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Abstract:
This paper reviews the existing law and economics literature on crime, noting where various models might apply to the terror context. Specifically, it focuses on two strands of the literature, deterrence and incapacitation. Challenging the conventional application of the basic rational agent model of crime in the context of terrorism, it considers anti-terror measures enacted by different countries, highlighting how the details of the laws correspond to the insights from economic models of crime. In conclusion, the paper proposes an efficient sorting mechanism in which individuals will be provided with adequate incentives to reveal their type to law enforcement authorities.

organized crime, basic crime model, communal liability, deterrence, incapacitation, penalty enhancements, terrorism

Abstract:
This article presents a model of non-monetary sanctions with corruption. It is a well-known result in the law enforcement literature that in the absence of corruption, non-monetary sanctions, such as imprisonment, should be imposed infrequently. We show that, in the presence of corruption, it is still sometimes optimal to use non-monetary sanctions. In fact, it may be optimal to use them more often. Corruption transforms a non-monetary sanction into a monetary bribe. While this reduces deterrence, it also lowers the social cost of non-monetary sanctions, because they are seldom actually imposed. In addition, non-monetary sanctions can be beneficial in a corrupt environment, because they allow officials to extract higher bribes, thus restoring some deterrence.

Non-monetary sanction, corruption

Abstract:
Duty of care cannot be used anymore as the touchstone to differentiate negligence from strict liability, because the scope of liability (traditionally called proximate causation) requirement replicates many of the former features. Indeed, under a negligence rule the marginal Hand formula is applied twice: First to assess whether the defendant did breach his or her duty of care, and, second, to delimit whether defendant's behavior was a proximate cause of the harm suffered by the victim. But under a strict liability rule, the Hand formula question is applied only once when the proximate causation question is raised.

Traditional law and economics analysis has almost always taken normative questions raised by the causation requirement as given, which is a major flaw of mainstream models, because the centrality of the scope of liability or proximate causation requirement in real legal practice is disregarded if not simply expelled from the analysis.

Then, defining the subjective scope of liability, that is to say, the boundaries of the pool of potential defendants, is the basic policy decision in each an every liability rule. In the model presented in this paper, the government first chooses efficient scope of liability, and, second, given the scope of liability, the government decides liability rule and damages that guarantee efficient precaution.

In the final part of the article, most known scope of liability doctrines developed by both common law and civil law systems are described in order to show how large the common ground between negligene and strict liability can be.

scope of liability, causation, negligence, strict liability, Hand rule

Abstract:
Although highly criticized by legal scholars, plea-bargaining is probably the most transplanted instrument of criminal procedure. In contrast to most of the legal literature, Law and Economics is quite optimistic about it. In this paper, we take the view that such optimism is not well founded. Our approach is based on the view of plea-bargaining as part of a nexus of relationships that undermines the efficiency argument. In particular, we find it quite important to assess the defendant's lawyer's incentives and the prosecutor's goals, both of which are rather neglected in Law and Economics. Other aspects we consider are the interests of the victims and judicial scrutiny. Our conclusions temper the usual Law and Economics optimism.

Plea-Bargaining, Defendant, Prosecution, Judicial Scrutiny

Abstract:
There have been a large number of innovations in legal scholarship in the U.S. legal academy over the past 25 or so years and very few from legal scholars in other parts of the world. For instance, because both of us work in the area of law and economics, we were both acutely aware of the large differences in the receptivity to law and economics as between the U.S. and Europe. The U.S. legal academy has generously embraced law and economics (and some other legal innovations), while Europe (and the rest of the world) has not. Why has the U.S. led the world in the production and adoption of legal scholarly innovations? This Article seeks to answer that question generally and with particular reference to law and economics.

In Part II we deal with two definitional issues - what we mean by a "legal innovation" and what counts as "law and economics." The scholarly innovations on which we focus are new methods of looking at many areas of the law, such as feminist jurisprudence, or the articulation of the principles and boundaries of an entire new area of law, such as elder law. By "law and economics," we mean the application of economic analysis to any of the area to which its application would not be obvious. Then in Part III we offer a series of anecdotes and empirical studies designed to show that law and economics is much more prominent in U.S. legal scholarship than in European legal scholarship.

We then seek, in Part IV, explanations for the differences between the U.S. and European legal academies in their production and adoption of legal scholarship innovations generally and with respect to law and economics particularly. Our central claim is that it is the competitiveness of higher and legal education that is the principal explanation for the scholarly innovativeness of the U.S. and the lack of competition (and the consequent lack of an incentive to innovate) in European higher and legal education that explains the differences. We further hypothesize that the production and adoption of law and economics are attractive only to those who have experienced a prior legal scholarly innovation - legal realism. We draw a clear line of intellectual heritage from legal realism to law and economics.

