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The Scope of Punishment: An Economic Theory of Harm-Based vs. Act-Based Sanctions

  • Garoupa, Nuno
  • Obidzinski, Marie

The harm caused by many acts is not certain but probabilistic. Current public enforcement of the law combines harm-based sanctions (usually in criminal law) with act-based sanctions (very common in administrative law and regulation). We propose an economic theory of the choice between harm-based and act-based sanctions in public enforcement. The efficiency of act-based versus harm-based sanctions is analyzed and a typology of the determinants is drawn up. In the simple model with risk neutral offenders, both legal policies have the same deterrent level, but act-based sanctions end up punishing more people and the sanctions are lower. However when the assessment of the probability of harm diverges across individuals, the choice between harm-based or act-based sanctions depends on whether it is the enforcer or the average individual who is better informed. Legal policy implications are discussed.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5899.

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Date of creation: Oct 2006
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Handle: RePEc:cpr:ceprdp:5899
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  1. Fon, Vincy & Parisi, Francesco, 2007. "On the optimal specificity of legal rules," Journal of Institutional Economics, Cambridge University Press, vol. 3(02), pages 147-164, August.
  2. Schmitz, Patrick W., 2000. "On the Joint Use of Liability and Safety Regulation," MPRA Paper 12536, University Library of Munich, Germany.
  3. Mookherjee, Dilip & Png, I P L, 1992. "Monitoring vis-a-vis Investigation in Enforcement of Law," American Economic Review, American Economic Association, vol. 82(3), pages 556-65, June.
  4. 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.
  5. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
  6. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  7. Dhammika Dharmapala & Nuno Garoupa, 2002. "Penalty Enhancement for Hate Crimes: An Economic Analysis," Working papers 2002-12, University of Connecticut, Department of Economics.
  8. Isaac Ehrlich & Richard A. Posner, 1974. "An Economic Analysis of Legal Rulemaking," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 257-286, January.
  9. Friedman, David D, 1991. "Impossibility, Subjective Probability, and Punishment for Attempts," The Journal of Legal Studies, University of Chicago Press, vol. 20(1), pages 179-86, January.
  10. Shavell, Steven, 1990. "Deterrence and the Punishment of Attempts," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 435-66, June.
  11. Louis Kaplow, 1992. "A Model of the Optimal Complexity of Rules," NBER Working Papers 3958, National Bureau of Economic Research, Inc.
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