Economics, Law and Individual Rights

Hugo M. Mialon, Paul H. Rubin

• Publisher: Routledge
• Year: 2008
• ISBN:
  9781135979874
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This is the first book to examine individual rights from an economic perspective, collecting together leading articles in this emerging area of interest and showing the vibrant and expanding scholarship that relates them. Areas covered includeThe implications of constitutional protections of individual rights and freedoms, including freedom of spee

1 Introduction

Hugo M. Mialon and Paul H. Rubin

This book brings together for the first time the emerging but still small and fragmented literature that employs economics to analyze the implications of constitutional protections of individual rights and freedoms, including freedom of speech and of the press, the right to bear arms, the right against unreasonable searches, the right against selfincrimination, the right to trial by jury, and the right against cruel and unusual punishment.

Most of these constitutional protections involve tradeoffs, including the balance between preserving freedom of speech and allowing harmful ideas to be communicated; between arming victims and arming criminals; between protecting against crime and invading individual privacy; and between punishing the guilty and punishing the innocent. Therefore, issues related to constitutional safeguards of individual rights are actually in the realm of economics, a science uniquely suited to the study of decisions involving tradeoffs between benefits and costs.

Several of the papers included in the book employ economic theory to analyze the social efficiency of policies related to these constitutional protections, and others formulate empirical models to estimate the effects of these policies on measurable outcomes of concern to society. Many of the results are directly relevant to current debate and policy-making. These studies are brought together here for the first time, resulting in a new, rigorous, and unified understanding about how best to protect important individual rights against encroachment by government.

Studies of freedom of speech and of the press are presented first because these freedoms are essential for creating and enforcing all other individual rights. Economic analysis of freedom of speech starts with the notion of a marketplace for ideas, formally introduced by Coase (1974). Free speech is free competition in an ideas market. If an ideas market fails to produce a socially optimal outcome, intervention to restrict speech in that market might be justified. However, as Breton and Wintrobe (1992) argue, restrictions on freedom of speech in an ideas market can lead to a monopoly on ideas, which can also lead to social inefficiency. Under monopoly restrictions on speech, ideas could be unduly repressed.

The danger and costs of monopoly restrictions on freedom of speech are particularly high in the case of political speech. Political parties in power have a natural tendency to restrict the speech of their political rivals to retain their power. Moreover, speech is the principal means by which politicians compete for power. Restrictions on political speech could therefore directly paralyze political competition and result in a monopoly over governmental power. Abuse of such a monopoly would entail costs that could easily outweigh all other considerations.

Restrictions on speech can also limit economic freedom. Rubin and Jordan (1979) show that there are costs to regulation of commercial speech, and that markets for advertising and other forms of commercial speech work well without regulation.

Like restrictions on the freedom of political speech, restrictions on the freedom of the press can also limit political competition, and could even subvert democracy. If voters are not well informed about the actions of elected politicians, then the elected politicians are free to be corrupt. A free press might reduce the informational asymmetry, thereby curbing corruption. Brunetti and Weder (2003) empirically investigate the effects of freedom of the press on aggregate measures of corruption across countries. Their results indicate that freedom of the press does indeed significantly reduce corruption. Mullainathan and Shleifer (2005) show that with reader heterogeneity a free press will lead to a variety of views such that a reader could become accurately informed.

Freedom of speech and freedom of the press are essential for creating and enforcing other rights. If a government can violate a right and nobody can hear of the violation, then the government incurs no cost from the violation. The freedoms of speech and of the press increase political competition and government accountability, which in turn determine the extent of all other individual rights.

The rest of the book is devoted primarily to individual rights related to crime and punishment. Economic studies of the right to bear arms, the right against unreasonable searches, the right to trial by jury, and the right against cruel and unusual punishment are presented in that order. The studies are ordered by topic in a way that follows the history of a crime and its punishment—from decisions about methods used to commit or defend against a crime, to the behavior of police in seeking a criminal, to rules of trial, to punishment.

In the first stage of a crime, citizens choose whether to obtain a gun to commit or defend against a crime. Here, the individual’s right to bear arms comes into play. Mialon and Wiseman (2005) develop an economic model of crime and self-defense that provides a rationale both for having a basic right to bear arms and for regulating this right. An absolute prohibition on gun carrying would completely disarm both criminals and potential victims. Under such a rule, a criminal would not likely be severely hurt if he attacked a victim, since the victim would be unarmed. Moreover, the criminal’s chance of winning an unarmed confrontation could be quite high given the criminal’s first-mover advantage. If the values of victims’ assets are sufficiently high, criminals would then attack even though they do not have guns, leading victims to lie low to avoid losing their assets. Therefore, full gun control would lead to a situation in which potential victims usually lie low and suffer a large loss of freedom. Thus, a basic right to bear arms might be fundamental to individual freedom.