Before settling on competition and legal realism as the principal explanations for the production and adoption of legal scholarship innovations, we canvass (and reject) a large number of alternative explanations, such as political ideology, money, the differences between common and civil law systems, the structure of legal education, and more.

In Part V we draw a connection between the standard economic theory of innovation and diffusion and our observations in the prior four sections of the Article. That economic theory of innovation and diffusion identifies three factors - demand, supply, and market structure - as determining the presence and pace of innovation and diffusion. We relate each of those factors to observable differences between the U.S. and Europe, showing that our explanation of the production and adoption of legal scholarly innovations follows the same factors as does the economic theory of innovation in production techniques.

Abstract:
This paper analyzes the choice of the socially optimal titling system assuming rational individual choices about recording, assurance and registration decisions. It focuses on the enforcement of property rights on land under private titling and the two existing public titling systems, recording and registration. When the reduction in the expected costs of forfeiture balances the higher cost of initial registration, a registration system is more efficient than a recording system. Implications for title assurance, land improvements and transactions are also considered.

land transfer, registration, recording, property rights, title assurance, insurance, adverse selection

Abstract:
Previous works on asymmetric information in asset markets tend to focus on the potential gains in the asset market itself. We focus on the market for information and conduct an experimental study to explore, in a game of finite but uncertain duration, whether reputation can be an effective constraint on deliberate misinformation. At the beginning of each period, an uninformed potential asset buyer can purchase information, at a fixed price and from a fully-informed source, about the value of the asset in that period. The informational insiders cannot purchase the asset and are given short-term incentives to provide false information when the asset value is low. Our model predicts that, in accordance with the Folk Theorem, Pareto-superior outcomes featuring truthful revelation should be sustainable. However, this depends critically on beliefs about rationality and behavior. We find that, overall, sellers are truthful 89% of the time. More significantly, the observed frequency of truthfulness is 81% when the asset value is low. Our result is consistent with both mixed-strategy and trigger strategy interpretations and provides evidence that most subjects correctly anticipate rational behavior. We discuss applications to financial markets, media regulation, and the stability of cartels.

Abstract:
This article analyzes public and private law enforcement when the government is motivated by rent seeking. A rent-seeking government seeks primarily to maximize revenue. The article concludes as follows: (1) if offenders have sufficient wealth, a rent-seeking government is more aggressive than a social-welfare-maximizing government in enforcing laws against minor crimes (such as parking violations) but more lax in enforcing laws against major crimes; (2) competitive private enforcement is usually better and never worse than monopolistic private enforcement; (3) The choice between competitive private enforcement and public enforcement depends on which is cheaper and on the severity of the offense.

Abstract:
The article analyzes public and private law enforcement when the government is motivated partially or entirely by rent-seeking. The model compares and contrasts the optimal law enforcement policies chosen by a benevolent, social welfare-maximizing government and a self-interested, rent-seeking government. The principal difference between these two kinds of governments is that a rent-seeking government seeks primarily to maximize revenue, while a welfare-maximizing government seeks primarily to deter socially harmful behavior. Among the central results of the paper are: (1) If offenders have sufficient wealth, a rent-seeking government is more aggressive in enforcing laws against minor crimes, while it is more lax in enforcing laws against major crimes. (2) Whether the government's objective is welfare maximization, rent maximization, or some combination of the two, competitive private enforcement is always at least as good and usually better than monopolistic private enforcement. (3) The choice between competitive private enforcement and public enforcement depends on which is cheaper and on whether the government seeks to completely deter offenses.

Abstract:
In this paper is analyzed the regulation of access to and activity of certain professions, namely of lawyers and physicians. A quick review of the economic theory of regulation of professions, namely (a) Why regulate, (b) How to regulate, and (c) What to regulate is presented. We suggest a set of indicators to measure the quality of regulatory restrictions (hence exposing comparative inefficiencies) in professional activities. We conclude that generally speaking the US followed by Norway, the UK [England and Wales] and Belgium perform better in terms of efficient regulation, whereas Germany, Austria and Portugal perform badly for both legal and medical professionals. Other countries (including the Netherlands, Spain, France) vary. Our results are somehow consistent with previous reports.

Regulation, Rent-Seeking, Lawyers, Physicians, Numerical Comparative Law

Abstract:
In this paper, we take an organizational view of organized crime. In particular, we study the organizational consequences of product illegality attending at the following characteristics: (i) contracts are not enforceable in court, (ii) all participants are subject to the risk of being punished, (iii) employees present a major threat to the entrepreneur having the most detailed knowledge concerning participation, (iv) separation between ownership and management is difficult because record-keeping and auditing augments criminal evidence.

