Econ 522 Economics of LawSlide 1Way back in contract law…So what to do about…Seriously.Turns out…Would this be enforceable?Slide 7Monday, we started criminal lawSlide 10Slide 11Slide 11PunishmentSlide 14Slide 15From Monday: what would the efficient criminal law system look like?Discretion in sentencingStigmaSlide 19FinesShould the rich pay bigger fines than the poor?Slide 22Slide 23Death penaltySlide 24Do harsher punishments deter crime?Probability versus severityMarginal deterrenceSlide 28“Victimless” crimesDrugsGunsRacial profilingKnowles, Persico and Todd, “Racial Bias in Motor Vehicle Searches: Theory and Evidence”Slide 35Slide 36Slide 37Slide 37Crime in the U.S.Slide 40Slide 41Why did U.S. crime rate fall in 1990s?Slide 43Econ 522Economics of LawDan QuintSpring 2010Lecture 222Digression3We discussed contracts of adhesionStandard terms given as take-it-or-leave-it offers (car rental, etc.)Concluded as long as the market is competitive, it’s not really much of a problemAnd you were asked (HW2 Q2) about what should happen if you claim you signed a contract without reading itMost agreed “I didn’t read the contract” shouldn’t be a valid performance excuseIf it were, contract law would basically be uselessWay back in contract law…4British computer game retailer GameStation, on April Fool’s Day, added this to Terms & Conditions customers agreed to before buying online:“By placing an order via this website… you agree to grant us a non transferable option to claim, for now and for ever more, your immortal soul.Should we wish to exercise this option, you agree to surrender your immortal soul, and any claim you may have on it, within 5 (five) working days of receiving written notification from gamestation.co.uk or one of its duly authorised minions.…If you a) do not believe you have an immortal soul, b) have already given it to another party, or c) do not wish to grant us such a license, please click the link below to nullify this sub-clause and proceed with your transaction.”So what to do about…5Seriously.Source: http://www.foxnews.com/scitech/2010/04/15/online-shoppers-unknowingly-sold-souls/6They were mostly trying to prove the point that nobody reads the Terms and Conditions they agree to when buying things onlineBased on how few people selected the “opt out” check box, GameStation estimate 88% of people did not read T&CAnd a UK game company now owns the right to 7,500 immortal soulsThey say they have no intention to claim them, and will instead email customers to nullify their rightTurns out…7“Shrinkwrap licenses” – generally not enforceableOnline “check box” agreements generally are enforceableApril Fools Day is not a formation defenseRemember Lucy v. Zehmer: “I was joking” does not void a contractBut: unconscionabilityWould this be enforceable?8CriminalLaw9Like with civil law, the goal of criminal law is to minimize social costs, which consist of…Social cost of crimes that are committedCost of catching offendersAnd cost of punishing themWays criminal law differs from civil law…Intent is requiredCases brought by government, not an individualHarms tend to be publicHigher standard of proof required for convictionPunishment (vs judgment in a civil case) – goal is to deter all crimes, not just the inefficient onesMonday, we started criminal law10Reasons why tort law might not work for criminal activityPerfect compensation may be impossibleIf you’re unlikely to get caught, need more severe punishment to deter activityCriminals may be judgment-proofPublic harms – if harm is diffuse, nobody has incentive to sue, but we still want to discourage the behaviorBeckerIf crime level depends only on (probability of being caught) X (severity of punishment)……double the punishment, fire half the police and judges to save money!(What Becker actually meant…)Monday, we started criminal law11Friedman: marginal cost of deterrence could be positive or negativeif supply of crimes is elastic enough, more police much less crime fewer criminals we catch and have to punishif supply of crimes is inelastic, more police almost the same number of crimes, but more criminals we catch and have to punishat optimal level of deterrence,if marginal cost of deterrence is positive, optimal to only deter some inefficient crimesif marginal cost of deterrence is negative, optimal to deter all inefficient crimes, some efficient ones tooMonday, we started criminal lawExpected PunishmentDamage to Victim=Marginal Cost of Deterrence–12Punishment13In Europe, many small crimes punished by finesIn U.S., most crimes punished by imprisonmentImprisonment has several effects:DeterrencePunishmentOpportunity for rehabilitationIncapacitationWhen is incapacitation effective?When supply of criminals is inelastic(When there isn’t someone else waiting to take criminal’s place)And when it changes number of crimes a person will commit, rather than just delaying themPunishment14Fines are efficientNo social costBut, greater threat of abuse, since state makes moneyFriedman: “In a world of efficient punishments, somebody gets most of what the convicted defendant loses.It is in that somebody’s interest to convict defendants, whether or not they are guilty.”Punishment15Other punishments tend to be inefficientMake criminal worse off, costly to rest of society tooDirect costs of holding someone in maximum-security prison estimated at $40,000/yearIn some states, prisoners do useful workAttica State Prison (NY) had metal shopMinnesota firm employs inmates as computer programmersMedium-security prisons in Illinois make marching band uniformsBut legal limitationsDeath penalty extremely expensive under current systemLonger cases, more jurors rejected, automatic appealsFriedman: capital punishment would be more efficient if organs were kept for transplantPunishment16Friedman:“It would be designed to squeeze the largest possible fines out of convicted criminals, using the threat of more unpleasant alternatives for those who failed to pay.If the fines that victims can pay, even under such threats, are inadequate, they are supplemented by penal slavery for criminals who can produce more than it costs to guard and feed them, execution (with the organs
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