On Economic Theories of Criminal Punishment: Pricing, Prevention, or Proportionality?

This article examines competing economic theories of crime and punishment within a common analytical framework. The theories—due to Becker (1968. “Crime and Punishment: An Economic Approach,” 76 Journal of Political Economy 169–217), Posner (1985. “An Economic Theory of the Criminal Law” 85 Columbia Law Review 1193–231), and Adelstein (1981. “Institutional Structure and Evolution in the Criminal Process,” 76 Northwestern University Law Review 1–99)—share the view of crime as exchange, but differ in the interpretation of punishment; specifically, is it aimed at pricing crime, preventing crime, or achieving corrective justice? The hybrid model used to address this question, originally developed by Hylton (2005. “The Theory of Penalties and the Economics of Criminal Law,” 1 Review of Law and Economics 175–201), explicitly incorporates market exchange as an alternative to criminal exchange. The results show that the optimal enforcement policy generally involves maximal punishment (however that is defined), but the optimal probability of apprehension can be high or low, depending on the parameters of the model. In the latter case, crime may completely crowd out the market. (JEL K14, K42)