Bar Hill and Harel 2001

Crime Rates and Expected Sanctions: The Economics of Deterrence Revisited
Author(s): Oren Bar‐Gill and Alon Harel

Source: The Journal of Legal Studies, Vol. 30, No. 2 (June 2001), pp. 485-501
Published by: The University of Chicago Press for The University of Chicago Law School
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CRIME RATES AND EXPECTED SANCTIONS: THE
ECONOMICS OF DETERRENCE REVISITED
OREN BAR-GILL and ALON HAREL*
Abstract
A higher expected sanction lowers the crime rate. This intuitive cornerstone of deter-
rence theory has garnered extensive theoretical and empirical research. The present study
focuses on the opposite effects—the effects of the crime rate on the expected sanction.
It turns out that these effects are versatile and rich in both the direction and the magnitude
of their influence on the expected sanction. After analyzing these countereffects of the
crime rate on the expected sanction, we present a new model of deterrence that explicitly
incorporates the crime rate as one of the determinants of the expected sanction. The
adjusted model is then used to study the effects of the crime rate on deterrence and on
optimal law enforcement policy.
I. Introduction
A higher expected sanction lowers the crime rate. This intuitive corner-
stone of deterrence theory has garnered extensive theoretical and empirical
research. The present study focuses on the opposite effects—the effects of
the crime rate on the expected sanction. It turns out that these effects are
versatile and rich in both the direction and the magnitude of their influence
on the expected sanction. More important, the common disregard for these
effects in traditional models inevitably dictates inaccurate policy recom-
mendations.
The expected sanction is determined by the size of the sanction and by
the probability of apprehension and conviction (hereafter “the probability of
punishment”). Both components of the expected sanction are influenced by
the rate of crime. A higher crime rate may either increase or decrease the
probability of punishment, depending on the law enforcement technology
* The Eitan Berglas School of Economics, Tel-Aviv Unitersity, and John M. Olin Center for Law,
Economics, and Business, Harvard Law School; and Faculty of Law, the Hebrew University, Mt.
Scopus, Jerusalem. We would like to thank Lucian A. Bebchuk, Omri Ben-Shahar, Miriam Gur-
Arye, Louis Kaplow, Barak Medina, Gerard Lynch, Assaf Hamdani, Uriel Procaccia, and seminar
participants at Harvard Law School, the Hebrew University in Jerusalem, and Tel-Aviv University
for their many helpful comments. The standard disclaimer applies. Oren Bar-Gill gratefully ac-
knowledges the financial support offered by the John M. Olin Center for Law, Economics and
Business at Harvard Law School and by the Cegla Institute for Comparative and Private International
Law at Tel-Aviv University.
[Journal of Legal Studies, vol. XXX (June 2001)]

䉷 2001 by The University of Chicago. All rights reserved. 0047-2530/2001/3002-0008$01.50
485
486 the journal of legal studies
and the internal organization or modus operandi of the criminal community.

Similarly, a higher crime rate may either increase or decrease the magnitude
of the sanction, through its influence on the social sanction, which is a
component of the overall sanction.
The modern literature on the economics of law enforcement, initiated by
Gary Becker’s seminal 1968 article,1 has largely ignored the countereffects
of the crime rate on the expected sanction. While Becker himself did allow
for certain indirect effects of the crime rate in his model,2 most of the post-
Becker economic models of deterrence implicitly assume that the crime rate
has no effect on the expected sanction.3
A few exceptions to the common disregard for the countereffects of the
crime rate should be noted. First, several empirical studies of crime and law
enforcement have attempted to estimate the impact of the crime rate on the
probability of punishment.4 Yet these estimates were usually obtained as by-
products of the econometric methodology employed in the estimation of the
standard effect of the probability of punishment on the crime rate. A few
theoretical models that recognize the effects of the crime rate on the expected
sanction may also be found in the literature. However, these accounts suffer
from several important shortcomings. First and foremost, none of the existing
studies places the effects of the crime rate at the center of the analysis.
Second, the existing literature has failed to identify the full scope of the
phenomenon. Only a few specific effects of the crime rate have been studied,
and even these effects have usually been studied under extremely specific
assumptions. In particular, the existing studies focus on one effect of the
crime rate on the probability of punishment. The common assumption, known
as the “overload effect” or the “crowding effect,” stipulates that when the
crime rate is higher, fewer resources are devoted to solving each crime, thus
1
See Gary S. Becker, Crime and Punishment: An Economic Approach, 76 J. Pol. Econ. 169
(1968).
2
Becker assumed that a higher crime rate raises the cost of law enforcement, if a given probability
of detection is to be maintained. See id. at 175.
3
See, for example, Lucian Arye Bebchuk & Louis Kaplow, Optimal Sanctions When Individuals
Are Imperfectly Informed about the Probability of Apprehension, 21 J. Legal Stud. 365 (1992);
Louis Kaplow, The Optimal Probability and Magnitude of Fines for Acts That Definitely Are Un-
desirable, 12 Int’l Rev. L. & Econ. 3 (1992); Arun S. Malik, Avoidance, Screening and Optimum
Enforcement, 21 RAND J. Econ. 341 (1990); A. Mitchell Polinsky & Steven Shavell, The Optimal
Tradeoff between the Probability and Magnitude of Fines, 69 Am. Econ. Rev. 880 (1979); A. Mitchell
Polinsky & Steven Shavell, The Optimal Use of Fines and Imprisonment, 24 J. Pub. Econ. 89 (1984);
A. Mitchell Polinsky & Steven Shavell, Enforcement Costs and the Optimal Magnitude and Prob-
ability of Fines, 35 J. Law & Econ. 133 (1992); A. Mitchell Polinsky & Steven Shavell, The Economic
Theory of Public Enforcement of Law, 38 J. Econ. Literature 45 (2000); Steven Shavell, Specific
versus General Enforcement of Law, 99 J. Pol. Econ. 1088 (1991).
4
Prominent examples are Isaac Ehrlich, Participation in Illegitimate Activities: A Theoretical and
Empirical Investigation, 81 J. Pol. Econ. 521, 540–41, 557 (1973); and R. A. Carr-Hill & N. H.
Stern, Crime, the Police and Criminal Statistics, 61–63 (1979). Other early econometric studies are
summarized in David J. Pyle, The Economics of Crime and Law Enforcement, ch. 7 (1983).
expected sanctions 487
leading to a smaller probability of detection and conviction.5 But the crowding

