  • Waldfogel, Joel

Abstract

Optimal penalty theory predicts that, because imprisonment is costly and fines are costless, fines will be used to the maximum extent possible before they are supplemented with imprisonment. If criminal procedure functions as a market system, as some observers have suggested, then optimizing models of sanctions may be viewed as positive and not just normative descriptions of criminal sentencing. This article examines the use of fines and prison terms to punish federal fraud offenders. We find that prison terms depend strongly and positively on harms, while fines depend strongly and positively on ability to pay. In addition, individuals punished with higher fines receive shorter prison terms, a finding that supports efficient punishment over some of its alternatives. These results demonstrate optimizing tendencies in sentencing, even if not optimality itself. Copyright 1995 by the University of Chicago.

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  • Waldfogel, Joel, 1995. "Are Fines and Prison Terms Used Efficiently? Evidence on Federal Fraud Offenders," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 107-139, April.
    • Handle: RePEc:ucp:jlawec:v:38:y:1995:i:1:p:107-39
    DOI: 10.1086/467327
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    1. Polinsky, A Mitchell & Shavell, Steven, 1991. "A Note on Optimal Fines When Wealth Varies among Individuals," American Economic Review, American Economic Association, vol. 81(3), pages 618-621, June.
    2. Shavell, Steven, 1991. "Specific versus General Enforcement of Law," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1088-1108, October.
    3. Lott, John R, Jr, 1992. "Do We Punish High Income Criminals Too Heavily?," Economic Inquiry, Western Economic Association International, vol. 30(4), pages 583-608, October.
    4. Polinsky, A. Mitchell & Shavell, Steven, 1984. "The optimal use of fines and imprisonment," Journal of Public Economics, Elsevier, vol. 24(1), pages 89-99, June.
    5. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-891, December.
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    Cited by:

    1. Abdul‐Rahman Khokhar & Hesam Shahriari, 2022. "Is the SEC captured? Evidence from political connectedness and SEC enforcement actions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2725-2756, June.
    2. Einat, Tomer, 2008. "Sentencing rationales, judicial discretion, and the practice of criminal fines in Israel," Journal of Criminal Justice, Elsevier, vol. 36(5), pages 444-452, September.
    3. Kenneth Avio, 1998. "The Economics of Prisons," European Journal of Law and Economics, Springer, vol. 6(2), pages 143-175, September.
    4. Isaac Ehrlich, 2010. "The Market Model of Crime: A Short Review and New Directions," Chapters, in: Bruce L. Benson & Paul R. Zimmerman (ed.), Handbook on the Economics of Crime, chapter 1, Edward Elgar Publishing.
    5. Pallage, Stephane & Demougin, Dominique, 2003. "Limiting court behavior: a case for high minimum sentences and low maximum ones," International Review of Law and Economics, Elsevier, vol. 23(3), pages 309-321, September.
    6. Levitt, Steven D., 1997. "Incentive compatibility constraints as an explanation for the use of prison sentences instead of fines," International Review of Law and Economics, Elsevier, vol. 17(2), pages 179-192, June.
    7. Kahan, Dan M & Posner, Eric A, 1999. "Shaming White-Collar Criminals: A Proposal for Reform of the Federal Sentencing Guidelines," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 365-391, April.
    8. Jose Meade & Joel Waldfogel, 1998. "Do Sentencing Guidelines Raise the Cost of Punishment?," NBER Working Papers 6361, National Bureau of Economic Research, Inc.

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