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20 Eur. J.L. & Econ. 5 (2005)

handle is hein.journals/eurjlwec20 and id is 1 raw text is: European Journal of Law and Economics, 20: 5-15, 2005 - © 2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands. Credible Criminal Enforcement MATTHEW J. BAKER mbaker@usna.edu Department of Economics, United States Naval Academy, Annapolis, MD THOMAS J. MICELI thomas.miceli@uconn.edu Department of Economics, University of Connecticut, Storrs, CT, 06269-1063 Abstract Economic models of crime and punishment implicitly assume that the government can credibly commit to the fines, sentences, and apprehension rates it has chosen. We study the government's problem when credibility is an issue. We find that several of the standard predictions of the economic model are altered when commitment is taken into account. Specifically, when only fines are used, commitment results in a lower apprehension rate and hence a higher crime rate. However, when jail is used (with or without fines), apprehension rates and jail terms may be higher or lower compared to the optimal static policy. Keywords: economics of crime, credible policies, time consistency JEL Classification: K14, K42 1. Introduction The interaction between government and criminals follows a natural sequential structure. The government sets fines, sentences, and apprehension rates, which are observed by poten- tial criminals, who then decide whether or not to engage in criminal acts. Once a crime has been committed, the government has to carry out its promised policy. While this sequence of events is obvious, it is typically suppressed in economic models of crime and punish- ment. This is tantamount to assuming that enforcement policies are credible, and that the government faces no pressure to deviate from these policies once they are announced. The potential difficulty with such an assumption is that, once a criminal has decided whether or not to commit a crime given the government's announced punishment plan, the social benefits from the enforcement policy have been completely realized with respect to that individual. Thus, because apprehension of criminals is costly, the government may have an incentive to renege on the announced policy, thereby reaping the full benefits from the policy, while at the same time avoiding some enforcement costs. The government faces essentially the same credibility issues when deciding how severely to punish a criminal once he is apprehended. Boadway, Marceau, and Marchand (1996) make this point, but then suggest that pun- ishment may be credible in multi-period setting, given that criminal enforcement is not a one-shot game but is repeated with each offense that is committed. According to this