effect is just one example of the versatile effects of the crime rate on the
expected sanction. As mentioned earlier, the effects of the crime rate on the
expected sanction may be divided into four categories: effects by which a
higher crime rate (1) lowers the probability of punishment, (2) raises the
probability of punishment, (3) lowers the magnitude of the sanction, and
(4) raises the magnitude of the sanction. By focusing almost exclusively on
the crowding effect, previous studies have ignored three out of the four
categories.6
The final shortcoming of the existing literature concerns law enforcement
policy. Most of the existing studies conduct a purely positive analysis. Only
a few derive policy implications, and these implications are inevitably specific
to the particular settings assumed in these studies.7 In short, the existing
models fail to draw the general and far-reaching policy implications that arise
when the effects of the crime rate are taken into account.8
The present study aims to correct these shortcomings and, thus, to impel
the discussion of the effects of the crime rate into the mainstream of the law
enforcement literature. Therefore, in Section II, we begin with a systematic
account of the versatile effects of the crime rate, in an attempt to highlight
the practical importance of these effects to the theory of deterrence. In Section
III, we adjust the traditional law enforcement framework to accommodate
the effects of the crime rate on the expected sanction. We then employ our
new framework to study the positive and normative ramifications of crime
5
Moreover, even within this particular effect of the crime rate, the existing models are usually
restricted to specific mechanisms through which this effect operates. Raaj Sah employs a dynamic
model of crime that is based on imperfect information regarding the probability of punishment and
on specific mechanisms of information dissemination. See Raaj K. Sah, Social Osmosis and Patterns
of Crime, 99 J. Pol. Econ. 1272 (1991). Scott Freeman and coauthors view the “crowding effect”
as the force that drives criminals from one neighborhood to the next. See Scott Freeman, Jeffrey
Grogger, & Jon Sonstelie, The Spatial Concentration of Crime, 40 J. Urban Econ. 216 (1996). Joel
Schrag and Suzanne Scotchmer assume that a higher crime rate induces more police mistakes, which
lead to an increased willingness to acquit by juries and, hence, to a lower probability of conviction.
See Joel Schrag & Suzanne Scotchmer, The Self-Reinforcing Nature of Crime, 17 Int’l Rev. L. &
Econ. 325 (1997).
6
There are a very few exceptions in the literature that discuss effects other than the crowding
effect. See Eric Rasmusen, Stigma and Self-Fulfilling Expectations of Criminality, 39 J. Law &
Econ. 519 (1996); Isaac Ehrlich & George D. Brower, On the Issue of Causality in the Economic
Model of Crime and Law Enforcement: Some Theoretical Considerations and Experimental Evidence,
77 Am. Econ. Rev. 99 (1987); Isaac Ehrlich, Crime, Punishment and the Market for Offenses, 10
J. Econ. Persp. 43 (1996). Yet there is not a single paper that attempts to systematically classify or
analyze these effects in a comprehensive manner.
7
For instance, Jens Chr Andvig & Karl Ove Moene, in their model of bureaucratic corruption,
consider a policy of raising the wages of the bureaucrats in the organization. See Jens Chr Andvig
& Karl Ove Moene, How Corruption May Corrupt, 13 J. Econ. Behav. & Org. 63, 75–76 (1990).
See also note 37 infra.
8
A recent survey that disregards the effects of the crime rate altogether, Polinsky & Shavell,
Economic Theory, supra note 3, serves as a clear testimony that the specific models mentioned
above have failed to influence the general understanding of the economics of law enforcement.
rates and their effects on the expected sanction. We demonstrate that the
deterrence effects of the standard policy variables, investment in law en-
forcement and the legal sanction, are not as predicted by traditional analysis,
and we explore how this finding affects optimal law enforcement policy. In
Section IV, we discuss the multiple-equilibria phenomenon, which naturally
arises when the effects of the crime rate are accounted for, and its main
policy implication—“enforcement campaigns.”
II. Crime Rates and Expected Sanctions

This section examines the ways in which the rate of crime influences the
expected sanction. As demonstrated below, these numerous diverse effects
may operate simultaneously, such that any particular conjecture as to their
overall direction or magnitude must be verified empirically.
A. The Crime Rate and the Probability of Punishment

1. The Probability of Punishment May Decrease as the Crime Rate In-
creases. This effect is based on empirical evidence9 as well as on a common
understanding of law enforcement technology. Within a constant budget, law
enforcement authorities are able to employ a constant number of police
officers, prosecutors, and judges, say, n1 police officers, n 2 prosecutors, and
n 3 judges. In a given time period, each police officer can catch a maximum
of X criminals,10 each prosecutor can prosecute a maximum of Y criminals,
and each judge can convict a maximum of Z criminals. Consequently, the law
enforcement system can punish no more than min{n1 7 X, n 2 7 Y, n 3 7 Z}, that
is, the minimum of the three values n1 7 X, n 2 7 Y, and n 3 7 Z, in a given time
period. Analogous considerations apply to nonhuman resources. For a given
number of police cars, interrogation facilities, courtrooms, and computerized
aids, only a limited number of cases may be pursued efficiently.11
Focusing on detection, one can distinguish between two types of inves-
tigative efforts: investigative efforts that impose a burden proportional to the
rate of crime and investigative efforts that impose constant burdens irre-
9
See Ehrlich, supra note 4, at 540–41, 557; and Alejandro Gaviria, Increasing Returns and the
Evolution of Violent Crime: The Case of Colombia, 61 J. Dev. Econ. 1, 7–11 (2000). Carr-Hill &
Stern, supra note 4, at 61–63, also reports results consistent with such an effect. Pyle, supra note
4, at 140, describes additional econometric studies that support this effect of the crime rate.
10
Carr-Hill & Stern, supra note 4, at 61–63. See also Freeman, Grogger, & Sonstelie, supra note
5, at 219.
11
The crowding effect on the resources of the law enforcement and criminal justice systems is
the most commonly studied effect of the crime rate. This effect was already noted by Becker, supra
note 1, at 175; and Ehrlich, supra note 4, at 540–41. Subsequent writings that have also focused
on this effect include Carr-Hill & Stern, supra note 4, at 6163; Freeman, Grogger, & Sonstelie,
supra note 5, at 219; Gaviria, supra note 9, at 7–11; Pyle, supra note 4, ch. 3; Sah, supra note 5,
at 1274–75; and Schrag & Scotchmer, supra note 5, at 327. The crowding effect was also mentioned
in Dan M. Kahan, Social Influence, Social Meaning, and Deterrence, 83 Va. L. Rev. 349, 357 (1997).
spective of the rate of crime.12 It is the former type of investigation that