Abstract:
This paper develops an economic analysis of penalty enhancements for bias-motivated (or "hate") crimes. Our model allows potential offenders' benefits from a crime to depend on the victim's group identity, and assumes that potential victims have the opportunity to undertake socially costly victimization avoidance activities. We derive the result that a pattern of crimes disproportionately targeting an identifiable group leads to greater social harm (even when the harm to an individual victim from a bias-motivated crime is identical to that from an equivalent non-hate crime). In addition, we consider a number of other issues related to hate crime laws.

Law enforcement, hate crimes, penalty enhancement

Abstract:
The issue of bias-motivated crimes (also known as hate crimes) has attracted considerable attention in recent years. This paper provides an economic framework in which to analyze penalty enhancements for hate crimes. It extends the standard model by introducing two different groups of potential victims of crime; potential offenders' benefits from a crime depend on the group to which the victim belongs. The conditions under which penalty enhancements are socially optimal are derived. Choosing sanctions from behind a Rawlsian "veil of ignorance" concerning group identity does not alter these conditions. However, the (partial) exclusion of bias-motivated illegal gains from social welfare makes penalty enhancements more attractive. This conclusion also follows from the incorporation of fairness considerations that entail a social loss from different groups facing different probabilities of victimization. The paper endogenizes this social loss using a model in which victims can engage in socially costly avoidance activities that displace crime.

Law enforcement, hate crimes

Abstract:
Though clearly distinct in nature and procedure, both Regulatory Agencies and Courts frequently rely on similar instruments to sanction the same or very similar kinds of illegal behavior. In this paper, we develop a theory of the use of criminal sanctions in addition to regulatory penalties. We show that it is generally more effective to have a penalty imposed by a Regulatory Agency rather than by the Courts. We extend our analysis by considering imprisonment sentences, legal error, and collusion between a Regulatory Agency and an offender. The objective of the paper, though, is not limited to the determination of the theoretical conditions that can make the use of both sanctioning schemes optimal. Our analysis is also relevant to the application of a specific legal doctrine, the Double Jeopardy clause.

Abstract:
Corporate criminal liability puts a serious challenge to the economic theory of enforcement. Are corporate crimes different from other crimes? Are these crimes best deterred by punishing individuals, punishing corporations, or both? What is optimal structure of sanctions? Should corporate liability be criminal or civil? This paper has two major contributions to the literature. First, it provides a common analytical framework to most results presented and largely discussed in the field. In second place, by making use of the framework, we provide new insights into how corporations should be punished for the offenses committed by their employees.

Abstract:
This paper shows that the least cost avoider approach in tort is not necessarily the optimal way to attain least cost avoidance when accidents can be avoided by either of two parties. When parties do not observe each other's costs of care at the time of the accident and are unable to determine which party is the least cost avoider, they fail to anticipate the outcome of the adjudication. Under these circumstances, accident avoidance becomes a commons problem because care by each individual party reduces the prospect of liability for both parties. As a result parties suboptimally invest in care. We show that regulation removes this problem and is superior to tort liability both when parties act simultaneously and when they act sequentially. We further examine how different liability rules perform in this respect.

tort, fine, precaution cost liability, last clear chance, least cost avoider

Abstract:
In this paper we test to what extent the Kelsenian-type of constitutional judges are independent from political parties by studying of the Portuguese Constitutional Court. The results yield three main conclusions. First, constitutional judges in Portugal are quite sensitive to their political affiliations and their political party's presence in government when voting. Second, peer pressure is very relevant. Third, the 1997 reform that was enacted to increase judicial independence has had no robust statistically significant effect.

constitutional courts, judges, Portugal, empirical legal studies

Abstract:
In this paper we analyze sanctioning policies in international law. We develop a model of international military conflict where the conflicting countries can be a target of international sanctions. These sanctions constitute an equilibrium outcome of an international political market for sanctions, where different countries trade political influence. We show that the level of sanctions in equilibrium is strictly positive but limited, in the sense that higher sanctions would exacerbate the military conflict, not reduce it. We then propose an alternative interpretation to the perceived lack of effectiveness of international sanctions, by showing that the problem might not be one of undersanctioning but of oversanctioning.

Conflict Management, International Sanctions, Arms Embargo, International Political Market, Pressure Groups

Abstract:
I consider a general specification of criminals' objective function and argue that, when the general non-expected utility theory is substituted for the traditional expected utility theory, the high-fine-low-probability result (Becker, 1968) only holds under specific and strong restrictions.

