Economic Theory of Public Enforcement of Law

Competition Policy and Antitrust

Article Snapshot


A. Mitchell Polinsky and Steven M. Shavell


Journal of Economic Literature, Vol. 38, pp. 45-77, 2000


This article surveys many issues relating to public sector law enforcement.

Policy Relevance

In some areas such as parking fines and fines for corporate safety violations, making penalties more severe would increase deterrence without raising enforcement costs.

Main Points

  • Public enforcement of law includes using police, prosecutors, tax auditors, and other public agents to find and punish law-breakers. This makes sense when it is hard for private individuals to find wrongdoers.

  • One key issue is whether someone who injures others should pay a penalty only if it is his fault. Figuring out fault can be costly, but strict liability rules enforced regardless of fault entail more costly enforcement activity. 

  • Other issues include the costs of wrongful convictions and acquittals and whether firms are treated like individuals. 

  • Strict liability rules make people pay for any harm they do even if it not their fault. People think about harm before they act (e.g. by driving more) and are likely to do less harm overall. If one pays only when one is at fault, one is likely to do more harm because one will not have to pay every time.

  • Safety laws that do not impose strict liability can allow too much dangerous activity.

  • Sometimes it is best to have low fines and a high probability of being caught. But raising the probability of being caught can be costly.

  • Many criminal laws set penalties far higher than the harm the illegal act does, to provide deterrence when the probability of being caught is low.

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