presents a serious challenge for the classical model. If each violation imposes
a burden on the enforcement system, an increase in the frequency of crime
inevitably reduces the resources invested in the investigation of each crime.
Consequently, the probability of detection is bound to decrease. An analogous
phenomenon could probably be identified with respect to private citizens.
Individuals are willing to expend limited resources to help the police detect
criminals or to help courts convict them. For instance, individuals are gen-
erally willing to provide the police with testimonies or to serve as witnesses
in criminal proceedings, as long as the burden imposed on them is not too
great. If the resources that individuals are willing to invest in combating
crime are constant, an increase in the rate of crime will inevitably lead to a
reduction in the private resources invested in the detection and conviction
of each criminal.13 Consequently, a higher crime rate entails a lower prob-
ability of detection and conviction. The crime rate may also affect the level
of private efforts to fight crime. Citizens may decide whether to help the
police on the basis of their perceptions of the apprehension and conviction
rates—perceptions that, in turn, are influenced by the crime rate.14 In addition,
a decrease in the cooperation of private citizens may be brought about if a
higher crime rate (and a correspondingly smaller probability of punishment)
increases the risk of retaliation from criminals.15
Finally, it is perhaps worth noting that a larger criminal community usually
develops increasingly sophisticated criminal technologies. Criminals often
learn from the accumulated experiences of other criminals.16 These obser-
vations also suggest that a higher crime rate may cause the probability of
punishment to fall.
2. The Probability of Punishment May Increase as the Crime Rate In-
creases. Notwithstanding the plausibility of the previous effects, a careful
12
The following example illustrates the difference between the two types of investigative efforts.
Assume that the police can investigate tax violations using two detection technologies. Under the
first detection technology, the police investigate tax violations by sampling 10 percent of the files.
Hence, the probability that an offender is detected is 10 percent irrespective of the number of violators.
Under the second detection technology, the police use informers and investigate not a random sample
but a sample based on demonstrable suspicions. While the burden on the police, under the first
detection technology, is independent of the number of violators, under the second technology the
burden on the enforcement system increases as the number of violators increases. The distinction
between monitoring and investigation proposed by Dilip Mookherjee and I. P. L. Png is based on
a similar rationale. See Dilip Mookherjee & I. P. L. Png, Monitoring vis-à-vis Investigation in
Enforcement of Law, 82 Am. Econ. Rev. 556 (1992).
13
The constant-resources hypothesis is not always applicable. For example, if the crime rate rises
as criminals “discover” a new neighborhood, then presumably the higher crime rate will be accom-
panied by an increase in the private resources available for detection and conviction of criminals.
14
See Kahan, supra note 11, at 387.
15
We owe this point to Gerard Lynch.
16
Gaviria, supra note 9, at 12–14, suggests that learning and technological spillovers in the criminal
industry contributed to the recent escalation of violent crime in Colombia.
analysis exposes a variety of contexts in which the crime rate is more likely
to affect the probability of punishment in the opposite direction, that is, the
probability of punishment increases as the crime rate increases.17 There are
several reasons why an increase in the rate of crime may increase the prob-
ability of detection. First, criminals often operate in groups or gangs. When
criminality is organized in groups, police surveillance or interrogation of one
criminal may lead to the apprehension of other members of the same criminal
group.18 If this is the case, a higher rate of crime increases the number of
group members to whom a single criminal is likely to lead. Similarly, pros-
ecutorial and judicial efforts may become more efficient as the size of the
criminal groups increases (owing to an increase in the crime rate). This may
be the case, for example, when several group members are tried together (or
in connected trials) as accomplices or conspirators.19 In other words, law
enforcement technology may exhibit increasing returns to the scale of the
criminal activity.
Second, the investigation of a criminal with regard to one offense often
yields information concerning other crimes she has committed. The result is
that if an increase in the rate of crime is largely due to increased criminal
activity by repeat offenders, the probability of punishment may rise.20 There-
fore, in deciding to commit a crime, the criminal has to take into account
not merely the expected sanction for the particular crime she committed but
also the expected sanction for other crimes committed by her in the
past—crimes that will be resolved during her investigation. This effect may
also influence her decision to commit the first offense.
Third, specialized investigation techniques often exhibit increasing returns
to scale. For example, computer-based comparison of fingerprints becomes
more and more effective as the size of the fingerprint database increases.21
Fourth, it is often the case that a higher crime rate induces an increase in
17
The empirical evidence regarding the effects of the crime rate on the probability of punishment
is inconclusive. For example, Carr-Hill & Stern, supra note 4, at 227, reports results that may support
a positive correlation between the crime rate and the probability of punishment (the study also reports
results that may support a negative correlation; see note 9 supra).
18
This point was suggested to us by Uriel Procaccia.
19
For these “gang effects” to hold, it is also required that the rise in the rate of crime raises the
percentage of gang-related crimes (as opposed to crimes committed by criminals who are not affiliated
with gangs). This requirement may be satisfied, for example, if criminal groups are initially small
such that increasing returns to scale motivates an increase in the average number of gang members
(as the crime rate rises).
20
This point was suggested to us by Miriam Gur-Arye. See also David A. Dana,
Rethinking the Puzzle of Escalating Penalties for Repeat Offenders, 110 Yale L. J. 733, 742 et seq.
(2001), which suggests that the probability of apprehension is greater when the offender has a
criminal record.
21
This explanation is based on the plausible assumption that many criminals are repeat offenders.
Hence, a higher crime rate increases the probability that the fingerprints of the repeat offender are
already in the police database.
the investment in precaution exercised by potential victims.22 These precau-

