Answer 5. a.

1st Law of Deterrance and optimal Deterrance

 1st law of deterrence was give by Robert Cooter.

 It provides for the elasticity of supply of crime.

1
N∝
E( P)

N = the number of crimes

E(P) = expected punishment

That is N is inversely proportional to E(P).

i.e. Higher the expected punishment lesser will be the crime committed in the society.

Graph 1 shows inverse relation between N and E(P)

Elasticity of Supply of crimes (e SC )

 A proportionate change in number of crime with respect to proportionate change in

expected punishment is the elasticity of supply of crime in a society.

%∆ N
e SC =
% ∆ E(P)

 The elasticity of supply of crime plays a vital role in the in deterrence of crime.

1
  Refers to crimes that are more elastic in nature and heavily influenced by a slight
change in deterrence. For instance, a raise in fine for breaking traffic rules
dramatically reduces the number of offenders. Here, the elasticity is greater than 1
for elastic crimes and this are usually includes minor crimes that are punished with
fines.

Graph 2: Crimes where elasticity is more than 1

 Inelastic crime includes those criminal acts that often have little or say no impact in
deterrence. The inelastic crimes include passionate crimes, drug abuse and seasoned
criminals. In such cases a mere raise in deterrence will not have a substantial impact.
The use of other means such as education, training, rehab etc will have to take place.
The elasticity is less than 1 in inelastic crimes and change in E(P) will not have a
strong impact and therefore the alternates are required.

Graph 3: Crimes where elasticity is less than 1

As far as the control policies are concencerned, they must be made keeping in mind the
nature of the crime. The elastic crimes can be controlled by increased deterrence whereas the
inelastic crimes require higher vigilance and alternates such as rehabilitation.

2
Answer 5. b.

With reference to the question,

Optimal deterrence (D*) = 60000

Cost to offender per month (c) = 5000
Wealth (W) = 30000
Initial probability of apprehension (p1) = 0.6
New probability of apprehension (p2) = 0.5
Savings (S) = 2000
Social Cost (SC) = 4000

 Iso-deterrence curve is a tool in order to obtain an optimal enforcement strategy by

stimulating the trade-off between the probability of apprehension (p) and Fine (F).
 The curve will be a rectangular hyperbole with a locus of different values of p and F
wherein at any point on the curve, p.F give a constant quantity of deterrence in terms of
the expected punishment.
 Thus, the combination of p.F remains constant on this curve and therefore, the deterrence
is unaffected.

Expected Fine E(F) = p . F = constant.

 There is an inverse relationship between p and F. The deterrence must be constant and
therefore a decrease in p will lead to an increase in F and vice-versa. This leads to two
significant outputs:

I) p is too high and F is low, that is high apprehension thus police will will nagate the
offender and the fine will be low. The social cost here will be very high as the
increase in probability of apprehension requires various expenses to improve the
control and vigilance.
II) p is low and F is too high, the conviction rates will be very low but very high will
be painful for the offender such that he will become judgement proof. So here the
maximum fine wll be quivalent to the wealth.
Therefore, any point of the pair (p,f) on the line will have the same value and it will
be optimum at W. Hence, p can only be lowered down upto p*.

3
 The range between p and p* is the range of laxity and optimizes the enforcement and
cost.

Graph 1: Iso-deterrence curve

In order to reduce the social cost,the quantity between p and p* can be relaxed. It is pertinent
to note that the deterrence is also not hurt as the fine is increased. A decrease in p must be
done only when the Net social harm (NSH) is more than the increase in Enforcement Cost
(EC). This can be determined through a simple CBA (cost benefit analysis).

NSH = h-g

If reduction in NSH is more than the increase in EC, only then it is wise to shift the
probability i.e. where benefits are more than cost, a shift in probability of apprehension
will have a real impact.

As specified by professor Gary Becker, fine must be the primary tool of deterrence and
imprisonment must be done only when an offender does not have the capacity to pay the fine.
The inability to pay the prescribed amount of fine is known as judgement proof.

Imprisonment is a secondary tool for deterrence and must be used only when an offender
is unable to pay the fine. There amount of fine can thus be calculated in the following ways:

h
Where ≤ W (the individual has the capacity to pay the fine):
p

Harm(h)
Optimal deterrence (D*) =
Probability of apprehension ( p)

h
Where > ( the individual is judgement proof)
p

4
 Optimal deterrence (D*) = Wealth (W) + Imprisonment

D* = p (F + ct)

In the present case, it is well established that the offender is judgement proof as the fine is
greater than the wealth. Therefore the shift in p will have a direct impact on the time (t) of
imprisonment and impact the overall social cost.

D* = p1 (F + ct1)

60000 = 0.6 (30000 + 5000 × t1)

100000 = 30000 + 5000 × t1

t1 = 70000/5000

t1 = 14 months.

Similarly, when the probability is reduced to 0.5

D* = p (F + ct2)

60000 = 0.5(30000 + 5000 × t2)

120000 = 30000 + 5000 × t2

t2 = 90000/5000

t2 = 18 months.

The imprisonment period has increased by 4 months.

Expected Social Cost E(SC) = p * SC = 0.5 * 4000 = 2000

Savings (S) = 2000

Since the expected social cost and the savings are equal, therefore it is not optimal to lower
the probability of apprehension. If the expected social cost was higher than the savings, it
would be optimal to reduce the p.

Hence, this must not be reduced.