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Should Criminal Penalties Include Third-Party Avoidance Costs?

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  • Daniel, Kermit
  • Lott, John R, Jr

Abstract

There is general agreement that burglary produces social costs over and beyond the damage done to the victim if a crime raises other potential victims' subjective estimates of being robbed and thus increases their investments in protecting themselves (e.g., purchasing more locks). Economists traditionally view the marginal investment in locks by neighboring houses as a negative externality produced by a burglary. This article shows that it is wrong to view third-party expenditures as a negative externality. Instead, they are usually an indicator that third parties are benefiting from the mistakes of others. We first show how this reasoning applies to burglary and then to fraud. Copyright 1995 by the University of Chicago.

Suggested Citation

  • Daniel, Kermit & Lott, John R, Jr, 1995. "Should Criminal Penalties Include Third-Party Avoidance Costs?," The Journal of Legal Studies, University of Chicago Press, vol. 24(2), pages 523-534, June.
    • Handle: RePEc:ucp:jlstud:v:24:y:1995:i:2:p:523-34
    DOI: 10.1086/467967
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    Cited by:

    1. C. McDougall & M. Cohen & R. Swaray & A. Perry, 2008. "Benefit‐Cost Analyses of Sentencing," Campbell Systematic Reviews, John Wiley & Sons, vol. 4(1), pages 1-86.
    2. Miles Stan & Pyne Derek, 2017. "The Economics of Scams," Review of Law & Economics, De Gruyter, vol. 13(1), pages 1-18, March.
    3. Anthony Heyes, 2001. "A Note on Defensive Expenditures: Harmonised Law, Diverse Results," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(3), pages 257-266, July.

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