tions may simply involve greater awareness, an increased attention to sus-
pects, and a greater willingness to report suspicious events to the police.
Alternatively, they may involve sophisticated technology designed to increase
the likelihood of detection or conviction of criminals, such as alarm systems,
tracking devices, or hidden cameras. In other cases, the increase in the rate
of crime may increase the willingness of victims of crime to cooperate with
the police and consequently raise the probability of detection. This happens
in cases in which the victims of crime are also victims of prejudice or of
hostility such as victims of rape or other sexual offenses. In those cases, an
increase in the rate of crime may induce them to report the crime and to
cooperate with the police. This explains why feminists invested immense
resources in exposing the great frequency of date rape.
Last, a higher crime rate increases the exposure of law enforcement officials
to criminal activity. This greater exposure leads to an accumulation of knowl-
edge and experience, which improves the effectiveness of the law enforce-
ment system. The increased efficiency of the police, the prosecution, and the
courts raises the probability of punishment.
B. The Crime Rate and the Magnitude of the Sanction

Traditional analysis generally presupposes that the size of the sanction is
independent of the crime rate. Yet treating the size of the sanction as an
exogenous variable is justified only as long as one ignores extralegal sanc-
tions23 or presupposes that the size of the extralegal sanctions is independent
of the crime rate. A more realistic approach has to concede that the overall
sanction is composed of both a legal sanction, which is determined by the
state, and extralegal sanctions. Moreover, while it may be justified to assume
that the legal sanction is independent of the rate of crime,24 the assumption
that the crime rate does not influence the extralegal sanctions cannot be
22
Compare to the assumption regarding victims’ responses to crime made by Ehrlich, supra note
6, at 48–49. See also Tomas J. Philipson & Richard A. Posner, The Economic Epidemiology of
Crime, 39 J. Law & Econ. 405 (1996); Wesley G. Skogan, On Attitudes and Behaviors, in Reactions
to Crime: Individual and Institutional Responses 19, 29–32 (Dan A. Lewis ed. 1981).
23
On the significance of extralegal sanctions see Polinsky & Shavell, Economic Theory, supra
note 3, at 73. See also S. Giora Shoham & Giora Rahav, The Mark of Cain: The Stigma Theory of
Crime and Social Deviance (2d ed. 1982). Empirical studies conducted by John Lott suggest that
extralegal sanctions may often be more significant than legal sanctions. See John R. Lott, Jr., An
Attempt at Measuring the Total Monetary Penalty from Drug Convictions: The Importance of an
Individual’s Reputation, 21 J. Legal Stud. 159 (1992); and John R. Lott, Jr., Do We Punish High
Income Criminals Too Heavily? 30 Econ. Inquiry 583 (1992).
24
Even the legal sanction may be influenced by the rate of crime. For example, a “crowding
effect” in prison facilities may force a decrease in the legal sanction. See Ehrlich, supra note 6, at
50 n.13. See also Steven D. Levitt, The Effect of Prison Population Size on Crime Rates: Evidence
from Prison Overcrowding Litigation, 111 Q. J. Econ. 319 (1996); and text accompanying note 29
infra.
sustained. In fact, there is a strong relation between the rate of crime and
the stigma or social sanction associated with the crime.
1. The Magnitude of the Sanction May Decrease as the Crime Rate In-
creases. The more frequent the crime, the lesser the stigma attached to
the crime. Jeremy Bentham referred to this effect as the syndrome of “rob-
beries without shame.”25 The result of this effect is that an increase in the
frequency of crime leads to a smaller overall sanction, even if the legal
sanction remains constant. If the offending behavior is very common (for
example, petty cheating, speeding, double parking, or smoking marijuana),
it is not perceived as contrary to social mores and hence generates less moral
outrage (and stigma). In a city like New York, where jaywalking is commonly
practiced, jaywalkers are not stigmatized at all. Meanwhile, on the West
Coast jaywalkers are frowned on as the enemies of the people and the rule
of law. Following a similar rationale, homosexuals like to emphasize the
prevalence of their preferences as a means to alleviate the moral outrage that
some straight persons associate with “deviance.” The proponents of “outing”
argue that demonstrating the prevalence of homosexuality weakens the stigma
attached to it.26
The Benthamite intuition can also find support in a simple cost-benefit
analysis. If the rate of crime is low, a law-abiding person has little to lose
if she refuses categorically to cooperate with criminals. Yet an increase in
the rate of crime inevitably raises the number of social and commercial
interactions that are lost as a consequence of adopting such an attitude. It is
likely therefore that as the rate of crime rises, the stigma associated with
crime will gradually be weakened. A related explanation involves the con-
jecture that extralegal sanctions suffer from diminishing returns regarding
successive crimes of a repeat offender. For example, a person might lose his
good name or business reputation after his first conviction, but he will have
little reputation left to lose after subsequent convictions. Therefore, if a higher
rate of crime is caused by the increased activity of repeat offenders, the
average total sanction will be smaller.27
Several studies in criminology and sociology employ “collective sociali-
zation” models, which support a negative effect of the crime rate on the
magnitude of the sanction. These models attempt to explain the increase in
25
In Bentham’s words, “where robberies are frequent, and unpunished, robberies are committed
without shame.” See Jeremy Bentham, An Introduction to the Principles of Morals and Legislation,
ch. XII, sec. I, par. X (1789). See also Gaviria, supra note 9, at 14–15; Kahan, supra note 11, at
357–58; Shoham & Rahav, supra note 23, at 14–15; Fred DuBow & David Emmons, The Community
Hypothesis, in Lewis ed., supra note 22, at 167 & 177.
26
Naturally, the social stigma is not determined by the prevalence of crime alone. It is the perceived
prevalence of crime that often weakens the social stigma associated with the crime. Yet it is not
implausible to presuppose some correlation between the perceived prevalence of crime and the actual
one.
27
See Dana, supra note 20. For another plausible effect, leading to a lower sanction as the crime
rate rises, see Rasmusen, supra note 6.
the rate of crime as a result of a change of values brought about by the initial
surge of crime in the community. Such a change of values allegedly erases
any prior stigma attached to illegal activity and even raises the social standing
of the criminal.28
Finally, let us return to the legal sanction itself. When the crime rate rises,
the delay prior to the implementation of the legal sanction rises as well. Such
a delay may result from the congestion of the criminal justice system. Fol-