However, once a basic right to bear arms is established, any further strengthening of the right involves an important social tradeoff. Guns may have a “deterrent effect” on crime, because criminals are less likely to attack if they fear an armed response. However, guns may also have a “facilitating effect” on crime, because they may end up in the hands of criminals. Given this tradeoff, it may be efficient to regulate or limit gun carrying. If the deterrent effect of guns is greater than the facilitating effect of guns, then allowing guns will reduce crime. However, if the facilitating effect is greater, then allowing guns will increase crime.

Lott and Mustard (1997) examine the effects of “shall-issue” laws on crime rates. These laws mandate the issuance of permits to carry concealed weapons for most adult non-felons requesting such licenses. The authors use a comprehensive panel data set of all counties in the United States from 1977 to 1992. They find that allowing easy issuance of gun licenses led to very large reductions in crime. In other words, they find that the “deterrent effect” of guns greatly outweighed the “facilitating effect.”

Many studies in the literature have examined these results, and the paper remains controversial. Dezhbakhsh and Rubin (1998) find that when the Lott—Mustard coefficients for states that allow shall-issue laws are plugged into the data for states that do not allow the laws, the effects on crime are small and ambiguous; some crimes in some states increase and some crimes in other states decrease. As of now, the weight of evidence is against the Lott—Mustard hypothesis, but more testing is still necessary. The Supreme Court will soon hear a challenge to the ruling that the District of Columbia law outlawing most guns possessed by civilians violates the Second Amendment. If the Court upholds this ruling, then the laws of many states will be overturned, and this will present an excellent opportunity to empirically test the effect of gun control on crime rates.

In the second stage of a crime, after each citizen has chosen whether and how to commit or defend against crime, evidence about whether a crime has been committed is generated, and the police choose whether to search a citizen based on the available evidence against him. Here, the individual’s right against unreasonable searches comes into play. In practice, the right against unreasonable searches is enforced through the exclusionary rule: if the police search a citizen when the evidence does not provide probable cause against the citizen, then any additional evidence that they uncover through the search is thrown out or excluded from court.

The exclusionary rule might reduce police searches and increase individual privacy, but it might also increase crime. If the rule is enforced, we would expect the police not to violate the rule because they know that its violation will lead to losing the case. Instead, they will adapt by using methods other than searches to find criminals. However, if searches are in some circumstances more efficient, having to turn to substitute alternative methods will lead to lower arrest and conviction rates, and in turn to higher crime rates.

Atkins and Rubin (2003) examine empirically the effect of the exclusionary rule on crime rates in the United States. Precedent for the exclusionary rule in state crimes was set by the 1961 Supreme Court case of Mapp v. Ohio. Even before Mapp, exactly one half of the states had adopted a version of the exclusionary rule on their own. Atkins and Rubin find that the 1961 ruling significantly increased crime rates only in those states that did not previously have the exclusionary rule, controlling for other factors that might also affect crime. The 1961 ruling caused an increase in most types of crime, including larceny, auto theft, burglary, robbery, and assault.

These results suggest that rules enforcing the right against unreasonable searches have a significant cost in terms of increased crime. However, these rules also protect against privacy invasion and police errors. From a social standpoint, the right against unreasonable searches should be strengthened up to the point where the marginal social benefits in terms of reduced privacy invasion and police errors are exactly equal to the marginal social costs in terms of reduced security.

In the third stage of a crime, after police have chosen whether to search and arrest a citizen, a citizen who is arrested must choose whether to disclose possibly incriminating evidence to police and prosecutors before and at trial. Here, the individual’s right to remain silent comes into play. Seidmann (2005) and Mialon (2005) analyze the efficiency of a right to silence, which attempts to block any adverse inference from a criminal suspect’s or defendant’s silence in the face of accusation.

Seidmann shows that given the possibility of perjury, a right to silence can benefit the innocent even if the right is exercised only by the guilty. Without a right to silence, the guilty might be forced to lie and make false exculpatory statements. Then the innocent would not be able to signal their innocence to the jury by making exculpatory statements since the guilty would also make such statements. As a result, the jury would not be able to distinguish the innocent from the guilty from their statements, and the innocent might be convicted. However, with a right to silence, the guilty would exercise the right and remain silent. Then, the innocent could signal their innocence through exculpatory statements, and would be less likely to be convicted.

