(unpublished article)
If someone breaks your arm you call a cop; if he breaks a contract
with you you call a lawyer. More generally, our legal system provide
two different sets of rules for dealing with acts by which one
individual harms another--tort law and criminal law. Both are similar
in general outlines: someone attempts to demonstrate that a wrong has
been done, and if he succeeds bad things happen to the offender, a
possibility which makes the commission of wrongs less attractive. But
they differ very much in the details. A tort claim belongs to the
victim--it is he who prosecutes it, collects the damage claim if he
wins, and has the legal power to settle. A criminal case belongs to
the state.
This dual system for prosecuting wrongs raises a number of
interesting questions. The first is whether there is any good reason
to have two separate systems of rules; whether, for example, a legal
system in which burglars and murderers were sued instead of arrested
would be workable.[1]
The second is why the particular sets of rules go together in the way
they do--why, for example, a system in which offenses are privately
prosecuted is also one in which the victim collects the fine and in
which guilt is proved by a preponderance of the
evidence.[2]
The third, and the question which which this note is concerned, is
how offenses ought to be sorted between the two systems: what should
be a tort and what should be a crime.
All three questions are complicated by the fact that legal rules
affect behavior on many margins. They affect the incentives to commit
offenses, the incentives to prosecute offenses, and the incentives to
prevent offenses. It is possible, even likely, that for some offenses
tort law will provide better incentives than criminal law on one of
those margins and worse incentives on another. If so, the question of
what ought to be a tort and what ought to be a crime will be
ambiguous, at least until we develop a theory good enough to predict
not only the sign but also the size of such effects.
My purpose here is simple. I wish to take one of the margins and
argue that, judged by the incentives provided by the alternative
legal systems on that margin, our legal rules are backwards. Things
we treat as crimes, such as burglary, ought to be torts; things we
treat as torts, such as auto accidents, ought to be crimes.
The incentive I have chosen to examine is the incentive that
potential victims have to prevent offenses. Seen from that
perspective, there is a simple and striking difference between tort
law and criminal law. The victim of a tort suffers an injury but he
also obtains an asset--a claim for damages against the offender. The
victim of a crime suffers an injury but obtains no corresponding
asset since the fine for the offense, if any, will go to the state,
not to him.[3]
It follows that one effect of treating an offense as a tort instead
of a crime is to reduce the net damage suffered by the victim, and
thus his incentive to prevent the offense.
Reducing the incentive to prevent the offense is not necessarily a
bad thing; here as elsewhere, what we want is the right incentive,
neither too much nor too little. The ideal legal system, seen from
this standpoint, is one in which the potential victim receives the
net social benefit produced by his defensive precautions. The
question for any particular class of offense is whether the reduction
in incentive provided by tort law moves the potential victim towards
or away from the efficient level of precaution.
In trying to answer that question, it is useful to start with a model
of law enforcement in which catching and punishing offenders is
costless. All offenders are detected, and none of them are judgement
proof. Within this simplified framework, what is the right incentive,
and what system gives it?
Start with automobile accidents. For simplicity, consider accidents
in which a car runs over a pedestrian and only the pedestrian is
injured. We may attempt to deter such accidents either with a tort
rule, in which the driver of the automobile is liable to the victim
for the damage done, or with a criminal rule, in which the driver
pays a fine but the victim does not receive it.
From the standpoint of the driver, the two rules (with the same
penalty) generate the same incentive. Any reduction in the
probability of an accident due to the driver’s production
reduces his liability by an amount equal to the savings in net social
cost. What about the pedestrian?
Under the tort rule, the pedestrian suffers no cost from being run
over, since his damages are fully compensated by the
driver.[4]
It follows that the pedestrian has no incentive to take precautions.
Under the criminal rule, on the other hand, the pedestrian pays the
full cost of the accident. It follows that he has the efficient
incentive to take precautions to prevent it.[5]
It follows that, from the standpoint of the incentive for victim
precautions, such offenses should be crimes, not torts.
Generalizing beyond the simplified example in which only one party
suffers a loss, the efficient rule is that each party bears his own
loss and pays a fine equal to the loss that the accident imposes on
the other party. Thus each bears the full cost of the accident and
has an incentive to take any cost justified precautions to reduce its
probability.
Consider next the offense of burglary--again in a world of costless
enforcement. The legal system sets the penalty for burglary equal to
the damage done--the value of what is stolen. Any burglar willing to
pay that price commits an offense--and should. The system generates
only efficient burglaries--those where the gain to the offender is
greater than the loss to the victim. The textbook example, due to
Judge Posner, is the hunter, lost and starving, who comes across a
locked cabin in the woods, breaks in, feeds himself, and telephones
for help.
In this world, a homeowner who puts a lock on his door is wasting his
own money and the burglar’s time. He is better off leaving the
door open and (costlessly) collecting the value of whatever goes out.
