Should Criminal Penalties Include Third-Party Avoidance Costs?

Kermit Daniel and Lott, John R,

The Journal of Legal Studies, 1995, vol. 24, issue 2, 523-34

Abstract: There is general agreement that burglary produces social costs over and beyond the damage done to the victim if a crime raises other potential victims' subjective estimates of being robbed and thus increases their investments in protecting themselves (e.g., purchasing more locks). Economists traditionally view the marginal investment in locks by neighboring houses as a negative externality produced by a burglary. This article shows that it is wrong to view third-party expenditures as a negative externality. Instead, they are usually an indicator that third parties are benefiting from the mistakes of others. We first show how this reasoning applies to burglary and then to fraud. Copyright 1995 by the University of Chicago.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:24:y:1995:i:2:p:523-34

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