Social Welfare and the Benefits to Crime

There exists a large literature on optimal deterrence of crime. Within the literature, however, there exists a controversy over what the appropriate criterion is to determine optimality. The most popular method is that of maximization of a utilitarian welfare function. The controversy stems from the fact that the benefits to crime are included in the welfare analysis. Another criterion that could be used is that of cost minimization. This paper demonstrates that maximizing the sum of utilities is in fact equivalent to minimizing the costs of crime, independent of the benefits criminals receive from their illegal activities. The model developed also provides explanations for sanctions that increase in one’s criminal history and why criminal law and the law of torts co-exist. ∗We would like to thank Christian Dippel, Murat Mungan, Paul Pecorino and participants at the Canadian Law and Economics Association meetings as well as seminars at Brock, McMaster and the University of Guelph for comments.