lowing the standard assumption that people discount the future, the increased
delay caused by the increase in the crime rate lowers the present value of
the sanction.29 In addition, a higher crime rate increases the burden on pros-
ecutors (see Section IIA1). This increased burden may force prosecutors to
offer generous plea bargains with lower sanctions, compared with what can
be expected at trial.
2. The Magnitude of the Sanction May Increase as the Crime Rate In-
creases. Sometimes the increase in the rate of crime reinforces the social
sanction. A higher crime rate increases the number of individuals who have
been exposed to the crime and who thus strongly feel that an act of the type
committed against them is morally pernicious. An increase in the rate of
crime may raise public attention and strengthen the intensity of the societal
condemnation against the crime.30 If a particular crime is extremely rare, it
may not attract any particular social reaction and, therefore, may not bring
about stigmatization. But once it becomes more frequent and people realize
the extent of the threat, moral panic may break out and public attitude may
drastically change. This is another explanation for the efforts made by fem-
inists to expose the great frequency of date rape.31 Recognition of the prev-
alence of date rape in society was one of the factors that increased the stigma
associated with it. Also, an increase in the rate of a crime inevitably increases
the efforts by the victims of the crime to draw attention to its harmful effects
and to strengthen the stigma associated with the crime. One example is the
28
Such reasoning was used with regard to crime in inner-city neighborhoods in the United States.
William Wilson, a prominent supporter of this view, is cited in Gaviria, supra note 9, at 15. See
also Anne C. Case & Lawrence F. Katz, The Company You Keep: The Effects of Family and
Neighborhood on Disadvantaged Youths 13, 17, 22 (Working Paper No. 3705, Nat’l Bureau Econ.
Res. 1991). This theory was also promoted by Gaviria, supra note 9, at 15, as a main reason for
the recent escalation of violent crime in Colombia.
29
On the other hand, people may exhibit anxiety aversion, namely, they may suffer during the
period they await the implementation of the legal sanction (in addition to their suffering during the
implementation itself). See Andrew Caplin & John Leahy, Psychologial Expected Utility Theory
and Anticipatory Feelings, 116 Q. J. Econ. 55 (2001).
30
As in Section IIB1, the preceived crime rate, which is assumed to be correlated to the true crime
rate, plays an important role in determining the magnitude of the extralegal sanction (see note 26
supra).
31
What determines whether an increase in the rate of crime increases or decreases the social
sanction? Agruably, in cases of offenses categorized as mala in se, an increase in the rate of crime
raises the social sanctions, while in the case of offenses categorized as mala prohibita, it has the
opposite effect.
public relations campaign launched by the music industry against the in-
creasing number of copyright infringements (via Napster, for example). This
campaign is likely to induce greater public condemnation of copyright vi-
olations and consequently to increase the overall sanction.
The numerous factors dictating the relationship between the rate of crime
and the expected sanction do not operate in isolation; instead, they often
influence each other. Assume for instance that an increase in the rate of crime
leads to a decrease in the probability of detection. A reduction in the prob-
ability of detection may weaken the incentives of victims to provide infor-
mation to the police, leading to an additional decline in the probability of
detection. In contrast, an increase in the probability of detection will
strengthen the incentives to provide information to the police—a process that
in turn will increase the probability of detection even further. The strength
of the social sanction will also influence the probability of detection. A crime
committed in a society in which intense social stigma is attached to the crime
is more likely to be detected given the greater incentives of victims and
witnesses to cooperate with the police. On the other hand, in a society inflicted
with the syndrome of “robberies without shame,” such cooperation is less
likely to take place.
We hope that the preceding analysis of the crime rate and its versatile
effects on the expected sanction has demonstrated the significant practical
importance of incorporating these effects in a theoretical analysis of law
enforcement.32 With this motivation in mind, we proceed to develop our new
model of deterrence.
32
Our analysis was based on the understanding that there is a single policy maker that determines
the size of the legal sanction and the resources invested in detection and conviction. Yet often there
are several different institutions that participate in the determination of the sanction and of the size
and distribution of the overall resources for crime prevention. Let us provide a few examples to
illustrate this point. The government indeed determines the overall resources devoted to law en-
forcement, yet the distribution of these resources is often determined by other institutions, for example,
the police. It is natural to believe that those institutions divide their resources in accordance with
the relative prevalence of different crimes or the relative prevalence of crimes in different areas.
Hence, when the government determines the law enforcement budget, it should consider the pos-
sibility that the crime rate will influence the probability of punishment through its effect on police
decisions regarding the distribution of resources. Similar institutional considerations apply to the
determination of the legal sanction. The legal sanction is composed of two components, the statutory
sanction and the judicial sanction. When studying optimal policy, one might distinguish between
the optimal statutory sanction, given judicial discretion in implementing the statutory guidelines,
and the optimal judicial sanction within the statutory boundaries. The legislature should consider
the possible effects of the crime rate on the use of judicial discretion. An increase in the rate of
particular crimes may lead judges to impose harsher sanctions. In some legal systems, the prevalence
of a crime is a legitimate factor in sentencing (see Andrew Ashworth, Sentencing and Criminal
Justice 89 (2d ed. 1995) (England); C. G. B. Nicholson, Sentencing: Law and Practice in Scotland
185–86 (2d ed. 1992) (Scotland); Clayton Ruby, Sentencing 162 (4th ed. 1994) (Canada)). But even
in jurisdictions that formally reject the prevalence-of-crime doctrine, an increase in the rate of crime
may influence the exercise of judicial discretion in a similar manner. Alternatively, judges may be
reluctant to render severe sanctions for a certain crime if they believe that “everybody does it.”
Hence, when setting the statutory sanction, the legislature should consider the possible effects of
the crime rate on the judicial sanction.
III. Incorporating the Effects of the Crime Rate in

