Privately Enforced & Punished Crime

I’ve been teaching law & economics for many years now, and have slowly settled on the package legal reforms for which I most strongly want to argue. I have chosen a package that seems big enough to inspire excitement and encompass synergies, and yet small enough to allow a compelling analysis of its net benefits.

My proposal is regarding how to detect, prosecute, and punish criminal law. It is not about non-criminal law, and it is not a proposal to change how we decide what acts are crimes, when to be persuaded by a particular crime accusation, how hard to work to discourage each criminal act, nor how hard to work to catch each criminal act. To start, I hold constant how we do these other things.

Now you might happen to think that we are very bad today at labeling acts as crimes, evaluating accusations, and choosing detection and discouragement priorities. So bad in fact that you think it a bad idea to make law more effective at detecting, prosecuting, and punishing crime. You might then prefer to reduce our criminal law enforcement abilities, such as via slashing police budgets or arbitrarily hindering police. For example, by  requiring police to wear big bricks on their ankles. And you might not want my proposal adopted until you first figure out how to fix the rest of criminal law. But you might still want my solution available for later. I’d be happy to work with you to design fixes for those other parts of the system. Just not today, not in this post. Today I focus on detection, prosecution, and punishment of crime.

Non-crime law deals mostly with accidents and mild sloppy selfishness among parties who are close to each other in a network of productive relations. In such cases, law can usually require losers to pay winners cash, and rely on those who were harmed to detect and prosecute violations. This approach, however, can fail when “criminals” make elaborate plans to grab gains from others in ways that make they, their assets, and evidence of their guilt hard to find.

Ancient societies dealt with crime via torture, slavery, and clan-based liability and reputation. Today, however, we have less stomach for such things, and also weaker clans and stronger governments. So a modern society instead assigns government employees to investigate and prosecute crimes, and gives them special legal powers. But as we don’t entirely trust these employees, we limit them in many ways, including via juries, rules of evidence, standards of proof, and anti-profiling rules. We also prefer to punish via prison, as we fear government agencies eager to collect fines. Yet we still suffer from a great deal of police corruption and mistreatment, because government employees can coordinate well to create a blue wall of silence.

I propose to instead privatize the detection, prosecution, and punishment of crime. My proposal isn’t especially original; many similar changes have been proposed before, and I can’t be bothered to do sufficient historical research to support public claims on who deserves how much credit for which suggestions. So I’ll instead just argue for a certain package of changes, and let historians work out the credit.

The key idea is to use competition to break the blue wall of silence, via allowing many parties to participate as bounty hunter enforcers and offering them all large cash bounties to show us violations by anyone, including by other enforcers. With sufficient competition and rewards, few could feel confident of getting away with criminal violations; only court judges could retain substantial discretionary powers.

That is, all laws are enforced, and enforced equally on everyone everywhere. Police and prosectors no longer have discretion to quietly ignore particular kinds of crimes like jaywalking that they think unworthy of their efforts. Or to prioritize crime in rich neighborhoods over poor ones. Or refuse to prosecute crimes by police or friends of the mayor. Enforcers are fully responsible for any harms they cause in attempting to pursue criminals. The legal system could still prioritize some people, acts, or neighborhoods, if it did so openly and explicitly, via officially declared legal parameters.

Okay, let’s get to the details. There are three big related changes:

Full Legal Liability Insurance – To get and keep a driver’s license today, one must usually show insurance able to pay others a certain minimum amount if found liable in a car accident. I propose to require that everyone get insurance to cover a high maximum liability for legal violations. At least a few million dollars. The main requirement to be an insurance firm here is to have deep enough pockets to pay client liabilities. Ideally clients and their insurers would retain a lot of freedom to make deals of their choosing, including over premiums, co-payments, etc., as long as it remains clear which insurers are responsible for paying for which clients. With full legal liability insurance, parties with deep pockets would sit on both sides of all criminal cases. No longer could a deep pocket side gain by threatening to force the other side to spend more than they have.

Cash Fines For Most Everything – With deep pocket insurers available to pay, we can use fines to punish most all legal violations. This makes it possible to avoid prisons for punishment, which are terribly inefficient. And if the rest of us feel that these fines sufficiently compensate us for crimes, we could make clients and insurers free to choose many details of how best to prevent and minimize the costs from crime, choices we now make awkwardly and centrally, taking too little context into account. Clients and insurers could make trades between preventing crime via monitoring and limiting client actions before a crime, or preventing crime via fear of punishment and loss after a crime. They might agree on (and arrange to pay for) specific amounts and types of punishment, such as fines, prison, torture, exile, or even death, in the event the client were found guilty of particular crimes. Only the crime of not obtaining full legal liability insurance might need an official non-fine punishment. Strong monitoring and punishments make sense here’; it should be possible to make this a very rare situation.

