Hyperbolic Criminals and Repeated Time-Inconsistent Misconduct

Abstract

This Article examines the effect of time-inconsistent preferences on the decision-making process of criminal offenders. It shows that even a relatively small preference for immediate gratification and over-optimism about their future self-control can lead hyperbolic criminals to repeatedly commit welfare-reducing crimes - i.e., those that (from a detached, long-term perspective) have negative expected returns. The Article makes four principal contributions. First, it develops a theory of repeated criminal misconduct that incorporates the findings of the growing behavioral economics literature on hyperbolic discounting and self-control problems. Second, it identifies various deterrence implications of the theory, showing, among other things, that the optimal sanctions of standard (or neoclassical) law & economics models will under-deter hyperbolic offenders. Third, it explains a number of well-known empirical puzzles of neoclassical theory, including why policymakers punish repeat offenders more harshly and spend more on enforcement than the theory predicts, as well as why, in some areas, such as tax compliance, people routinely forego committing crimes with positive expected returns. Fourth, the Article describes various implications of the time-inconsistent misconduct theory for the law of conspiracies, entrapment, and domestic violence.

Keywords: optimal deterrence, criminal law, recidivism, time-inconsistent preferences

JEL Classification: K14, K42, D99