the Economic Model of Deterrence
A. Framework of Analysis
The policy maker has two policy variables at her disposal: the level of
investment in law enforcement, x, and the legal sanction, l. The potential
criminal, however, is interested in the probability of punishment, p, and the
overall sanction, s. Standard models often do not distinguish between these
two sets of variables. It is commonly assumed that p is a simple function of
x and only x, that is, p p p(x), and the legal sanction is generally assumed
to be the only sanction, that is, s p l. This formulation implicitly assumes
away any effect of the crime rate on the probability of punishment or on the
overall sanction.33
We propose a richer framework, in which the effects of the crime rate on
both the probability of punishment and the overall sanction are explicitly
accounted for. Formally, denoting the crime rate by r, we allow the probabil-
ity of punishment, p, to be a function of both x and r, that is, p p p(x, r).34
Similarly, the magnitude of the sanction is taken to be a function of both l
and r, that is, s p s(l, r).
As in the traditional framework, we assume that the crime rate is deter-
mined by the expected sanction, that is, r p r( p 7 s), such that a higher
probability of punishment or a higher sanction lowers the rate of crime. Sub-
stituting our revised definitions of p and s, we obtain r p r( p(x, r) 7 s(l, r)).
B. Deterrence
Using our revised framework, we can now analyze the deterrence effects
of the two policy variables, x and l. Consider the effect of investment in law
enforcement. In standard models, an increase in the level of investment raises
the probability of punishment and thus lowers the crime rate—end of story.
Our adjusted model suggests a richer story. We concede that a higher in-
vestment level will increase p and thus lower r, but we argue that this is just
the beginning of the process. When the effects of the crime rate are incor-
porated into the economic model of deterrence, the initial decrease in the
crime rate may have significant effects down the road. Recall that both the
probability of punishment and the overall sanction are functions of the crime
rate. Therefore, the new lower crime rate will induce a new expected sanction,
33
These assumptions are made, for instance, in Polinsky & Shavell, Economic Theory, supra
note 3.
34
Recall that in Becker’s model p was an exogenous variable and the crime rate entered indirectly
through its influence on the cost of law enforcement. In the literature stemming from Becker, p was
exogenous, without even an indirect effect of the crime rate or, alternatively, p was a function of
the level of investment, x, but was unaffected by the crime rate.
which will depend on the precise effects of the crime rate. This new expected
sanction will again alter the crime rate, and so forth. It is clear that the overall
effect of the initial increase in the level of investment in law enforcement
may be quite different than what standard models predict. Similar reasoning
suggests that the overall effect of an increase in the level of the legal sanction
will also differ from traditional predictions.
The comparison between the deterrence effects of investment in law en-
forcement and of the legal sanction in our framework, as opposed to tradi-
tional analysis, is summarized in the following observation:
Observation 1.
i) If a lower crime rate raises the probability of punishment (see Section
IIA1) as well as the overall sanction (see Section IIB1), then the de-
terrence effects of law enforcement effort and of the legal sanction
are stronger in our adjusted model than in traditional analysis.
ii) If a lower crime rate lowers the probability of punishment (see Section
IIA2) as well as the overall sanction (see Section IIB2), then the de-
terrence effects of law enforcement effort and of the legal sanction
are weaker in our adjusted model than in traditional analysis.
iii) If a lower crime rate raises the probability of punishment (see Section
IIA1) but lowers the overall sanction (see Section IIB2), or vice versa
(see Sections IIA2 and IIB1), then the deterrence effects of law en-
forcement effort and of the legal sanction may be weaker, equal, or
stronger in our adjusted model than in traditional analysis, depending
on the relative magnitudes of the effects of the crime rate on the
probability of punishment and overall sanction.
The intuition for observation 1, which is proved in the Appendix, is as
follows. An increase in the level of investment, x, or in the level of the legal
sanction, l, increases the expected sanction (by increasing the probability of
punishment, p, or the overall sanction, s) and leads to a lower crime rate.
But contrary to conventional analysis, the story does not end here.
i) If a lower crime rate raises the probability of punishment as well as
the overall sanction, then the original decrease in the crime rate causes
the probability of punishment and the sanction to rise. The rise of p
and s, and the resulting increase of the expected sanction, lowers the
crime rate, which leads to an additional rise in p and s, and so forth.
The effects of the crime rate on the expected sanction reinforce the
original deterrence effect of the increased investment in law enforce-
ment or of the higher legal sanction.
ii) If a lower crime rate lowers the probability of punishment as well as
the overall sanction, the original decrease in the crime rate reduces
the probability of punishment and the sanction (which initially have
risen). The reduced p and s, and the resulting lower expected sanction,
increase the crime rate. Now, the increased crime rate raises p and s,
which again lower the crime rate, and so forth. The original deterrence
effect of the increased investment in law enforcement or of the higher
legal sanction is contravened by the effects of the crime rate on the
expected sanction. This starts an oscillating dynamic in which the crime
rate falls r the expected sanction falls r the crime rate rises r the
expected sanction rises r the crime rate falls again, and so forth. The
countereffects of the crime rate weaken the overall effect of the original
increase in the level of investment in law enforcement or in the legal
sanction.
iii) If a lower crime rate raises the probability of punishment but lowers
the overall sanction, or vice versa, then the outcome depends on the
relative strength of the two forces described above.
C. Optimal Law Enforcement Policy