Cash-Paid Bounty Hunters – A bounty hunter is a party who pays to collect evidence on a crime, who pays to convince a court that a particular party is guilty, and who gets paid a bounty upon obtaining such a conviction. For each possible crime the legal system must set both a bounty and a fine, or a process for setting such quantities, which could depend on context (such as criminal wealth). The fine tells the insurer and client how hard to work to prevent violations, and the bounty tell hunters how hard to work to catch violations. A bounty that rises with the duration since a crime could pay small bounties for easy to catch fines, and large bounties for hard to catch ones. Large differences between bounties and fines, however, can induce the creation of crime, either by hunters to get bounties or governments to get fines.

Okay, that’s the key package of big changes. Now lets discuss some details.

With bounty hunters, I’m not sure how to handle privacy and property rights about evidence regarding a possible crime. Hunters could be given extra abilities to penetrate privacy, and might temporarily acquire exclusive property rights over evidence that they have collected. I’m pretty sure that if people like the rest of this legal reform package, we could work out reasonable solutions on these issues. And I’m not sure its worth the bother to work out such solutions in the absence of seeing sufficient interest.

As per my new book, citizens may prefer hypocritical legal systems, which pretend to do one thing, but really do another. Hypocrisy can sometimes be achieved by agents with discretion, who can say they are doing one thing but are given opaque incentives to do another. Today police, prosectors, and judges all have discretion. In my alternative proposal, only judges can retain much discretion, to decide if particular people are guilty, and perhaps also case to decide case-specific fines and bounties. If citizens want hypocrisy, but judge discretion is insufficient to achieve it, this becomes a disadvantage of my proposal. Even so, we might study reactions to a proposal like this to help identify common hypocrisies regarding legal policy.

It is in general very important for legal systems set legal liability carefully. The power to make others more liable to you, just because you want to get paid more, is a huge and dangerous power. For example, if we make big firms pay little people like us huge amounts for being harmed by product defects, just because we sympathize more with them relative to big firms, well that can cause great harm, such as overly cautious product safety. This issue becomes somewhat more important in my proposal, as all laws are fully enforced and insurers’ deeper pockets allow for larger liability payments. If we are handling this problem reasonable well now, however, we can probably continue to manage it well enough. But if this problem gets bad enough, it might be better not to have any legal system.

This system could include redistribution to help poor people with high legal liability premiums. For example, someone with a long conviction history might only be able to afford premiums if they agreed to stay on a gated and isolated work farm. The rest of us would have to decide whether to subsidize this person to gain more lifestyle options. Note that today such a person might be just left in prison. Note also that we don’t today offer special cheap insurance to low income folks who have caused many auto accidents; we instead want them off the road.  As premiums depend on the deals that clients accept on punishments, monitoring, and action limitations, redistribution polices would implicitly make judgements about which such deals are seen as reasonable. Even so, this might still give individuals more flexibility than in our world of criminal law. A related option is to create standard public insurance options open to all.

Relative to non-criminal law, we today make it more difficult to obtain convictions in criminal law, such as via juries and higher standards of proof. If this is because we less trust government police and prosecutors not to collude with judges, then we might see this as less of a problem in a more open system of competitive bounty hunters. If so, we could cut juries and lower standards of proof, and then catch more crimes more cheaply. There are also other ways we might plausibly lower court costs without much lowering the accuracy of decisions.

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  • Ryan Weller

    Are you serious?

    You miss the main purpose of criminal law as opposed to only civil law. Some things are hard to put a price on. What’s the right price to compensate for a murder? or a rape? How much utility does the criminal derive from the act?

    Two reasons that there is a higher standard of proof for criminal cases is because there is a penalty (not just compensation for the harm caused). There are a few exceptions of punitive damages in civil cases, but those are a relatively recent innovation that apply only in a few types of cases. We generally want to be absolutely sure someone is guilty before we let the government punish someone. If it’s a close call between two private parties (“He caused the car crash!” “No, you did!”) we don’t mind having one compensate the other in a close call.

    Your solution to people who can’t afford insurance—putting repeat offenders in work camps—seems worse than the status quo. Instead of these people loosing their liberty because of a finding of guilt beyond a reasonable doubt, you propose letting insurance companies (and how do you make sure this is a perpetually competitive market?) charge more than they can afford. On the opposite end of the spectrum, it seems like wealthy people who can afford the higher insurance premiums would barely be affected by the criminal law. Does this we’re okay with a billionaire murdering a few people as long as he/she pays his/her insurance premiums? If not, it seems like you would want a penal system that more resembles the one we have.

