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Public Enforcement of Law

May 2006
Working Paper
05-016
By  A. Mitchell Polinsky, Steven Shavell
This entry for the forthcoming The New Palgrave Dictionary of Economics (Second Edition) surveys the economic analysis of public enforcement of law—the use of public agents (inspectors, tax auditors, police, prosecutors) to detect and to sanction violators of legal rules. We first discuss the basic elements of the theory: the probability of imposition of sanctions, the magnitude and form of sanctions (fines, imprisonment), and the rule of liability. We then examine a variety of extensions, including the costs of imposing fines, mistake, marginal deterrence, settlement, self-reporting, repeat offenses, and incapacitation.