Abstract:
This Article uses comparative evidence to inform the ongoing debate about the selection and discipline of judges. In recent decades, many countries around the world have created judicial councils, institutions designed to maintain an appropriate balance between judicial independence and accountability. Our Article has two aims. First, we provide a theory of the formation of judicial councils and identify some of the dimensions along which they differ. Second, we test the extent to which different designs of judicial council affect judicial quality. We find that there is little relationship between councils and quality. We also offer a positive explanation for why judicial councils nevertheless remain attractive institutions.

judicial independence, rule of law

Abstract:
In this paper, we focus on the problem created by asymmetric information about the enforcer's (agent's) costs associated to enforcement expenditure. This adverse selection problem affects optimal law enforcement because a low cost enforcer may conceal its information by imitating a high cost enforcer, and must then be given a compensation to be induced to reveal its true costs. The government faces a trade-off between minimizing the enforcer's compensation and maximizing the net surplus of harmful acts. As a consequence, the probability of apprehension and punishment is usually reduced leading to more offenses being committed.

We show that asymmetry of information does not affect law enforcement as long as raising public funds is costless. The consideration of costly raising of public funds permits to establish the positive correlation between asymmetry of information between government and enforcers and the crime rate.

Abstract:
The earliest economic theory of discrimination proposed the subsequently neglected idea of a "vicious circle" of discrimination (Myrdal,1944). We draw on psychological evidence (that people derive utility from believing that the world is just) to propose a behavioral economic model in which the vicious circle envisaged by Myrdal can arise. We demonstrate the power of this approach through an application to the issue of whether and how to justify penalty enhancements for hate crimes against members of disfavored groups. The crucial assumption is that individuals engage in biased inference in order to preserve their Belief in a Just World, thus attributing the disproportionate victimization of a group to that group's negative characteristics, rather than to the hate-motivated preferences of offenders. In a simple two-period setting, we show that disproportionate victimization of the disfavored group in the first period can lead to additional crime against that group in the second period. The reason is that potential offenders' inferences about the victimized group's characteristics become more negative as a consequence of disproportionate victimization, raising the net benefits of crime against that group (under the assumption that the benefits of crime depend partly on the victimized group's perceived characteristics). Our main result is that penalty enhancements can reduce the social harm due to these extra crimes.

Hate crimes, behavioral economics

Abstract:
In this paper, we study the contribution of divorce law reforms for the evolution of divorce rates in Portugal over the last forty years. We focus on the reforms of divorce law in the 70s and in the 90s as well as socioeconomic factors as determinants of the divorce rate. We find that the introduction of a modern divorce law in the 70s had a significant effect on the divorce rate, but not the changes of the 90s that effectively implemented a generalized no-fault regime. Our observations suggest that the reforms in the 1990s were more the response of the legislator to growing divorce rates rather than the cause.

Marriage, Divorce, Time-Series, Law Reform

Abstract:
In this paper, we argue that social decisionmaking is subject to a fundamental conflict between consistency and completeness. We show that a consistent welfarist method of policy assessment, that is, one that never violates the Pareto principle, may be incomplete in the sense of being incapable of providing a solution to important social welfare problems.

Individualistic social welfare, Interdependent preferences

Abstract:
In this paper we analyze the relationship between strictness of employment protection and efficiency of bankruptcy law. We argue that country's legal tradition provides the appropriate institutional proxy to explain the nature of such relationship. We find that for civil law countries where bankruptcy procedures are more inefficient a stricter employment protection policy is enforced. For common law countries no relationship between employment protection and bankruptcy law is obtained. These results support the thesis that inefficiencies in bankruptcy law help employment protection policies for interventionist governments. They are also consistent with normative theories of bankruptcy for common law countries.

bankruptcy law, employment protection, legal origin

Abstract:
Under contingent fees, the attorney gets a share of the judgement; under conditional fees, the lawyer gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a principal-agent framework where the lawyer chooses unobservable effort after they have observed the amount at stake. Contingent fees provide better incentives than conditional fees independently of whether upfront payments are restricted to be non-negative or not. Under contingent fees, the attorney uses their information about what is at stake more efficiently.

Contingent fees, conditional fees, moral hazard, incentives

Abstract:
Under contingent fees the attorney gets a share of the judgment; under conditional fees the lawyer gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a principal-agent framework where the lawyer chooses unobservable effort after she has observed the amount at stake. Contingent fees provide better incentives than conditional fees independently of whether upfront payments are restricted to be non-negative or not. Under contingent fees the attorney uses her information about what is at stake more efficiently.

Contingent fees, conditional fees, moral hazard, incentives

Abstract:
The economic literature on crime and punishment focuses on the trade-off between probability and severity of punishment, and suggests that detection probability and fines are substitutes. In this paper it is shown that, in presence of substantial underdeterrence caused by costly detection and punishment, these instruments may become complements. When offenders are poor, the deterrent value of monetary sanctions is low. Thus, the government does not invest a lot in detection. If offenders are rich, however, the deterrent value of monetary sanctions is high, so it is more profitable to prosecute them.