Our analysis of the deterrence effects of the two policy variables, x and
l, added a new dimension to the traditional deterrence models. This new
dimension alters the standard policy prescriptions derived from the traditional
models.
With regard to the optimal investment in law enforcement, it is clear that
if the impact of law enforcement efforts is not as stipulated in traditional
analysis (see observation 1), the optimal level of law enforcement will be
altered accordingly. Specifically, when the effects of the crime rate on the
probability of punishment and on the magnitude of the sanction reinforce
the direct deterrence effect of law enforcement efforts, then the optimal
investment in law enforcement is higher compared to the prescriptions of
the classical models. On the other hand, when the effects of the crime rate
on the probability of punishment and on the magnitude of the sanction
dampen the direct deterrence effect of law enforcement efforts, then the
optimal investment in law enforcement is lower, compared to the prescriptions
of the classical models. Finally, note that if the effects of the crime rate on
the probability of punishment and on the magnitude of the sanction operate
in opposite directions, the optimal investment in law enforcement may be
higher than, lower than, or equal to the prescriptions of the classical models,
depending on the relative magnitude of these effects. The optimal legal
sanction should be adjusted, compared to that in traditional analysis, in a
similar fashion.35
35
This result is based on the assumption that the legal sanction is not costless to impose (considering
both direct costs—see, for example, Polinsky & Shavell, Enforcement Costs, supra note 3; and
Polinsky & Shavell, Optimal Use of Fines, supra note 3—and various indirect costs, which have
been identified in the literature). If it is costless to impose the legal sanction, then the legal sanction
should be set at its maximal feasible level (as in the classical Becker framework).
IV. Multiple Equilibria and Enforcement Campaigns

Under the traditional assumptions, which implicitly ignore the effects of
the crime rate on the expected sanction, any combination of the policy var-
iables (x and l) defines a unique crime rate, regardless of the initial crime
rate in the relevant jurisdiction. This analytically convenient result does not
carry over to the more realistic setting in which crime rates do affect the
expected sanction. Specifically, when the traditional assumptions are relaxed,
a single policy combination may result in multiple crime rate–expected sanc-
tion equilibria, where the equilibrium that will actually occur depends on the
initial crime rate.36 The following scenario commands special interest. Sup-
pose that a higher crime rate lowers the deterrence effect of law enforcement
efforts (see Section IIA1). Now examine the consequences of a given law
enforcement policy. If the original crime rate is low, the investment in law
enforcement is more effective, leading to a low-crime equilibrium. But if the
original crime rate is high, the investment in law enforcement is less effective,
leading to a high-crime equilibrium.
The possibility of multiple equilibria may pose a significant problem for
the policy maker. For example, a policy, P1, may lead to two possible out-
comes, O1 and O2, and an alternative policy, P2, may lead to two different
outcomes, O3 and O4. While O1 is better than O3, O2 is inferior to O4.
Fortunately, even when multiple equilibria exist, the resulting outcome is not
chosen randomly from the set of possible equilibria. As suggested above,
the initial crime rate in the relevant jurisdiction will determine the outcome
of a given policy. For example, a policy maker who knows that the crime
rate is high will know that P1 will lead to O1 and P2 will lead to O3. Hence,
according to our assumptions, the policy maker should choose P1.
However, if the crime rate had been low, P1 would have led to O2 and
P2 would have led to O4. If that were the case, the optimal policy would
have been P2. Also assume, as is natural, that the low-crime outcome, O4,
is superior to the high-crime outcome, O1. Is the policy maker confined to
the inferior high-crime outcome simply because the initial crime rate was
too high? Often the answer will be a disappointing “yes.” However, in many
cases a more optimistic answer presents itself. Consider a policy P3 that
costs more than P1 or P2 but can lower the crime rate rather quickly. Now
consider the following combined policy: P3 will be employed, as a transition
policy, only long enough to lower the crime rate below the threshold level
36
The multiple-equilibria phenomenon is known to arise when the effects of the crime rate on
the expected sanction are taken into account. See Andvig & Moene, supra note 7; Freeman, Grogger,
& Sonstelie, supra note 5; Kevin M. Murphy, Andrei Shleifer, & Robert W. Vishny, Why Is Rent
Seeking So Costly to Growth? 83 Am. Econ. Rev. 409 (1993); Francis T. Lui, A Dynamic Model
of Corruption Deterrence, 31 J. Pub. Econ. 215 (1986); Rasmusen, supra note 6; Sah, supra note
5; Schrag & Scotchmer, supra note 5. Gaviria, supra note 9, offers empirical support for the multiple-
equilibria phenomenon.
from which O4 can be achieved; then P3 will be replaced by P2, and the
low-crime outcome, O4, will result. Admittedly, while P3 is carried out,
society loses compared to the P1 alternative. But in many cases the resulting
long-run advantage of securing the low-crime outcome will more than com-
pensate for that loss. The transition policy, P3, is the often invoked “en-
forcement campaign.”37 Similar effects may be achieved by temporarily in-
creasing the legal sanction.38
V. Conclusion
This paper demonstrates that the crime rate may have significant effects
on the expected sanction. Hence, the traditional post-Becker studies of de-
terrence, as well as the attempts to draw policy implications from these
studies, are flawed. When the effects of the crime rate on the expected
sanction are taken into account, the optimal investment in law enforcement
as well as the optimal legal sanction may be greater or smaller than predicted
by traditional analysis. A new framework—one that is more sensitive to the
effects of the crime rate on the expected sanction—should be adopted in
order to address the complexities of law enforcement.
MATHEMATICAL APPENDIX
In this Appendix we present a formal model that incorporates the effects of the
crime rate into the traditional law enforcement framework. The model is used to
formally prove the main results, which were stated in the text.
I. Framework of Analysis
Risk-neutral individuals choose whether to commit a criminal act. The act benefits
the actor by b, which is assumed to be distributed uniformly in the interval [0, 1].
The government chooses the levels of two policy variables: the investment in law
enforcement, x, and the legal sanction, l.
Our central hypothesis, by which the present model differs from traditional analysis,
concerns the functional dependence of the expected sanction on the crime rate, which
is denoted r. We allow the probability of punishment, p, to be a function of both x
and r, that is, p p p(x, r). Similarly, the magnitude of the sanction is taken to be a
function of both l and r, that is, s p s(l, r). By explicitly incorporating the crime
rate into the two functional forms, we recognize that generally pr ( 0 and s r ( 0.39
This key feature of the present model, which is actually a relaxation of the standard
implicit assumptions that pr p 0 and s r p 0 , allows us to study the effects of the
crime rate on the expected sanction.
An individual will decide to commit a criminal act if and only if her private
benefits from the criminal act, b, exceed the expected sanction, that is, if and only
37
Transition policies of a similar nature are mentioned in Andvig & Moene, supra note 7, at
75–76; Lui, supra note 36, at 216, 228–29; and Rasmusen, supra note 6, at 534. See Peter-J. Jost,
Crime, Coordination and Punishment: An Economic Analysis, 21 Int’l Rev. L. & Econ. 23, 28
(2001).
38
See note 32 supra.
39
Subscripts represent partial derivatives.
if b 1 p 7 s. Let bˆ represent the maximal private gains for which individuals are still
deterred from committing a criminal act. By definition, bˆ satisfies bˆ p p 7 s. Since
b is distributed uniformly in the interval [0, 1], b̂ also represents the share of indi-
viduals who decide not to commit a criminal act—the level of deterrence. Accord-
ingly, the share of individuals who do decide to commit a criminal act, that is, the
crime rate, is given by r p 1 ⫺ bˆ . Therefore, the probability of punishment can be
written as p(x, b) ˆ , and the magnitude of the sanction can be written as s(l, b) ˆ .
Substituting the functional specifications into the identity b̂ p p 7 s, we obtain
bˆ p p(x, b)
ˆ 7 s(l, b).
ˆ (A1)
The adjusted framework will now be used to study the interdependence between
the crime rate and the expected sanction.
II. Deterrence
The functional dependence of the deterrence level (and of the crime rate) on the
policy variables, x and l, that is, b̂(x, l), can be derived from equation (A1). More
important, taking partial derivatives of equation (A1) gives us—after some rear-
ranging—the impact of the two policy variables on the level of deterrence, b̂ (and
on the rate of crime, r p 1 ⫺ bˆ ):
p 7 sl
b̂l p (A2)
1 ⫺ ( pbˆ 7 s ⫹ p 7 sbˆ )
and
px 7 s
b̂x p . (A3)
1 ⫺ ( pbˆ 7 s ⫹ p 7 sbˆ )
For comparison, note that in the classical formulation, where pbˆ p sbˆ p 0, ex-
pressions (A2) and (A3) reduce to bˆ l p p 7 sl (or bˆ l p p if s p l ) and bˆx p px 7 s.
This comparison exemplifies one of the main points of the present analysis. The
interdependence between the crime rate and the expected sanction results in a mul-
tiplier effect. The deterrence effect of the policy variables x and l is multiplied by
1
mp ,
1 ⫺ ( pbˆ 7 s ⫹ p 7 sbˆ )
compared to the deterrence effects predicted by the classical framework.
We can now state the formal equivalent of observation 1.
Observation 1A.
i) If pbˆ 1 0 and sbˆ 1 0, then m 1 1,40 and the deterrence effects of x and l are
stronger in our adjusted model than in traditional analysis.
ii) If pbˆ ! 0 and sbˆ ! 0, then m ! 1, and the deterrence effects of x and l are weaker
in our adjusted model than in traditional analysis.
iii) If (pbˆ 1 0 and sbˆ ! 0) or (pbˆ ! 0 and sbˆ 1 0), then m ! 1 or m 1 1, and the de-
40
We focus on m 1 0. A negative multiplier is theoretically possible (when 1 ⫺ (pbˆ 7 s ⫹ p 7 sbˆ ) !
0); however, it is characteristic of an unstable and thus an unrealistic deterrence level. See Oren
Bar-Gill & Alon Harel, Crime Rates and Expected Sanctions: The Economics of Deterrence Revisited
(Working Paper No. 14-2000, Tel-Aviv Univ. Sch. Econ., June 2000).
terrence effects of x and l may be weaker, equal, or stronger in our adjusted

