The Economics of Crime and Punishment

III. Three Critical Questions in Law Enforcement
In this section, I overview what I consider the three most important questions in current research on the economics of crime and punishment.
a. The Efficacy of Deterrence
The previous section discussed some potential policy tools that are available to the government to restrict crime. In principle, the government might attempt to limit the benefits to crime or raise the legal wage. However, historically the most important weapons against crime have been the direct tools of arrest and punishment. Before the
19th century, serious crimes were generally punished with death or other forms of severe corporal punishment (see Foucault, 1995). Lesser crimes were punished with public humiliation and lesser forms of corporal punishment. In some societies, fines were also used (even occasionally for murder).
After 1800, prisons became the standard form of punishment for almost all crimes, throughout Europe and the U.S.. There are several possible explanations for the evolution. Some theorists credit the increasing distaste of the public for painful, public physical punishment. Alternatively, other theorists have argued that the use of prisons was part of the common movement to restrict the power of the state in imposing punishment. This vein of thought emphasizes that the restrictions on cruel and unusual punishment were part of the Bill of Rights, which are generally meant to restrict the powers of government. A final theory is that incarceration makes more sense as professional criminals replace amateurs. When crimes are committed as random acts by generally productive persons, it is very costly to engage in incarceration. However, as crime became more professional, incarceration leads to social gains as criminals are incapacitated. The modern economics literature on the efficacy of forms of punishment began in the
1970s. Exemplars of this literature include the early work of Isaac Ehrlich (1973,

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