    • We of course do put prices on crime today. We choose how much to spend on police, prosecutors, and punishment.

      It is inaccurate to call work camps my solution. I described that as what the parties might choose without redistribution, and then said that we might choose do add redistribution.

      I said that fines could depend on context. That context includes the wealth of the criminal.

    • davidmanheim

      How does the current system address the difficulty of pricing criminal acts? It doesn’t – it simply assigns a penalty, and tries to calibrate that to minimize total harm done.

      And the idea that burden of proof should be 2-tiered is strange, and advocating for it seems like privileging the status quo more than is warranted. Why only 2 levels? Why not an ascending burden depending on severity or some other factor?

      • wiztwas

        There are alternatives, instead of punishing those who do wrong and making them members of the criminal class destined to spend a life in and out of jail, we can rehabilitate them, we can show them a better way to live their lives, we can rescue them from drug addiction, we can save them (and ourselves) from a life of crime and incarceration.

        Single solutions are not the answer, the answer is to find the right solution for each individual, some people will need to be locked up and some can be helped, the majority could go either way, it is our choice.

        If the economics of the system are such that more profit is to be made from maintaining a level of crime, then that is what the system will be optimised towards.

        Eradicating all crime would be an economic disaster for this model, although it would be bliss for society.

      • In my proposal, insurers who believe your claims would have incentives to do what you say regarding suitable clients. This would happen far more often than in our current system.

  • I think you are approaching this wrong. Instead you should be making the case there is a problem that needs fixing and how this method would lower costs and improve results. It just isn’t enough to propose an alternative claiming it might or would have this effect. You need to total these costs and estimate those savings, together with identifying other problems that may arise and how much those would cost. It isn’t at all clear this would be less costly, in direct or indirect costs.

    I would assume many will not be able to afford insurance, or more likely, no insurer will be willing to underwrite at any cost, or any restraint. Are there any insurers willing to underwrite life insurance for the imprisoned today? Or would be if they couldn’t exclude the very conditions they would most likely cause loss? Willful disregard isn’t currently insurable under any circumstances today, both because such insurance would lead to lessening the restraint involved and the moral hazard of making crime an economic calculation rather than a moral one. Incentives to achieve one end generally result in incentives to reward others, such as making crime a business.

  • Robert Koslover

    These seem like rather large changes. Do you envision paths by which any of these ideas could actually be adopted, and thus experimentally tested, even if only in part, via smaller (and potentially staying within the bounds of the US Constitution) changes to existing local law enforcement systems?

    • We already have a lot of data on bounty hunters, prizes, liability insurance, and fines. So it is just a matter of doing larger and larger scale and scope trials.

  • Peter Watt

    In support of your arguments, it seems that the private sector Pinkertons were prior to and better than the FBI. The FBI “crowded them out”. I think Bruce Benson argues that historically the state has generally taken over private justice because it is always looking to get into remunerative new lines of business.

    A possible problem with your idea is that the cost of getting insurance might increase the incentive for a person to drop out, not get insurance, have no resources that can be taken, live hand-to-mouth etc. So they couldn’t be fined. Against that, if your scheme worked, that problem could be overcome by greatly-increased average wealth.

    • As I said, strong monitoring and punishment make sense for the specific crime of not having liability insurance.

  • wiztwas

    The rich will have more enforcement than the poor because they have more money and can buy a private police force of their own to police just their area.

    Privatised public services only serve to help the rich and powerful. The risk v reward in some areas will become negative, we will have ghettos of lawlessness where poor people live and pinnacles of piety where no crime goes unpunished and only the rich live.

    I only hope Donald Trump doesn’t read this because he is idiot enough to do it.

    Public service and Private profits are incompatible.

    We need to stop wasting public money giving it to companies that are set up to make private profits.

    We do not have to be selfish, we do not have to embrace the worst aspects of capitalism, we can walk a middle line, we can have corporations that do not have private profit as a goal, we can go in other directions.

    • Do you think government police today should be allowed to buy clothes, cars, computers, and guns from private firms? Doesn’t your argument imply that nothing should be provided by private firms, as they all only serve the rich?

      • Peter David Jones

        The point can be steelmanned to “private profit does not optimise for making something affordable to everyone, and is therefore a bad solution where universal provision is required”.

      • But profit oriented firms do in fact achieve universal provision of food.

      • Peter David Jones

        By giving it for nothing to people with no money? No, governments give food stamps to people with no money.