Crime, Probability and Severity of Sanctions, Law Enforcement

Abstract:
This paper considers why some harm-generating activities are controlled by criminal law and criminal sanctions while others are subject to some other mechanism such as civil law, administrative law, regulation or the tax system. It looks at the question from the perspective of the law and economics approach. We seek to identify the comparative benefits of using the criminal law relative to other enforcement mechanisms and more broadly why certain specific behaviours are criminalized. The paper argues that an economic approach emphasizing the relative merits of alternative legal instruments for bringing about harm reduction can provide an explanation for a number of recent legal developments. It argues also that the willingness of legislators to combine the use of sanctions traditionally used in one area of the law with sanctions from other areas is more readily explicable in economic terms than in other terms.

Abstract:
This paper considers why some harm-generating activities are controlled by criminal law and criminal sanctions while others are subject to some other mechanism such as civil law, administrative law, regulation or the tax system. It looks at the question from the perspective of the law and economics approach. We seek to identify the comparative benefits of using the criminal law relative to other enforcement mechanisms and - more broadly - why certain specific behaviours are criminalized. The paper argues that an economic approach emphasizing the relative merits of alternative legal instruments for bringing about harm reduction can provide an explanation for a number of recent legal developments. It argues also that the willingness of legislators to combine the use of sanctions traditionally used in one area of the law with sanctions from other areas is more readily explicable in economic terms than in other terms.

criminal law, criminalization, mens rea, harm principle, ultima ratio

Abstract:
Large law firms seem to prefer hourly fees over contingent fees. This article provides a moral hazard explanation for this pattern of behavior. Contingent legal fees tend to align the interests of the attorney with those of the client but not necessarily with those of the partnership. We show that the choice of hourly fees is a solution to a common agency problem. The article also discusses other possible explanations. (JEL J4, K1, K2, K4)

Abstract:
Large law firms seem to prefer hourly fees over contingent fees. This paper provides a moral hazard explanation for this pattern of behavior. Contingent legal fees align the interests of the attorney with those of the client, but not necessarily with those of the partnership. We show that the choice of hourly fees is a solution to an agency problem with multiple principals, where the interests of one principal (law firm)collide with the interests of the other principal (client).

Law firms, legal fees, moral hazard, risk-sharing

Abstract:
We incorporate the process of enforcement learning by assuming that the agency's current marginal cost is a decreasing function of its past experience of detecting and convicting. The agency accumulates data and information (on criminals, on opportunities of crime) enhancing the ability to apprehend in the future at a lower marginal cost. We focus on the impact of enforcement learning on optimal stationary compliance rules. In particular, we show that the optimal stationary fine could be less-than-maximal and the optimal stationary probability of detection could be higher-than-otherwise.

Abstract:
We provide an interpretation based on consistent beliefs for the widely accepted observation that a criminal conviction generates more stigma than an administrative penalty. We also show that maximal fines are not coherent with this interpretation.

Consistent beliefs, stigma, administrative law, criminal law

Abstract:
Mandatory disclosure of evidence and double jeopardy are considered to be among the most important bulwarks against prosecutorial misconducts. While protecting the generality of defendants in the criminal process, we show that under certain reasonable assumptions, these procedural mechanisms hurt innocent defendants by inducing prosecutors to adjust their behavior and thus triggering adverse practices.

Double jeopardy, evidence, prosecutor, defendant, criminal procedure

Abstract:
In recent decades, many countries around the world have institutionalized judicial councils, institutions designed to enhance judicial independence and accountability. Our paper, the first comparative inquiry into this phenomenon, has two aims. First, we provide an economic theory of the formation of judicial councils and identify some of the dimensions along which they differ. Second, we discuss the national experience of several legal systems in light of our theory.

Abstract:
The felony murder rule would appear to be an anomaly in the common law. It represents one of the very few instances in criminal law where the element of intent is waived. Criticism of the rule is almost uniform among scholars and commentators, yet it endures in most jurisdictions throughout the United States. Typically, critics assert the rule's longevity is the result of political forces that make it difficult to change laws that make criminal prosecutions easier. Others claim the rule fills some psychological need to mete out retribution when harm occurs to innocent parties. If a justification for the rule is offered, it generally focuses on the deterrence properties of the rule, however empirical research suggests the rule does little to deter felonies or felony murders. We offer a model in which the felony murder rule serves to deter crimes against relatively weak victims, who would otherwise be more attractive targets of crime in the absence of the rule. This model predicts only a relatively modest decrease in felonies, as perpetrators substitute away from relatively weak victims toward less vulnerable victims.

