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The Economic Theory of Public Enforcement of Law

Jul 1999
Working Paper
By  Steven Shavell, A. Mitchell Polinsky
Public enforcement of law -- the use of public agents (inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules -- is a subject of obvious generate, the extent of compliance with the income tax code, and the incidence of theft, robbery and other crimes. The earliest economically-oriented writing in the subject of law enforcement dates from the eighteenth century contributions of Montesquieu (1748), Cesare Beccaria (1767), and, especially Jeremy Bentham (1789), whose analysis of deterrence was sophisticated and economic scholarship until the late 1960s, when Gary S. Becker 1968 published a highly influential article. Since then, well over two hundred articles have been written on the economics of enforcement. The main purpose of our article is to present the economic theory public enforcement of law in a systematic and comprehensive way. The theoretical core of our analysis (section 2 through 4) answers the following basic questions: How much of society's resources should be devoted to apprehending injuries? If an injurer is caught, should the rule of liability be strict or fault-based? Should the form of the sanction be a fine, an imprisonment term, or a combination of the two? At what level should sanctions be set?