On the existence of the optimal fine for environmental crime
Classical theory states that the optimal fine equals the damage caused by the crime divided by the probability of detection. But does such an optimal fine exist? We focus on emissions from production, and, even if we assume that the damage function is perfectly known, we still show that the optimal fine typically does not exist. Non-existence occurs as the environmental damage function is non-linear in overall emissions, meaning that there are interactions between emissions, the economy and the environment. We argue that these interactions cannot be accurately reflected in the fine imposed by the regulator. Previous literature on optimal fines does not recognize the non-existence of the applicable optimal fine, basically since this literature uses discrete models where the damage caused by the crime is assumed constant. Our result reduces the attractiveness of fines and might thus help explain enforcement agencies' inclination towards non-monetary enforcement instruments.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-92, September.
- Yew-Kwang Ng, 2004. "Optimal Environmental Charges/Taxes: Easy to Estimate and Surplus-yielding," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(4), pages 395-408, August.
- A. Mitchell Polinsky & Steven Shavell, 1990.
"Enforcement Costs and the Optimal Magnitude and Probability of Fines,"
NBER Working Papers
3429, National Bureau of Economic Research, Inc.
- Polinsky, A Mitchell & Shavell, Steven, 1992. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 133-48, April.
- Karine Nyborg & Kjetil Telle, 2006. "Firms’ Compliance to Environmental Regulation: Is There Really a Paradox?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(1), pages 1-18, September.
- Heyes, Anthony, 2000. "Implementing Environmental Regulation: Enforcement and Compliance," Journal of Regulatory Economics, Springer, vol. 17(2), pages 107-29, March.
- Repetto, Robert, 1987. "The policy implications of non-convex environmental damages: A smog control case study," Journal of Environmental Economics and Management, Elsevier, vol. 14(1), pages 13-29, March.
- Bolin, Bert, 2003. "Geophysical and geochemical aspects of environmental degradation," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 1, pages 7-59 Elsevier.
- Rousseau, Sandra, 2009. "The use of warnings in the presence of errors," International Review of Law and Economics, Elsevier, vol. 29(3), pages 191-201, September.
- Nuno Garoupa, 2000.
"Optimal magnitude and probability of fines,"
Economics Working Papers
454, Department of Economics and Business, Universitat Pompeu Fabra.
- 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 880-91, December.
- Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July.
- Nyborg, Karine & Telle, Kjetil, 2003.
"The Role of Warnings in Regulation: Keeping Control with Less Punishment,"
24/2003, Oslo University, Department of Economics.
- Nyborg, Karine & Telle, Kjetil, 2004. "The role of warnings in regulation: keeping control with less punishment," Journal of Public Economics, Elsevier, vol. 88(12), pages 2801-2816, December.
- Sandra Rousseau, 2007. "Timing of environmental inspections: survival of the compliant," Journal of Regulatory Economics, Springer, vol. 32(1), pages 17-36, August.
- Jonathan Yoder, 2002. "Estimation of Wildlife-Inflicted Property Damage and Abatement Based on Compensation Program Claims Data," Land Economics, University of Wisconsin Press, vol. 78(1), pages 45-59.
- Stafford, Sarah L., 2002. "The Effect of Punishment on Firm Compliance with Hazardous Waste Regulations," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 290-308, September.
- Gary S. Becker, 1974.
"Crime and Punishment: An Economic Approach,"
in: Essays in the Economics of Crime and Punishment, pages 1-54
National Bureau of Economic Research, Inc.
- Kaplow, Louis, 1990. "A note on the optimal use of nonmonetary sanctions," Journal of Public Economics, Elsevier, vol. 42(2), pages 245-247, July.
- Steven Shavell, 2007. "Optimal Discretion in the Application of Rules," American Law and Economics Review, Oxford University Press, vol. 9(1), pages 175-194.
- Thomas J. Miceli, 2008. "Criminal Sentencing Guidelines And Judicial Discretion," Contemporary Economic Policy, Western Economic Association International, vol. 26(2), pages 207-215, 04.
- Mookherjee, Dilip & Png, I P L, 1994. "Marginal Deterrence in Enforcement of Law," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 1039-66, October.
- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-37, September.
- Shavell, Steven, 1992. "A note on marginal deterrence," International Review of Law and Economics, Elsevier, vol. 12(3), pages 345-355, September.
- 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 618-21, June.
- A. Mitchell Polinsky & Steven Shavell, 1990. "A Note on Optimal Fines When Wealth Varies Among Individuals," NBER Working Papers 3232, National Bureau of Economic Research, Inc.
- Jennifer Reinganum, 2000. "Sentencing Guidelines, Judicial Discretion, and Plea Bargaining," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 62-81, Spring.
- Louis Kaplow & Steven Shavell, 1997.
"On the Superiority of Corrective Taxes to Quantity Regulation,"
NBER Working Papers
6251, National Bureau of Economic Research, Inc.
- Louis Kaplow & Steven Shavell, 2002. "On the Superiority of Corrective Taxes to Quantity Regulation," American Law and Economics Review, Oxford University Press, vol. 4(1), pages 1-17, January.
- Montero, Juan-Pablo, 2002. "Prices versus quantities with incomplete enforcement," Journal of Public Economics, Elsevier, vol. 85(3), pages 435-454, September.
- Salvatore Bimonte, 1999. "An Algorithm for Optimal Pigouvian Taxes Without Benefits Data," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(1), pages 1-11, January.
- Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
- Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
- Ananda, Jayanath & Herath, Gamini & Chisholm, Anthony H., 2001. "Determination of yield and erosion damage functions using subjectively elicited data: application to smallholder tea in Sri Lanka," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(2), June.
When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:30:y:2010:i:4:p:329-337. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.