crime, deterrence, equal protection, homicide

Abstract:
This article analyzes private law enforcement in an environment with corruption. The effect of corruption is studied both under the assumption of monopolistic enforcement by a single private enforcement agency and under the assumption of competitive enforcement by many private enforcers. In addition, the model takes into account the different objectives of a benevolent, social welfare-maximizing group and a self-interested, rent-seeking group, as well as the possibility of a government divided between welfare-maximizing and rent-seeking groups. Among the central results of the paper are (1) corruption is especially problematic under monopolistic enforcement, (2) when governmental decision making is divided, a rent-seeking group which is unable to control the level of fines and rewards usually prefers monopolistic to competitive enforcement. The article demonstrates the plausibility and relevance of the model by examining corruption and private law enforcement in pre-modern England.

Abstract:
In Roman law, manifest theft (essentially, the one in which a thief was caught in the act)was punished with a more severe penalty than non-manifest theft. This legal policy seems to contradict the economic theory of efficient deterrence. In this paper, we try to explore how economic analysis of criminal law and law enforcement points out at several efficiency-based arguments to understand the puzzle, and allows us to tentatively conclude that technological changes in law enforcement in the broad sense might have been the major factor in the disappearance of the rule in modern legal systems.

Economics of Law Enforcement, Roman Law, Manifest Theft, Non-Manifest Theft

Abstract:
This paper makes several contributions to the growing literature on the economics of religion. First, we explicitly introduce spatial-location models into the economics of religion. Second, we offer a new explanation for the observed tendency of state (monopoly) churches to locate toward the "low-tension" end of the "strictness continuum" (in a one-dimensional product space): This result is obtained through the conjunction of "benevolent preferences" (denominations care about the aggregate utility of members) and asymmetric costs of going to a more or less strict church than one prefers. We also derive implications regarding the relationship between religious strictness and membership. The driving forces of our analysis, religious market interactions and asymmetric costs of membership, high-light new explanations for some well-established stylized facts. The analysis opens the way to new empirical tests, aimed at confronting the implications of our model against more traditional explanations.

Location theory, economics of religion

Abstract:
This paper makes several contributions to the growing literature on the economics of religion. First, we explicitly introduce spatial-location models into the economics of religion. Second, we offer a new explanation for the observed tendency of state (monopoly) churches to locate toward the "low-tension" end of the "strictness continuum" (in a one-dimensional product space): This result is obtained through the conjunction of "benevolent preferences" (denominations care about the aggregate utility of members) and asymmetric costs of going to a more or less strict church than one prefers. We also derive implications regarding the relationship between religious strictness and membership. The driving forces of our analysis, religious market interactions and asymmetric costs of membership, high-light new explanations for some well-established stylized facts. The analysis opens the way to new empirical tests, aimed at confronting the implications of our model against more traditional explanations.

Location theory, economics of religion

Abstract:
This paper analyzes the influence of political and institutional factors on the enactment of sentencing guidelines and truth-in-sentencing legislation by US states. First, we develop a model of strategic interaction among the judiciary, parole boards and state legislators, to analyze the consequences of these laws for the relative bargaining power of the actors. The model predicts that the enactment of these laws is more likely the greater the divergence in preferences between the legislature and the other actors. We test this hypothesis using a semiparametric proportional hazard model. Consistent with our hypothesis, the enactment of both of these types of legislation is more likely in states that have had a longer history of divided government (in particular, with Republican governors and Democratic legislatures; however, divided government with Democratic governors does not have a significant effect). These results indicate that either conservative judges and parole boards are less likely to oppose these laws, or that legislatures are more interested in constraining conservative judges and parole boards. Our results also suggest that legislatures are more likely to constrain the judiciary by enacting sentencing guidelines when the guidelines will have a substantial influence on incarceration lengths because discretionary parole has either been abolished or restricted. Truth-in-sentencing laws, which severely limit early release from prison, are also more likely to be passed when states have already abolished discretionary parole.

criminal law, judges, sentencing guidelines

Abstract:
This paper develops an economic analysis of enforcement technology choice and privacy rights. We provide an efficiency explanation for the Human Rights Act 1998 adopted by the UK. Our model suggests that an enforcement technology with privacy rights generates more offences (deterrence is diluted) and exhibits a reduced quality of convictions (in terms of false negatives and false positives), but could be welfare enhancing if the individual cost of being investigated is reasonably high. We also show that the choice of enforcement technology is related to the level of harm caused by crime, and it is likely that an enforcement technology with privacy rights will be welfare diminishing for extremely harmful crimes.

