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What You Don't See Can't Hurt You: An Economic Analysis of Morality Laws

This paper provides an efficiency explanation for regulation of sex, drugs and gambling (the so-called ``morality laws''). The argument is motivated by the observation that the design an enforcement of these laws often promotes discretion by the people engaging in such activities. We propose that morality laws can be best explained by considering the proscribed activities to impose a negative externality on others when the activity is observed. In such a case, efficiency requires discretion by the individual who engages in such activities. When discretion is difficult to regulate directly, the activities can instead be proscribed thereby giving individuals incentive to hide their actions from others. We find conditions for the first-best levels of consumption and hiding to be implementable. In addition, since some level of activity is efficient, this paper provides another environment in which the optimal sanctions are not maximal.

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Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp07-05.

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Length: 20
Date of creation: May 2007
Date of revision:
Handle: RePEc:sfu:sfudps:dp07-05
Contact details of provider: Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
Phone: (778)782-3508
Fax: (778)782-5944
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Order Information: Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
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  1. Polinsky, A. Mitchell & Shavell, Steven, 1984. "The optimal use of fines and imprisonment," Journal of Public Economics, Elsevier, vol. 24(1), pages 89-99, June.
  2. Arun S. Malik, 1990. "Avoidance, Screening and Optimum Enforcement," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 341-353, Autumn.
  3. James Andreoni, 1991. "Reasonable Doubt and the Optimal Magnitude of Fines: Should the Penalty Fit the Crime?," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 385-395, Autumn.
  4. Kaplow, Louis, 1990. "A note on the optimal use of nonmonetary sanctions," Journal of Public Economics, Elsevier, vol. 42(2), pages 245-247, July.
  5. Gary S. Becker & Kevin M. Murphy & Michael Grossman, 2004. "The Economic Theory of Illegal Goods: The Case of Drugs," NBER Working Papers 10976, National Bureau of Economic Research, Inc.
  6. Jeffrey A. Miron & Jeffrey Zwiebel, 1995. "The Economic Case against Drug Prohibition," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 175-192, Fall.
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