How criminalizing minor offenses can mean there is less of a deterrent for people to commit more serious crimes.

Those convicted of a crime are often punished twice; once via the legal system’s formal sanction, and again through the stigma of having a criminal record. Murat C. Mungan argues that the criminalization of many small offenses – such as drug possession – means that this stigma is becoming diluted for more serious criminal offenses. If a large percentage of the population is branded as criminals, he writes, this means that having a criminal record becomes less of marker of a person’s character, no matter if that crime is minor or severe

The Law and Economics of Fluctuating Criminal Tendencies and Incapacitation

Economic analyses of criminal law are frequently and heavily criticized for being unable to explain many criminal law rules and doctrines people find intuitively just. Existing economic models cannot properly explain, for instance, why criminal law distinguishes between (1) repeat offenders and first-time offenders, (2) murder and voluntary manslaughter, and (3) remorseful and non-remorseful offenders. This Article proposes a richer economic theory of crime that captures the rationales behind these practices and potentially behind many other important criminal law principles and doctrines. Unlike an overwhelming majority of previous economic analyses, my theory accounts not only for the deterrent effect of criminal punishment, but also for its incapacitative effect. Moreover, and perhaps more importantly, it acknowledges the fact that people have fluctuating, rather than constant, criminal tendencies. That is, it recognizes that some people who ordinarily would not consider committing a wrongful act can, in rare circumstances, lapse into committing a crime. Surprisingly, these two simple but critical concepts have never to my knowledge been jointly considered in an economic analysis of crime, even though their inclusion appears to be an obvious extension of the standard crime and deterrence model formalized almost half a century ago by Gary Becker. The threat of imprisonment deters crime, but even when deterrence fails and a crime is committed, imprisonment benefits society by preventing the criminal from committing further wrongs outside prison for the duration of the sentence. The more dangerous the criminal, the stronger the rationale for imprisonment because these incapacitative benefits exist only if the offender would commit more crimes if left at large. Since people have fluctuating criminal tendencies, however, the mere fact that a person committed a crime reveals imperfect information regarding his likelihood of recidivating. As such, the offender’s criminal history and the circumstances surrounding the crime reveal important pieces of information that can be used to update our beliefs concerning the offender’s expected dangerousness— that is, to distinguish those who have made an uncharacteristic mistake from the dangerous and reckless criminals. Capturing the interaction between the incapacitation function of imprisonment and potential offenders’ fluctuating criminal tendencies allows the model to supply specific, consequentialist justifications for repeat offender laws, voluntary manslaughter laws, and the treatment of remorse in criminal law. Going forward, this more nuanced approach will provide a clearer lens through which to view other pervasive elements of criminal law, such as the mens rea requirement, and to revisit the normative prescriptions of the previous generation of economic analyses

Gateway Crimes

Many who argue against the legalization of marijuana suggest that while its consumption may not be very harmful, marijuana indirectly causes significant social harm by acting as a “gateway drug,” a drug whose consumption facilitates the use of other, more harmful drugs. This Article presents a theory of “gateway crimes,” which, perhaps counterintuitively, implies that there are social gains to decriminalizing offenses that cause minor harms, including marijuana-related offenses. A typical gateway crime is an act which is punished lightly, but because it is designated as a crime, being convicted for committing it leads one to be severely stigmatized. People who are stigmatized have less to lose by committing more serious crimes, and therefore the criminalization of these acts increases recidivism. Thus, punishing gateway crimes may generate greater costs than benefits, and this possibility must be kept in mind when discussing potential criminal justice reforms. This “gateway effect” does not require that, but is strongest when, people underestimate or ignore either the likelihood or magnitude of the consequences associated with being convicted for a minor crime. Therefore—if potential offenders in fact underestimate expected conviction costs—this theory not only implies previously unidentified benefits associated with decriminalizing acts that cause questionable or minor harms but also benefits associated with making the costs associated with convictions more transparent

Don\u27t Say You\u27re Sorry Unless You Mean It: Pricing Apologies to Achieve Credibility

Remorse and apologies by offenders have not been rigorously analyzed in the law and economics literature. This is perhaps because apologies are regarded as ’cheap talk’ and are deemed to be non-informative of an individual’s conscious state. In this paper, I develop a formal framework in which one can analyze remorse and apologies. I argue that legal procedures can be designed to price apologies, such that only truly remorseful individuals apologize. Hence, apologies would not be mere ’cheap talk’ and could send correct signals regarding an offender’s true conscious state, making them credible. This will lead victims, upon receiving apologies, to forgive offenders more frequently. Moreover, pricing apologies does not negatively impact the possibility of achieving optimal deterrence. An (arguably negative) effect of pricing apologies is its elimination of insincere apologies. If it is assumed that apologies, even if insincere, carry rehabilitative and/or palliative benefits, then the optimality of pricing apologies depends on a trade-off between achieving credibility and increasing such rehabilitative and palliative benefits