Law enforcement, privacy rules, ECHR, Human Rights Act 1998

Abstract:
This article modifies a standard model of law enforcement to allow for learning by doing. We incorporate the process of enforcement learning by assuming that the agency's current marginal cost is a decreasing function of its past experience of detecting and convicting. The agency accumulates data and information (on criminals, on opportunities of crime), enhancing the ability of future apprehension at a lower marginal cost. We focus on the impact of enforcement learning on optimal compliance rules. In particular, we show that the optimal fine could be less than maximal and the optimal probability of detection could be higher than otherwise. It is also suggested that the optimal imprisonment sentence could be higher than otherwise.

Abstract:
This article modifies a standard model of law enforcement to allow for learning by doing. We incorporate the process of enforcement learning by assuming that the agency's current marginal cost is a decreasing function of its past experience of detecting and convicting. The agency accumulates data and information (on criminals, on opportunities of crime), enhancing the ability of future apprehension at a lower marginal cost. We focus on the impact of enforcement learning on optimal compliance rules. In particular, we show that the optimal fine could be less than maximal and the optimal probability of detection could be higher than otherwise. It is also suggested that the optimal imprisonment sentence could be higher than otherwise.

fine, probability of detection and punishment, learning

Abstract:
We consider the role of asymmetric information on the emergence of collusion between criminals and enforcers, in the framework proposed by Bowles and Garoupa (1997) and Polinsky and Shavell (2001). Our Paper proposes that the optimal criminal sanction for the underlying offense is not necessarily maximal. We achieve this result by coupling the criminal sanction for the underlying offense with a criminal sanction for corruption, both imposed on offenders. A higher criminal sanction for the underlying offense implies that the government must spend more resources to detect and punish corruption (since the likelihood of collusion increases). Thus, the government could reduce this sanction, save on detection, and increase the criminal sanction for corruption (in order to offset the negative effect on deterrence).

Fine, probability of detection and punishment, corruption, information

Abstract:
In this Paper, we provide a strategic explanation for the spontaneous convergence of legal rules, which nevertheless falls short of harmonization across jurisdictions. We identify a free-riding problem and discuss its implications for legal culture, integration, and harmonization. It is argued that harmonization of legal rules by a central authority in order to generate a uniform legal culture could be the response to a coordination failure. It could also be a serious policy mistake, however, leaving everybody worse off. The result depends crucially on the relative benefits and costs of importing and integrating different legal orders.

Legal transplant, game theory, harmonization

Abstract:
Legislation enabling courts to confiscate or remove illegal gain has grown rapidly across a wide range of countries within both civil and common law systems. We review these developments from an economic perspective and show that there are certain types of offence for which the removal of illegal gain may provide a valuable complement to more traditional sanctions such as fines. Offences committed sequentially in small units and where the `victims` are unaware of offences as they are being committed may be very difficult (and costly) to detect. The probability of the offender being detected and convicted are correspondingly very low and the costs of getting convictions thus become very high. With a very low probability of detection efficient deterrence can be achieved only with extremely high fines. Some legislatures have preferred to give courts powers to remove illegal gain as an alternative means of increasing deterrence. We argue that the fact that these powers have most often been developed for offences such as environmental crime and drug trafficking lends support to our contention that more traditional sanctions have failed most conspicuously in areas of crime which tend to be repeated and `victimless`.

Abstract:
This paper introduces spatial-location models into the economics of religion. We offer a new explanation for the observed tendency of state (monopoly) churches to locate toward the 'low-tension' end of the 'strictness continuum'; obtained through the conjunction of 'benevolent preferences' (denominations care about the aggregate utility of members) and asymmetric costs of going to a more or less strict church than one prefers. We derive implications regarding the relationship between religious strictness and membership. Religious market interactions and asymmetric costs of membership, highlight new explanations for some well-established stylised facts, opening the way to new empirical comparisons with more traditional explanations.

Abstract:
In an influential paper Polinsky and Che (1991) propose that litigation can be made a more cost effective tool for setting primary activity incentives (e.g., for product safety or promissory performance) by reducing plaintiffs' recovery while simultaneously raising defendants' damages. "Decoupling" in this manner reduces the number of filed suits, but increases the deterrent impact of each. Litigation costs fall, but, if damages are raised sufficiently, deterrence is maintained. Yet when the state takes from liable defendants more than it gives to victorious plaintiffs it effectively taxes (probabilistically and collectively) the transaction that led to the present litigation. This tax drives a wedge between the expected social and private benefits of participating in the transaction in the first place. The result is that socially beneficial transactions fail to take place. In this paper we explore the impact of this transactions-discouraging effect on the propriety of decoupling.

decoupling, contracts, torts, private versus social surplus

Abstract:
This paper extends the economic model of litigation under the English rule for allocation of costs by considering payments upfront. Implications are derived for current legal reforms in Portugal.

