The Paradox of Expected Punishment: Legal and Economic Factors Determining Success and Failure in the Fight Against Organized Crime
Review of Law and Economics, Forthcoming
28 Pages Posted: 17 Apr 2008 Last revised: 21 Jul 2008
Date Written: 2008
The legal and economic analysis presented here empirically tests the theoretical framework advanced by Buscaglia (1997) and by Kugler, Verdier, and Zenou (2003). This paper goes beyond the prior literature by focusing on the empirical assessment of the actual implementation of the institutional deterrence and prevention mechanisms contained in the United Nations' Convention against Transnational Organized Crime (Palermo Convention). A sample of 107 countries that have already signed and/or ratified the Convention was selected. The paper verifies that the most effective implemented measures against organized crime are mainly founded on four pillars: (i) the introduction of more effective judicial decision-making control systems causing reductions in the frequencies of abuses of procedural and substantive discretion; (ii) higher frequencies of successful judicial convictions based on evidentiary material provided by financial intelligence systems aimed at the systematic civil/criminal forfeitures and confiscations of assets in the hands of criminal groups and/or under the control of "licit" businesses linked to organized crime; (iii) the attack against high level public sector corruption linked to organized crime (that is aimed at capturing and feudalizing the States) and (iv) the operational presence of government and/or non-governmental preventive programs (funded by the private sector and/or governments and/or international organizations) addressing technical assistance to the private sector, educational opportunities, job training programs and/or rehabilitation (health and/or behavioral) of youth linked to organized crime in high-risk areas (with highcrime, high unemployment, and high poverty).
An empirical jurimetrics model is for the first time developed for the above four anti-crime policy domains in order to assess the legal implementation of organized crime laws. In this context, the empirical results suggest that high-impact prosecutions and effective convictions against criminal organizations are less driven by incarceration of physical persons and more focused on disrupting the production function of criminal groups through asset forfeitures that reduce the amounts of net worth aimed at expanding public corruption rings in order to feudalize States. At the same time, preventive policies aimed at diminishing the flow of youth into criminal activities will also tend to disrupt the street-based operational capacities of organized crime.
Accordingly, a paradox of criminal dissuasion emerges that requires the adjustment of Becker's (1968) framework when applied to organized crime. As a result of the jurimetrics-based analysis presented in this study, just relying on traditional legal sanctions to counteract organized crime (e.g., increased incarceration and/or extradition of physical persons) will tend to create an incentive for criminal groups to expand their corruption rings and violent acts (in order to protect themselves from higher expected sanctions) thus increasing the feudalization of the state by criminal groups while enhancing their operational capacities. This unwanted result of applying traditional criminal sanctions will occur if the network of criminal assets (net worth in the hands of a network of licit and illicit businesses) is not hampered by intelligence and judicial authorities first. In the cases where criminal asset networks remain untouched, the 2001-2007 data in this paper show that criminal groups will simply react to higher expected punishments by re-assigning their relatively untouched financial resources to expanding their rings (scope and scale) of violence and of corruption to higher levels of the public sectors in order to protect themselves. As a result, organized crime and high level corruption grow even when the expected punishment aimed at the members of criminal enterprises is increasing at the same time. The jurimetrics-based results in 107 countries show that, in the absence of an active financial intelligence-based criminal/civil assets forfeiture program, high-level corruption grows rapidly while, paradoxically, public sectors continue to devote more criminal justice system resources to incarcerating increasing numbers of organized crime members. At the same time, empirical analysis shows that higher probabilities of sanctions combined with stiffer sentencing guidelines on the books against organized crime members do not play their dissuasive role in the absence of preventive programs to reduce the flow of youth to criminal groups. This constitutes the paradox of criminal sanctions where more frequent and stiffer punishments applied to physical persons lead to higher levels of organized crime and to higher levels of corruption. The deterioration of institutional performance against criminal enterprises in Afghanistan and Mexico and the recent 2001-2007 significant improvements experienced by Colombia and Jordan can be explained jointly by financial intelligence, judicial capacities, and preventive capabilities coordinated by public sectors and civil societies.
Keywords: organized crime, corruption, money laundering, financial intelligence unit, prosecution, judicial reform, criminal law, asset forfeiture, judicial error, feudalization of the state, state capture, jurimetrics
JEL Classification: C10, C35, C80, H41, K00, K14, K19, K10, K40, K49
Suggested Citation: Suggested Citation