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The Theory of Public Enforcement of Law

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  • A. Mitchell Polinsky
  • Steven Shavell

Abstract

This chapter of the forthcoming Handbook of Law and Economics surveys the theory of the public enforcement of law %u2013 the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of our analysis addresses the following basic questions: Should the form of the sanction imposed on a liable party be a fine, an imprisonment term, or a combination of the two? Should the rule of liability be strict or fault-based? If violators are caught only with a probability, how should the level of the sanction be adjusted? How much of society%u2019s resources should be devoted to apprehending violators? We then examine a variety of extensions of the central theory, including: activity level; errors; the costs of imposing fines; general enforcement; marginal deterrence; the principal-agent relationship; settlements; self-reporting; repeat offenders; imperfect knowledge about the probability and magnitude of sanctions; corruption; incapacitation; costly observation of wealth; social norms; and the fairness of sanctions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11780.

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Date of creation: Nov 2005
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Publication status: published as Shavell, Steven and A. Mitchell Polinsky. “The Economic Theory of Public Enforcement of Law.” Journal of Economic Literature 38, 1 (March 2000): 45-76.
Handle: RePEc:nbr:nberwo:11780

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