litigation, loser-pays rules, payments upfront

Abstract:
In this article we explore the incentive properties of academic tenure relative to alternatives that might be substitutes for tenure, in particular contractual damages. We emphasize the role of tenure in providing an incentive for incumbent faculty to reveal the characteristics of recruits and to maintain their own performance posttenure. Our results suggest that tenure is just one of many mechanisms potentially able to achieve honest revelation. (JEL I2, K0, L2)

Abstract:
The economic literature on enforcement is generally pessimistic concerning the use of legal aid. In this Paper, we show that legal aid can be part of optimal law enforcement. The rationale behind our result is that with legal aid, in a system with legal or judicial error, both guilty and innocent individuals are better off because the marginal cost of defense expenditure is reduced. If, on average, legal aid helps the innocent more than the guilty a government seeking to maximize social welfare will want to use it in order to increase deterrence.

Sanction, self-reporting, legal aid

Abstract:
The harm caused by many acts is not certain but probabilistic. Current public enforcement of the law combines harm-based sanctions (usually in criminal law) with act-based sanctions (very common in administrative law and regulation). We propose an economic theory of the choice between harm-based and act-based sanctions in public enforcement. The efficiency of act-based versus harm-based sanctions is analyzed and a typology of the determinants is drawn up. In the simple model with risk neutral offenders, both legal policies have the same deterrent level, but act-based sanctions end up punishing more people and the sanctions are lower. However when the assessment of the probability of harm diverges across individuals, the choice between harm-based or act-based sanctions depends on whether it is the enforcer or the average individual who is better informed. Legal policy implications are discussed.

Harm-based sanction, act-based sanction, uncertain harm

Abstract:
Specialized courts have become a key component of the legal reform packages implemented in civil law countries, particularly, in the area of family law. One argument for this policy is that they are able to reach a decision faster than the regular courts, which are normally congested. We use data from a survey of Spanish family courts in the region of Madrid to test this claim. After controlling for other relevant variables, the econometric results did not provide strong support for specialized courts.

Abstract:
The economic literature on enforcement is generally pessimistic concerning the use of legal aid. In this paper we show that legal aid can be a part of optimal law enforcement. The rationale behind our result is that with legal aid, in a system with legal or judicial error both guilty and innocent individuals are better off, because the marginal cost of defence expenditure is reduced. If, on average, legal aid helps the innocent more than the guilty, a government seeking to maximize social welfare will want to use it in order to increase deterrence.

Abstract:
We consider the distortions that corruption generates in law enforcement. Corruption dilutes deterrence, and hence the government needs to adjust law enforcement activities appropriately. We argue that this distortion is not the only one taking place. A misalignment of goals between the government and the enforcers results in another set of agency costs by which activities that put enforcers in direct contact with criminals increase at the cost of other law enforcement activities. The paper discusses the implications of both distortions.

corruption, fine, enforcer

Abstract:
This article shows that the least-cost avoider approach in tort is not necessarily the optimal way to attain least-cost avoidance when accidents can be avoided by either of two parties. When parties do not observe each other's costs of care at the time of the accident and are unable to determine which party is the least-cost avoider, they fail to anticipate the outcome of the adjudication. Under these circumstances, accident avoidance becomes a commons problem because care by each individual party reduces the prospect of liability for both parties. As a result, parties suboptimally invest in care. We show that regulation removes this problem and is superior to tort liability both when parties act simultaneously and when they act sequentially. We further examine how different liability rules perform in this respect. (JEL K13, K32)

Abstract:
In this paper we provide a strategic explanation for the spontaneous convergence of legal rules but which nevertheless, in many instances, falls short of unification across jurisdictions. We identify a free-riding problem and discuss its implications for legal integration. We argue that countries hesitate to adapt their laws to those of another jurisdiction because they hope to free ride on efforts towards convergence. Unification (by transplant) and harmonization (by convention) of legal rules emerge as an obvious corrective intervention to a coordination failure, thus solving the free-riding problem. However, it could also be a serious policy mistake either because convergence is absent due to very high costs of importing and adjustment or due to agency costs.

Legal transplant, game theory, convergence, harmonization, unification, agency costs

Abstract:
In this paper, we develop a general equilibrium model of crime and show that law enforcement has different roles depending on the equilibrium characterization and the value of social norms. When an economy has a unique stable equilibrium where a fraction of the population is productive and the remaining predates, the government can choose an optimal law enforcement policy to maximize a welfare function evaluated at that steady state. If such steady state is not unique, law enforcement is still relevant but in a completely different way because the steady state that prevails depends on the initial proportions of productive and predator individuals in the economy. The relative importance of these proportions can be changed through law enforcement policy.

Abstract:
This paper extends the optimal law enforcement literature to organized crime. We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents. In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.