Working Paper: NBER ID: w11780
Authors: A. Mitchell Polinsky; Steven Shavell
Abstract: This chapter of the forthcoming Handbook of Law and Economics surveys the theory of the public enforcement of law - the use of governmental agents (regulators, inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. The theoretical core of our analysis addresses the following basic questions: Should the form of the sanction imposed on a liable party be a fine, an imprisonment term, or a combination of the two? Should the rule of liability be strict or fault-based? If violators are caught only with a probability, how should the level of the sanction be adjusted? How much of society's resources should be devoted to apprehending violators? We then examine a variety of extensions of the central theory, including: activity level; errors; the costs of imposing fines; general enforcement; marginal deterrence; the principal-agent relationship; settlements; self-reporting; repeat offenders; imperfect knowledge about the probability and magnitude of sanctions; corruption; incapacitation; costly observation of wealth; social norms; and the fairness of sanctions.
Keywords: public enforcement; law enforcement; sanctions; liability; deterrence
JEL Codes: D23; D62; D63; H23; H26; K14; K42; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary sanctions (E42) | likelihood of compliance (K40) |
| non-monetary sanctions (E42) | likelihood of compliance (K40) |
| higher fines (R48) | greater deterrence (K49) |
| probability of detection (C52) | social welfare (I38) |
| fine levels (Y50) | social behavior (Z13) |
| structure of liability rules (K13) | overall enforcement costs (K40) |
| risk aversion (D81) | effectiveness of sanctions (F51) |
| enforcement strategy (K40) | social welfare outcomes (I38) |