      • As I’ve repeated many times here, redistribution could subsidize insurance for any desired group. As with food, that is compatible with private firms providing the key products.

      • Peter David Jones

        Private firms already provide bits and pieces of the criminal justice system in many countries…that is not a radical point.

        It would be radical to suggest that a largely free market approach provides better incentives, but you seem to have backed down from that.

        I can’t see what you are saying at this point. A fine based system might work if most crime is minor and perpetrated by average income people. But people who can’t pay fined are going to commit more crime, people who can easily pay fines need more of a deterrent, and dangerous people need to be taken of circulation.

        You can keep fixing those problems, but problems, but I strongly suspect the process will end up with a similar system to current ones.

    • Trut Tella

      If the correct incentives are applied, the people who cause the problems (hint- they don’t live in a holler in Appalacia) will go somewhere more hospitable, like Brazil. Problem solved.

  • Huseyin

    The rich will buy high premium insurance with low monitoring and low non-monetary punishment. The poor will buy government subsidized, low premium insurance with lots of monitoring, prison, torture, and execution. Not that different than the current system just more transparent. Low premium does not mean cheap lawyers in court though. The poor will be defended by good lawyers which will be a big improvement. There will be a lot of pressure on the government to keep the subsidies low, but it will hit a lower bound pretty quickly since there needs to be willing parties to insure. Non-monetary punishment will increase. Signals will be very strong so if there is enough competition the optimum amount of deterrence will be chosen. If capital punishment/torture is not working as a deterrent it will not appear in even the cheapest insurances. However there can also exist insurances with very high punishment for even the most minor offenses for signaling purposes.

    • These seem a reasonable set of estimates to me.

  • Totally dystopian.

  • I don’t think you could get away constitutionally with subjecting folks to monitoring simply because they lack the funds to buy liability insurance.

    If this is your example of a small change that encounters unexpected resistance, it only debunks your claim.

    • People agree via contract all the time to be monitored.

      This post is obviously about a large change.

      • Peter David Jones

        > This post is obviously about a large change

        Yeah: it is no longer possible to avoid being monitored.

  • Ronfar

    The obvious, but not necessarily deal-breaking issues…

    1) What happens to people who can’t find an insurer or have no money?

    2) Bounty hunters – and perhaps “ordinary” citizens too – have an incentive to frame people or induce people to commit crimes in order to collect rewards for a successful prosecution. This incentive does not exist as strongly with traditional police. Similarly, entrapment defenses are more plausible when incentives line up this way.

    3) Police are also tasked with stopping crime in progress as well as investigating crimes after the fact. To that end, they are authorized to use force in ways that it are illegal for private citizens to use. How does this work with a bounty system?

    • 1) One option is to create standard public insurance option open to all.
      2) Incentives to mislead judges exist in all court cases.
      3) Making attempted crime a crime handles in progress crime. Insurers will want to monitor to prevent crime.

      • Trut Tella

        It doesn’t seem that much of a stretch for insurers to offer either their clients (for a discount on insurance) or passersby either a standard bounty, or an adjusted payment based on some similar process to the laws of maritime salvage.

      • Peter David Jones

        1. So a pure free market solution doesn’t work? That raises the question of why you would even need a partial free market solution.

        2. Fallacy of grey.

        3. Doesn’t address the original point: how does a citizen stop a putative crime without illegal use of force?

  • Trut Tella

    Not reasonable.

    One can argue for full legal liability insurance in a homogenous society, where say, working class Finns are only slightly more likely to commit a crime than upper class Finns.

    • In a world where it is clear there are different types of people, insurers will offer them different contracts. Those very prone to cause harm will pay higher premiums, and face more restrictions on their behavior.

      • Peter David Jones

        Those prone to cause harm will have less money. You have re-created the situation where people who can’t earn much money because of chronic illnesses have to pay high medical insurance premiums, because of their chronic illnesses. Don’t reinvent bad things.

      • As I said in the post, one can choose to redistribute to those likely to cause crime, just as some places do in favor of those more likely to get sick.

      • Peter David Jones

        So you are re-inventing the US medical “system”?

  • Silent Cal

    This triggers my absurdity heuristic as much as anyone’s, but I’m trying to look past that and tally advantages and disadvantages.

    -Breaks the Blue Wall of Silence. If bounty hunters shoot you when you’re unarmed, other bounty hunters will be compelled by the full force of the profit motive to collect bounties on them.

    If you think the current state of police violence is unacceptable, you cannot dismiss this proposal out of hand.

