IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/3008.html
   My bibliography  Save this paper

The Optimal Probability and Magnitude of Fines for Acts that Definitely are Undesirable

Author

Listed:
  • Louis Kaplow

Abstract

Even when society would wish to deter all acts of some type, such as tax evasion and many common crimes, the benefits from deterrence often will be insufficient to justify the expenditures on enforcement that would be required to deter everyone. If some individuals are not deterred, however, they will bear risk when fines are employed as a sanction. As a result, it may be optimal to reduce total risk-bearing costs by reducing the number of individuals who bear any risk. This can be accomplished by increasing enforcement above the level that would be justified considering only the benefits of deterrence and the direct costs of enforcement. Another possibility is that it may be optimal reduce the risk borne by those who act, by employing fines below the maximum feasible level. This latter result constitutes an instance in which the well-known implication of Becker's analysis that it is optimal to employ extreme sanctions for all offenses is invalid.

Suggested Citation

  • Louis Kaplow, 1989. "The Optimal Probability and Magnitude of Fines for Acts that Definitely are Undesirable," NBER Working Papers 3008, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3008
    Note: PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w3008.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jan Eeckhout & Nicola Persico & Petra E. Todd, 2010. "A Theory of Optimal Random Crackdowns," American Economic Review, American Economic Association, vol. 100(3), pages 1104-1135, June.
    2. Jan Boone & Peter Fredriksson & Bertil Holmlund & Jan C. van Ours, 2007. "Optimal Unemployment Insurance with Monitoring and Sanctions," Economic Journal, Royal Economic Society, vol. 117(518), pages 399-421, March.
    3. Ezra Friedman & Abraham L. Wickelgren, 2006. "Bayesian Juries and The Limits to Deterrence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(1), pages 70-86, April.
    4. Carmen Arguedas, 2008. "To Comply or Not To Comply? Pollution Standard Setting Under Costly Monitoring and Sanctioning," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(2), pages 155-168, October.
    5. Roger H. Gordon & Jeffrey K. MacKie-Mason, 1995. "Why Is There Corporate Taxation in a Small Open Economy? The Role of Transfer Pricing and Income Shifting," NBER Chapters, in: The Effects of Taxation on Multinational Corporations, pages 67-94, National Bureau of Economic Research, Inc.
    6. Timothy Stanley, 1995. "Optimal Penalties for Concealment of Crime," Law and Economics 9507001, University Library of Munich, Germany, revised 27 Dec 1995.
    7. Isaac Ehrlich, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter.
    8. Marcel Boyer & Tracy R. Lewis & Wei Lin Liu, 2000. "Setting standards for credible compliance and law enforcement," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 319-340, May.
    9. Hugh Gravelle & Nuno Garoupa, 2002. "Optimal Deterrence with Legal Defense Expenditure," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 366-379, July.
    10. Nøstbakken, Linda, 2008. "Fisheries law enforcement--A survey of the economic literature," Marine Policy, Elsevier, vol. 32(3), pages 293-300, May.
    11. Thomas J. Miceli & Kathleen Segerson, 2007. "Punishing the Innocent along with the Guilty: The Economics of Individual versus Group Punishment," The Journal of Legal Studies, University of Chicago Press, vol. 36(1), pages 81-106, January.
    12. Éric Langlais & Marie Obidzinski, 2015. "Public law enforcers and political competition," EconomiX Working Papers 2015-40, University of Paris Nanterre, EconomiX.
    13. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    14. Nathan Berg & Jeong-Yoo Kim, 2015. "Quantity Restrictions with Imperfect Enforcement in an Overused Commons: Permissive Regulation to Reduce Overuse?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(2), pages 308-329, June.
    15. Peter Fredriksson & Bertil Holmlund, 2006. "Improving Incentives in Unemployment Insurance: A Review of Recent Research," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 357-386, July.
    16. E. Motchenkova & P. M. Kort, 2006. "Analysis of Current Penalty Schemes for Violations of Antitrust Laws," Journal of Optimization Theory and Applications, Springer, vol. 128(2), pages 431-451, February.
    17. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    18. Chiu, W.Henry & Madden, Paul, 2007. "Crime, punishment, and background risks," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 543-555, April.
    19. Gregory DeAngelo & Gary Charness, 2012. "Deterrence, expected cost, uncertainty and voting: Experimental evidence," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 73-100, February.
    20. Kingsley, David C. & Brown, Thomas C., 2016. "Endogenous and costly institutional deterrence in a public good experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 33-41.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3008. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.