ABSTRACT
This chapter explains how economic theory can aid policymakers seeking to regulate criminal behaviour through an incentive mechanism. Much of this analysis is positive, focusing on the likely effect of proposed criminal laws on behaviour. The chapter focuses on the normative question of what kind of conduct is appropriately condemned. Recall that the economic criterion is efficiency, which focuses on the satisfaction of revealed preferences. This perspective yields insights into the nature of criminal behaviour. There are two categories of crime: those that are necessarily inefficient and those that efficiency may occasionally justify. The latter category bears similarities to tortious conduct, which the law wishes to restrict to a non-zero level reflecting the legitimate preferences of potential injurers and victims to engage in their desired behaviours. The economic goal of criminal law is to achieve the lowest possible level of such crime at the least social cost.
