Escaping from Punishment

Most crime literature emphasizes the substitution between legal and criminal behaviors. It contends that when punishment becomes austere, the price of crime increases, which, other things being equal, leads to less consumption of crime. This argument applies well to new criminals. However, the incumbent criminal might take price signal differently. From the standpoint of existing criminals, stiffer punishment implies the price of being caught becomes high compared to that of being free, causing those criminals to put in more effort at future crime, hence hard to catch conditional on policing efforts. In this paper, we argue the second effect could have a non-trivial impact in the total number of crime in a society both in a static and dynamic model. Numerical exercises find that insufficient increase in punishment can end up more crime and place the society in a less desirable state than as is. These findings are consistent with our theoretical prediction.