model than in traditional analysis.
III. Optimal Law Enforcement Policy

On the basis of observation 1A, the way in which our new model alters the policy
prescriptions of the traditional analysis is straightforward. For example, if the social
harm from a criminal act is h, and the government wishes to minimize total harm
plus costs of law enforcement, then the optimal investment in law enforcement is
given by
冕
1
∗
x p argmin x h db ⫹ x.
ˆ l))7s(l, b(x,
p(x, b(x, ˆ l))
The first-order condition is

1
px p 7 [1 ⫺ ( pbˆ 7 s ⫹ p 7 sbˆ )]. (A4)
h7s
Following the standard assumption of diminishing returns to investment in law en-
forcement, that is, px 1 0 and pxx ! 0, a comparison of equation (A4) and the corre-
sponding optimality condition in the classical framework, px p 1/ (h 7 s) , leads to the
following observation:
Observation 2A. For any sanction s,
i) if pbˆ 1 0 and sbˆ 1 0, the optimal investment in law enforcement is higher than
in traditional prescriptions;
ii) if pbˆ ! 0 and sbˆ ! 0, the optimal investment in law enforcement is lower than
in in traditional prescriptions; and
iii) if (pbˆ 1 0 and sbˆ ! 0) or (pbˆ ! 0 and sbˆ 1 0), the optimal investment in law
enforcement may be higher, lower, or equal to that in traditional prescriptions.

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Crime Rates and Expected Sanctions: The Economics of Deterrence Revisited

Author(s): Oren Bar‐Gill and Alon Harel

[Journal of Legal Studies, vol. XXX (June 2001)]

and the internal organization or modus operandi of the criminal community.

leading to a smaller probability of detection and conviction.5 But the crowding

II. Crime Rates and Expected Sanctions

A. The Crime Rate and the Probability of Punishment

spective of the rate of crime.12 It is the former type of investigation that

the investment in precaution exercised by potential victims.22 These precau-

B. The Crime Rate and the Magnitude of the Sanction

III. Incorporating the Effects of the Crime Rate in

C. Optimal Law Enforcement Policy

IV. Multiple Equilibria and Enforcement Campaigns

terrence effects of x and l may be weaker, equal, or stronger in our adjusted

III. Optimal Law Enforcement Policy

The first-order condition is

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