Synonyms

Law enforcement by government

Definition

Public enforcement (PE) is a sanctioning mode involving a wide variety of government people such as police, prosecutors, and regulators. Although society can rely on a range of nonpublic sanctioning modes to control undesirable acts, certain situations occur where economic rationales exist for PE. The social harm from the act, the probability of detection, and the severity of the sanction are critical for its optimality. It is also important to lower administrative costs and to overcome bureaucracy for successful PE.

Introduction

Public enforcement is a sanctioning mode sometimes with the use of physical force, involving a wide variety of people in the government sector such as police, prosecutors, and various regulators. In fact, the phenomenon of public enforcement playing such a predominant role is very recent in human history terms.

Believing that an efficient sanctioning mode varies across different situations, a number of scholars have examined the issue of enforcement for some time under themes such as “system of social control,” “structure of enforcement,” “modalities of regulation,” or “methods of public control” (Ellickson 1973; Shavell 1993; Posner 2011). In particular, since Becker (1968), scholars have paid special attention to public enforcement and have produced numerous articles.

Why Public Enforcement and How Is It Undertaken?

Society relies on a range of nonpublic sanctioning modes to control many undesirable acts. A representative example is “self-help” such as reputation, self-protection, and purchase of insurance (Ehrlich and Becker 1972). Another example is civil ligations associated with torts, contracts, and other private-law doctrines, sometimes called “judicial regulations” (Posner 2011). Society has also developed remedial methods to support these nonpublic sanctioning modes, such as the property rule, the liability rule, or inalienability (Calabresi and Melamed 1972). However, certain situations occur where these private sanctioning modes do not work or become very inefficient in coping with undesirable actors.

Since Becker and Stigler (1974), Shavell (1984a), and others, it has been well established that at least four economic rationales exist for public enforcement. Public enforcement becomes a superior mode as government is better equipped in gathering information about the production of harm. Also, upon being caught, injurers may have insufficient assets to compensate the victim (i.e., the judgment-proof problem). It is also superior when the potential injurer seldom faces the threat of civil suits and can thus escape liability. Finally, public enforcement should not incur too high administrative costs to secure its superiority.

Given these situations, based on Polinsky and Shavell (2000) and others, let us consider briefly how public enforcers could set the severity of the sanction (s) at an optimal level. A risk-neutral injurer (A) obtains a benefit (b) from an act which can incur social harm (h), with a probability (q). If h occurs, A is caught with a probability (p). p is less than one, reflecting the reality of imperfect enforcement. h differs across acts and is assumed to be fixed in the short run.

The optimality requires that the expected sanction to A, ps, should equal the expected social harm, qh. Since A then performs the act only when b exceeds ps, the optimality condition warrants the social efficiency of the act in question (i.e., the condition whereby b should exceed qh). In other words, A’s private incentive is consistent with that of the social planner. Further, since p is less than one, the optimal level of s is qh divided by p. Thus, the inverse of p plays the role of a multiplier, so that A’s private decision can be internalized appropriately. Note that the optimal level of s should be reduced if A is risk averse. Otherwise, A’s act will be over-deterred because the expected net benefit (i.e., b contracted by qh) is discounted by risk aversion. Finally, noteworthy is that this model is independent of A’s benefit, b. In fact, a model heavily focusing on b inevitably forces public enforcers to focus on the information associated with b that can inherently be more easily fabricated by A, consistently making the arrow of public enforcers land wide on the target of optimal sanctioning.

Additional comments on this simple model might shed beneficial insights, even for more complicated models that were later developed. First, public enforcers, of the three variables in the model, need to have precise information particularly regarding h across different acts, in order for this system to work (p and q are assumed to be fixed at least in the short run, and information on b is unnecessary). Therefore, the aforementioned superiority of government in gathering information about the harm is a core prerequisite for public enforcement.

Second, although the (low) level of p has often been treated as exogenous, public enforcers must maintain a certain level of p; otherwise, the system will suffer from the ex post equity problem between the detected injurers and those who escaped successfully. Further, a prohibitively high s with a very low p (close to zero) will too easily induce the judgment-proof problem, leading to nullification of public enforcement. More importantly, such a system will hamper the essential (constitutional) principle in enforcement of “marginal deterrence,” which postulates that the severity of sanction should increase proportionally to the harm level. This notion, in fact, was emphasized even in earliest writings such as Bentham’s Principles in 1789. For example, if the death penalty or a one million dollar fine is imposed to a driver who hits a pedestrian and causes a slight wound, the driver would have an incentive to run away or even to kill the wounded pedestrian to escape the penalty. Therefore, public enforcers are required to invest in raising p to an acceptable level, which would consume real resources.

