Deterrence Theory: Key Findings and Challenges

Cambridge Handbook of Compliance, Forthcoming

Columbia Law and Economics Working Paper No. 610 (2019)

15 Pages Posted: 10 Oct 2019 Last revised: 6 Dec 2019

Date Written: October 7, 2019

Abstract

This Chapter prepared for the Cambridge Handbook of Compliance reviews the key findings of the optimal deterrence theory and discusses the remaining challenges. Some of these challenges reflect current modeling choices and limitations. These include the treatment of the offender’s gains in the social welfare function; the design of the damages multiplier in a realistic, multi-period framework; the effects of different types of uncertainty on behavior; and the study of optional, imperfectly-enforced, threshold-based regimes—that is, regimes that reflect the most common real-world regulatory setting. Other challenges arise because several key regulatory features and enforcement outcomes are inconsistent with the deterrence theory’s predictions and prescriptions. These inconsistencies include the “abnormally” high levels of compliance, the pervasiveness of gain-based (rather than harm-based) sanctions, the widespread use of offense history in sanctions design, the variation of sanctions based on legal aggressiveness, and the significance of the offender’s mental state in the determinations of both liability and sanctions. The Chapter discusses how the recent optimal deterrence scholarship has addressed—but has not fully resolved—all these challenges.

Keywords: deterrence, compliance, sanctions

JEL Classification: K14, K42

Suggested Citation

Raskolnikov, Alex, Deterrence Theory: Key Findings and Challenges (October 7, 2019). Cambridge Handbook of Compliance, Forthcoming; Columbia Law and Economics Working Paper No. 610 (2019). Available at SSRN: https://ssrn.com/abstract=3460204 or http://dx.doi.org/10.2139/ssrn.3460204

Alex Raskolnikov (Contact Author)

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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