Reverse Payments, Perverse Incentives

Issuing and enforcing prescription drug patents requires courts and legislatures to strike a delicate balance. A patent gives drug manufacturers a legal, if temporary, monopoly on sales of a drug; this encourages manufacturers to engage in costly research and development of new medicines. But not all patents issued by the Patent Office are ultimately deemed valid – generic drug manufacturers can infringe the patent, and, when sued, attack its validity in court on a variety of grounds, including obviousness. In recent years, patent holders have begun to settle these suits (which they initiated) by paying the alleged infringer. Not surprisingly, these reverse payment settlements (“RPSs”) have been challenged on antitrust grounds. The federal courts of appeals split over whether this practice is presumptively an illegal restraint of trade, and in December 2012 the Supreme Court agreed to decide the issue, granting a writ of certiorari in FTC v. Watson Pharmaceuticals. In light of the importance of the issue to both drug consumers and manufacturers, it is crucial to understand the economic effects of RPSs. Many courts, including the Second Circuit and the Eleventh Circuit, commentators and scholars have suggested that restricting RPSs would necessarily retard technological progress, by reducing the expected returns of becoming a patentee. In this Article, I show, with the help of a game-theoretical model, that this conclusion is unwarranted. Restricting RPSs has the effect of chilling generic entry when – and only when – the underlying patent is strong, or likely to be held valid and infringed. Therefore, restricting RPSs increases the expected returns of holding a strong patent by eliminating potential payments to generic entrants, while at the same time eliminating the possibility of monopoly profit-splitting between branded and generic manufacturers when the patent is weak. This reward shifting effect implies that restricting the use of RPSs is likely to foster more revolutionary innovations, which lead to stronger patents, while lowering R&D towards relatively obvious inventions, which lead to weaker patents. This reward shifting effect of restrictive rules on RPSs, to the best of my knowledge, has gone unnoticed in the past, and it should play an important role in the Supreme Court’s cost benefit analysis

Abandoned Criminal Attempts: An Economic Analysis

An attempt is \u27abandoned\u27 if the criminal, despite having a chance to continue with his criminal plan, forgoes the opportunity to do so. A regime that makes abandonment a defense to criminal attempts provides an incentive to the offender to withdraw from his criminal conduct prior to completing the previously intended offense. However, the same regime may induce offenders to initiate criminal plans more often by reducing the expected costs associated with such plans. The former effect is called the marginal deterrence effect and the latter is called the ex-ante deterrence effect of the abandonment defense. This Article formalizes a trade-off between marginal and ex-ante deterrence by using standard economic analysis. The analysis suggests, contrary to the principles encapsulated by existing legal regimes, that all abandoned attempts, voluntary and involuntary alike, ought to potentially be punished less severely than completed attempts. Furthermore, an abandonment need not be treated as either a full excuse or no defense at all; optimal punishment schemes require abandonments to be treated as mitigating factors in sentencing. The Article then identifies two important factors that ought to be taken into consideration while determining the magnitude of mitigation: the predictability of the events that led to the abandonment and the information regarding the offender’s dangerousness that is revealed through the abandonment. Finally, existing laws on abandonment are briefly reviewed. This review reveals that there is significant variation among states, and that there are cases where courts (i) excuse abandoning defendants even when the law does not provide an abandonment defense, and (ii) punish abandoning defendants even where a strict reading of the law would require the defendant to be excused. I conclude by suggesting that deviations from strict readings of the law can be minimized by moving more closely towards the optimal punishment schemes identified in this Article

Repeat Offenders: If They Learn, We Punish Them More Severely

Many legal systems are designed to punish repeat offenders more severely than first time offenders. However, existing economic literature generally offers either mixed or qualified results regarding optimal punishment of repeat offenders. This paper analyzes optimal punishment schemes in a two period model, where the social planner announces possibly-different sanctions for offenders based on their detection history. When offenders learn how to evade the detection mechanism employed by the government, escalating punishments can be optimal. The contributions of this paper can be listed as follows: First, it identifies and formalizes a source which may produce a marginal effect in the direction of punishing repeat offenders more severely, namely learning. Next, it identifies conditions under which the tendency in legal systems to punish repeat offenders more severely is justified. Overall, the findings suggest that the traditional variables identified so far in the literature are not the only relevant ones in deciding how repeat offenders should be punished, and that learning dynamics should also be taken into account

Welfare Enhancing Regulation Exemptions

Sanctions for regulation violations are used to deter conduct which could potentially result in great social harms. This practice over-deters talented entities and under-deters untalented entities, which leads to social losses. This paper analyzes whether and how such social losses can be mitigated. I show that this can be achieved by allowing regulatees to purchase passes exempting them from regulations at appropriate prices

Welfare Enhancing Regulation Exemptions

Sanctions for regulation violations are used to deter conduct which could potentially result in great social harms. This practice over-deters talented entities and under-deters untalented entities, which leads to social losses. This paper analyzes whether and how such social losses can be mitigated. I show that this can be achieved by allowing regulatees to purchase passes exempting them from regulations at appropriate prices