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Louis Kaplow
NBER Working Paper No. 3008 (Also Reprint No. r1739)*
Issued in July 1992
NBER Program(s): PE
---- Abstract -----
Even when society would wish to deter all acts of some type, such as tax
evasion and many common crimes, the benefits from deterrence often will be
insufficient to justify the expenditures on enforcement that would be required
to deter everyone. If some individuals are not deterred, however, they will
bear risk when fines are employed as a sanction. As a result, it may be
optimal to reduce total risk-bearing costs by reducing the number of
individuals who bear any risk. This can be accomplished by increasing
enforcement above the level that would be justified considering only the
benefits of deterrence and the direct costs of enforcement. Another
possibility is that it may be optimal reduce the risk borne by those who act,
by employing fines below the maximum feasible level. This latter result
constitutes an instance in which the well-known implication of Becker's
analysis that it is optimal to employ extreme sanctions for all offenses is
invalid.
*Published: International Review of Law and Economics, Vol. 12, No. 1, pp. 3-11, (1992) .
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