Bounty Hunter Blackmail

Consider a fine-insured-bounty (FIB) crime law system such as I outlined here. All (but one) crime is punished officially by fines, everyone is fully insured to pay large fines, and bounty hunters detect and prosecute each crime. In a FIB system, we collectively decide the fine and bounty level for each crime, and manage a judicial system which decides individual cases.

If we set the fine level for each crime at our best estimate of the social harm produced by one more crime event of that type (divided by the chance that it will be caught, plus enforcement costs), then the insurer-client pair would internalize that social harm, in which case we could leave that pair free to choose punishment types, costs, and levels, as well as (many aspects of) police and prosecutor monitoring and investigative powers.

We could also let bounty hunters choose (many aspects of) police and prosecutor costs, methods, and priorities. Instead of agonizing over centralized one-size-fits-all crime policy decisions as we do now. We could also break the blue wall of silence to ensure that all laws are actually enforced, even on police, leaving only judge-based discretion on particular cases. Via redistribution, we could help those who face high insurance premiums, but know more precisely who we are helping how much.

The total social harm from each type of crime includes not just the harm caused directly by committing that crime, but also the costs incurred by bounty hunters in pursuit, and by insurers to prevent and estimate risks. Since in a competitive market with free entry the average bounty hunter costs should be close to the bounty level, this suggests that with competitive bounty hunters the fine is larger than the bounty.

This difference between the fine and bounty should also be large compared to the fine. After all, if this difference were small, then bounty costs would cause most of the social harm of this crime. In that case we’d be tempted to decriminalize this activity, to drastically lower its social cost. Unless the rate at which this activity happens varies strongly enough with the fine level, the harm of inducing more of these kind of events via decriminalization would be more than outweighed by less harm per event.

The fine and bounty levels should change if the criminal (or insurer) turns themselves in quickly. In that case, no one gets paid a bounty, there’s a high probability that such crimes will be caught, and both of these imply that the fine level should be lowered.

Having fines larger than bounties can create a dangerous incentive if the part of the system that sets fine and bounty levels also gets to spend a substantial part of the resulting net revenue. However, in modern governments it seems be quite feasible to greatly separate these groups, making this less of a concern.

Another problem created by big fine-bounty differences is private deals between insurers and bounty hunters. If a case regarding a particular claimed crime event goes to court, and the bounty hunter wins, then that hunter wins much less than the insurer loses. These two parties would rather settle out of court via “blackmail” deals where the hunter gets paid and keeps quite about their evidence. Here they could split the fine-bounty difference, so that the insurer loses less and the hunter gains more.

Now there are some big obstacles to such trades, in addition to the usual transaction costs, such as secrets, strategic delays, and finding the other party. The insurer can’t be sure that other hunters won’t acquire the same info, perhaps sold to them by this hunter, perhaps via overhearing this negotiation. The blackmailer might be bluffing about having info, and instead be recording their interaction to create evidence of criminal guilt. And payments must be spread out across time, as the blackmailer can continue to demand payments no matter what’s already been paid. These obstacles mean that in such deals the hunter will on average get much less than the fine amount.

But if we want to support large differences between fine and bounty amounts (e.g., F >3B), we’d have to prohibit such deals, and prohibit most insurer-hunter contact as well to make it hard to arrange such deals. Such prohibitions are easier to enforce on bounty hunters not protected by a blue wall of silence, but perhaps still not easy to enforce.

Keeping insurers and hunters apart has the disadvantage of making it harder for a hunter to help with crime prevention. If a hunter came across a person who seemed to be about to commit a crime, they might selfishly just wait for the crime to be committed, and then jump in to grab its bounty. We’d rather that they instead helped to prevent the crime. Such as by contacting the potential criminal’s insurer, and asking if they’d like to buy some info to help them avoid paying a fine. But if we allow such contact, hunters might contact insurers pretending to help with prevention, while in fact negotiating blackmail deals regarding crimes that have already happened.

When large fine-bounty differences are needed, I suspect that the best answer here is to just give up on having hunters help with prevention, and thus to limit insurer-hunter interactions. (This somewhat reverses my prior stance on blackmail.) Insurers are likely to take a lot of initiative to monitor and advise their clients. As a result insurers may usually be the first to guess that a crime may soon happen.

While most bounty hunters would be professionals, some would be amateurs who came across incriminating info via their usual interactions. Such amateurs would then face the choice to sell their info to professional hunters, or to contact the criminal (or insurer) in order to blackmail them. These these amateurs could more easily evade rules prohibiting hunter-insurer deals. But since they are not part of a competitive industry of hunters, compared to professional hunters their efforts are likely to be much more cost-effective, and far smaller. Thus amateur blackmail is much less likely to create a situation where most of the harm of a crime is due to hunter efforts. As a result, we may not actually mind this kind of hunter-insurer deal, and may not want to prohibit it.