The optimal level of precaution to prevent burglary is the same as
the optimal level of precaution for a supermarket to take in
preventing its customers from buying its vegetables--zero.
Under a tort rule, that is the level of precaution that the victim
will take. He knows he will be fully reimbursed for whatever he
loses, so has no incentive to spend resources preventing burglary.
Under a criminal rule, on the other hand, the criminal takes from the
victim but repays the state, so the victim has an incentive to
prevent the burglary. Hence, at least in the simplified world of
costless enforcement, and considering only the incentive of the
victim to defend himself, burglary ought to be a tort.
To see the underlying difference between an auto accident and a
burglary, it is useful to express both in the same form. We have two
parties, each of whom can spend resources affecting the probability
that an event--an auto accident or a successful burglary--will occur.
If we define E1 as expenditure by party 1 and E2
by party 2, and C1,2 similarly as the
cost to each party of the event occuring, p
(E1,E2) as the probability of the event, we
have, absent any legal rules:
Net Cost to party 1 absent legal rule
=E1+C1p(E1,E2)
Net Cost to party 2 absent legal rule
=E2+C2p(E1,E2)
We wish the efficient level of precautions, the level that minimizes
the summed cost:
Net cost to both parties = E1+ E2+
[C1+C2]p(E1,E2)
Giving us the first order marginal conditions:
1+
[C1+C2]p1(E1,E2)=0
(Equation 1a)
1+
[C1+C2]p2(E1,E2)
(Equation 1b)
Party 1 controls E1, party 2 controls E2, and
each wishes to minimize his net cost. We generate the efficient
marginal conditions 1a,b by a legal rule which, if the event occurs
imposes a fine of C2 on party 1 and a fine of C1
on party 2, generating new net costs:
Net Cost to party 1 absent legal rule
=E1+C1p(E1,E2)
Net Cost to party 1 with optimal rule =E1+
[C1+C2]
p(E1,E2)
Net Cost to party 2 with optimal rule =E2+
[C1+C2]
p(E1,E2)
The levels of E1,2 that minimize the new net
costs also satisfy Eqns 1a,b.
Seen from this perspective, all three of our cases are the same. In
the auto/pedestrian case, C1=0, C2>0, so we
get the efficient outcome by fining the driver for the damage done to
the pedestrian. In the more general case of mutual damage, for
instance an auto/auto collision, C1,2>0 and
we fine both drivers when an accident occurs. In the burglary case,
with party 1 the victim and party 2 the burglar, C1>0,
C2<0, since the burglar receives a benefit from a
successful burglary. So the efficient rule punishes the burglar with
a fine equal to the value of the amount stolen and rewards the victim
with a subsidy also equal to the amount stolen. In other words, the
efficient rule is a damage payment rather than a fine.
The attentive reader may wonder why I assume that the benefit to the
burglar is equal to the loss to the victim--after all, one of the
reasons we ban theft is that goods are usually worth more to their
present owner than to the thief. But I am considering an efficient
system with costless punishment. Since the burglar is paying a fine
equal to the victim’s cost, he will not steal unless the good
is worth at least that much to him.
There remains the possibility that, as in the starving hunter
example, the gain to the burglar may be larger than the loss to the
victim. To adequately take account of this possibility, one requires
tort law plus a subsidy to the victim representing the average gain
to the burglar from stealing, net of the fine he pays. The simple
tort rule gives the correct answer only for the marginal burglar, and
is thus correct at most for precautions that, like a small increase
in punishment, deter only marginal burglars. Even in that case, the
analysis is complicated by the possibility that a precaution that
deters marginal burglars raises the cost to all burglars, and thus
imposes an external cost on the undeterred burglaries.
The analysis becomes more complicated in a world with enforcement
costs--costs of catching and punishing[6]
an offender. In such a world, precautions by the victim of burglary
produce benefits as well as costs. If the optimal effective
punishment is less than damage done--if, in other words, we are
permitting some inefficient offenses because deterring them costs
more than it is worth[7]--then
precautions prevent some inefficient offenses. In addition,
precautions reduce the number of offenses and thus the cost of
apprehending and punishing offenders.
It remains true that preventing burglaries imposes a cost on burglars
which an efficient system of incentives ought to take into account.
It could do so by awarding victims damages representing the value to
the offender of his offense net of the cost of apprehending and
punishing him. That, roughly speaking, is what a tort system does,
since the victim must pay his own litigation fees and bears the risk
that the defendant may be judgement proof.
Readers interested in a more complete analysis of this problem may
either await a later revision of this essay or look at an earlier
article[8]
in which I proposed and analyzed a system of legal rules designed to
provide private enforcement of what is currently criminal law--a sort
of expanded tort system. In that system, victims of crimes were able
to sell their claim against the offender for a price representing the
amount of his punishment net of the cost of catching and punishing
him. I argued there that, if one assumed away a variety of potential
sources of market failure affecting the level of precaution taken by
potential victims,[9]
that set of institutions leads to an optimal level of precaution.