    -Creates market incentives to develop deterrence, incapacitation and rehabilitation schemes with a minimum of harm to the inmates. If you believe there are much better such schemes to be had if anyone really bothered to look, this should be exciting. In particular, if you think the current system has significant amounts of gratuitous cruelty that harms prisoners without benefiting anyone else, this should be exciting.

    -Presumably fellow officers in the same force have better knowledge of each others’ misdeeds than a rival force would uncover. So breaking the Blue Wall in the present system might lead to better-checked police action than the proposed system. We’d be giving up on that possibility–weight this by how strong a possibility you think it is.

    -Requires explicit acceptance of different justice treatments for rich and poor. This is widely believed to already happen plenty, so there’s certainly hypocrisy here, but realistically the magnitude would probably increase a lot, with the extreme case being a self-insured billionaire committing lots of crimes and paying the fines without breaking stride. This may not make the concrete outcomes worse for anyone, but it runs quite counter to human justice intuitions. This is probably the deepest real objection.

    Maybe you could cap insurance premiums so that even the rich have to risk punishment that the rest would recognize as punishment?

    -Insurances might offer ‘degrading’ choices that many people feel are wrong even if entered voluntarily. Granting for now the validity of this hotly-debated feeling, one could place legal limits on insurances’ conditions to prevent these.

    -Increased incentives for bounty hunters to frame/entrap, as Ronfar says. If framing/entrapment is easy to get away with, this would probably lead to much more of it than in the present system, as bounty hunters would have unlimited incentive to do it. But if framing/entrapment are easy to expose, the new system might be better, due to the Blue Wall breakdown.

    -Lots of room for unknown unknowns with a change this size, but that’s why you run trials.

    I have more bullets under disadvantages, but they’re mostly small/mitigable. Whereas IMO the second advantage is enormous.

    I would like to see trials of this.

    • I have little hope that we’ll soon find a clever way to break the blue wall in govt police.

      The fines could vary with wealth, making rich people also reluctant to commit crimes. Enforcement already doesn’t vary for rich, as hunters are eager for bounties on anyone.

      I’m okay with people choosing degrading options, if that’s what they want.

      Courts have long had to worry about lying litigants. They are all set up to be skeptical. If they can’t handle liars, there’s little point in using courts.

    • Peter David Jones

      The current US system, or a typical Western system? The US system has much worse outcomes that other wealthy countries, so the modest proposal would be to do as they do.

  • Anon

    This is a really good idea but the desire for hypocrisy is indeed the big disadvantage. For what it’s worth this is very similar to anarcho-capitalist justice, except for the “socialized” judges and backbone.

    Ultimately we’re going to get something similar to this whether we like it or not; assassination politics. The judge would be a prediction market (like Augur), the law would be determined by the costs against which people decide to insure, and the penalty for insufficient coverage would be death.

    • Its far less obvious to me that assassination markets will become easy and cheap to use.

      • Anon

        The average consumer wouldn’t be using the assassination market directly – they’d be buying insurance against losses or harm from crime.

        The transaction cost in buying insurance through an app should be compared to the cost of deciding which values for which to vote. And there’s a direct personal benefit to being insured, which there isn’t for voting.

  • Philon

    You are creating a new victimless crime: being without legal liability insurance. Like all victimless crimes, this one will be very difficult to enforce. It is good that “we could make clients and insurers free to choose many details of how best to prevent and minimize the costs from crime,” but this benefit would not apply to the new victimless crime, which would have to be handled by the government on its own. The “strong monitoring” that you expect the government to engage in is especially worrisome (compared with the monitoring, if any, that a client would agree to be subjected to by his insurance company).

    “For each possible crime the legal system must set both a bounty and a fine, or a process for setting such quantities, which could depend on context (such as criminal wealth).” You complain that the present system takes context too little into account; why do you think your reform will improve that circumstance?

    • I don’t expect the official fines and bounties to take enough context into account; I was just pointing out that they could take some. It is the deals between clients and insurers that I expect to take more context into account.

      If there were no expected future harms, at least as measured by crime law fines, premiums would be zero. The
      “victims” of not having insurance are the victims of those future crimes.

  • David McFadzean

    On the issue of bounty hunters potentially violating privacy and property rights in order to gather evidence, I think these should be handled as separate offenses. Bounty hunters could then make rational choices about when to violate rights knowing that they will likely have to compensate the victims. They would only do so when the expected value of the bounty is greater than the expected value of the fines incurred while gathering evidence.

    • Oh I intended any violations by hunters to be treated like violations by others. I meant should hunters be sometimes be given special permission to invade privacy, in which case that wouldn’t be a violation. And should they sometimes have property rights over the evidence that they’ve collected?