Lowering High Costs of Public Enforcement and Overcoming Bureaucracy

As theoretical inquiries have shown, public enforcement certainly offers an advantage under many circumstances. Nonetheless, as with many other government operations, it incurs generally high cost. If the assumptions about the government as the benevolent and omniscient planner are released, the cost further increases. A large portion of the literature considers this cost aspect of public enforcement.

Firstly, scholars realized that, while public enforcement is needed for a certain number of undesirable acts, for various reasons, such acts cannot be efficiently controlled by it alone. For example, the marginal information cost increases with respect to the degree of enforcement sophistication. In fact, such recognitions motivated scholars to examine the allocation of public enforcement resources, even from the early stage of research. It is perhaps in this context that research on the combination of public and nonpublic enforcement captured their attention. In retrospect, these early studies were meaningful contributions, particularly in the sense that the researchers were developing more hands-on normative theory built on positive observations.

Consider the case of using traffic signals to maintain order on public roads. Enforcement by police in terms of whether drivers violate them can be done reasonably easily. However, police cannot assign a tailor-made speed limit that reflects each driver’s value of time, level of urgency, driving skill, etc. The limit is uniformly enforced (e.g., 100 km/h on highways and 30 km/h in downtown areas). If a driver mistakenly hits another car while driving over the limit and causes harm, liability is imposed on top of issuing a ticket (i.e., “per se negligent”). However, the opposite rule (i.e., “compliance defense”) does not hold. That is, even if the injurer is driving under the limit, liability is not automatically exempted.

This joint use of public enforcement and liability is used in most jurisdictions. Shavell (1984b) attempted the first theorization to draw its efficiency implication. He highlighted the imperfect nature of public enforcement (e.g., enforcing the speed limit) due to imperfect information particularly about different magnitudes of harm. Also, the insufficient precaution when using liability alone was emphasized. Thus, a popular proposition followed that it is socially cheaper to employ regulation and liability jointly, with a lower regulatory standard than if liability were not used. Later, the role of liability to ameliorate the high costs of public enforcement, primarily in terms of reducing information costs, was further confirmed. Also, the role of public enforcement to support liability was sometimes underlined instead. Overall, these studies were endeavors in search of efficient public enforcement, given its high costs (Kolstad et al. 1990; De Geest and Dari-Mattiacci 2007; Bhole and Wagner 2008).

Scholars subsequently applied these theoretical studies to broad arenas, ranging from product safety to transportation, hazards, environment, health, etc. La Porta et al. (2006) provided an exemplary inquiry. The authors demonstrated that the proper use of civil liability standards together with public enforcement is necessary for the successful operation of securities markets. Meanwhile, extensions were made to explore the joint use of different modes of public enforcement, such as that of administrative penalties and criminal punishment (Garoupa and Gomez-Pomar 2004; Bowles et al. 2008). Given that such joint use is ubiquitous across countries, this approach is differentiated from the earlier dichotomous-choice models. Furthermore, research on the combined criminal sanctions of fines and imprisonment was launched already in the 1980s (Polinsky and Shavell 1984). A major implication is that the use of imprisonment, the highest-cost sanction, should be confined to cases where the insufficient-asset problem or the need to incapacitate offenders prevails.

Finally, a brief but significant caveat deserves mention. Although overall features of actual public enforcement are roughly consistent with the theories, substantial discrepancy routinely occurs, i.e., “bad equilibrium,” primarily due to the public enforcer’s incentives which differ from the public-interest mindsets that ordinary citizens would expect them to have (Becker and Stigler 1974). Public enforcement can be characterized as being dominated by “entrepreneurial competition,” wherein bureaucrats pursue their subjective goals such as wealth, promotion, and discretion (Breton and Wintrobe 1982). Numerous researchers have already examined public enforcement from this perspective. Nonetheless, in summary, it should be emphasized that the details of public enforcement must be steadily scrutinized through these critical lenses in order to facilitate a change in such bad equilibria. Also, in attempting to further lower high costs, incentive-compatible rules must be implemented that require much more use of “pricing” in the allocation of enforcement resources.

Cross-References