As Mialon argues, the innocent might also benefit from a right to silence more directly. The accuracy of the evidence regarding a defendant’s culpability is rarely perfect. Even if the defendant is innocent, the evidence might indicate that he is guilty, in which case he would choose to remain silent if lying is not an option. Moreover, the defendant might not know the evidence, in which case he would have to remain silent. In either case, the innocent defendant might be wrongfully convicted if the adverse inference from silence is not blocked, but rightfully acquitted if it is blocked. Thus, even without the possibility of perjury, a right to silence can reduce wrongful convictions and help the innocent.

Of course, a right to silence can also help the guilty. If a guilty defendant does not know the evidence, or knows the evidence and it correctly indicates that he is guilty, he might be rightfully convicted without the right to silence, but wrongfully acquitted with it. By reducing convictions, a right to silence might reduce wrongful convictions, but only at the expense of increasing wrongful acquittals. A right to silence might directly improve social welfare if society prefers a wrongful acquittal sufficiently more than a wrongful conviction.

However, a right to silence can only directly increase social welfare if the jury’s preferences are biased relative to society’s preferences. If the jury’s and society’s preferences over court outcomes coincide, and the jury rationally takes into account all available evidence, then the jury’s decision problem is the same as society’s. Thus, preventing the jury from making a rational inference from silence cannot improve social welfare.

If some juries are unduly biased against a defendant, a right to silence can, but still need not, improve welfare. A right to silence is more likely to enhance welfare if the police are more corrupt or biased. Innocent suspects are more likely to end up in court if the police are prejudiced or they disregard rights of suspects in their investigations. In such circumstances, more innocent defendants end up in court and stand to benefit from a right to silence. Thus, if jury and police discrimination is more of a problem, a right to silence is more likely to improve welfare.

In the fourth stage of a crime, after the defendant and prosecutor have chosen what evidence to present, the judge or jury evaluates the evidence and chooses whether to convict the defendant. Here, the right to trial by jury comes into play. A jury might evaluate the evidence differently than a judge, and therefore might arrive at a different verdict. The right of defendants to have their criminal culpability determined by a jury of their peers is a safeguard against overzealous prosecutors and biased judges.

Imposing an all-judge system in criminal cases might be inconsistent with the objective of trial fairness. But then, why not impose an all-jury system? Gay et al. (1989) argue that a right to unilaterally waive a jury trial increases the accuracy of trial outcomes relative to a system in which jury trials are mandated. In general, juries might not process evidence as efficiently as judges; that is, juries might be “noisier” than judges. As long as this is the case, the right to waive a jury trial strictly benefits the innocent, because waiving the right allows them access to a more accurate fact-finder. Therefore, innocent defendants are always better off in a system with the right to waive a jury trial than in an all-jury system. Moreover, conviction rates for the guilty would be the same under both systems, because the guilty would rationally choose jury trials even when they had the right to waive a jury trial, since juries are more likely to make mistakes than judges. Therefore, the right to waive a jury trial enhances the objective of trial accuracy.

Helland and Tabarrok (2000) empirically investigate the effects of the right to trial by jury in civil cases. Awards granted by juries are significantly higher on average than awards granted by judges. Moreover, plaintiffs are more likely to win cases before juries than before judges. However, the authors find that much of these differences can be attributed to the types of cases that are brought before judges and juries. Juries tend to see more high-award cases, such as medical malpractice and product liability cases, whereas judges tend to see more low-award cases, such as premises liability cases. This is an example of the economic significance of a non-criminal constitutional protection.

In the fifth stage of a crime, if the judge or jury has decided to convict the defendant, the nature and severity of the punishment are determined. Here, the right against cruel and unusual punishment comes into play. Punishment that is excessive relative to the severity of the offense is deemed cruel and unusual. Capital punishment might also be considered cruel and unusual.

Andreoni (1991) shows that scaling the punishment according to the severity of the offense is efficient if maximal deterrence is the objective. As the punishment increases, the cost of convicting an innocent person increases, while the cost of acquitting a guilty person remains the same, so rational juries are less likely to convict. There is a maximal punishment beyond which jurors are not willing to convict at all. However, the cost of acquitting a guilty person is higher if the severity of the offense is higher. Therefore, if the offense is more severe, the maximal punishment at which jurors are still willing to convict is higher. Hence, the punishment scheme that ensures maximal deterrence is one in which the severity of punishment grows with the severity of the offense.

An increase in the severity of punishment could deter more potential criminals from committing crime as long as it does not reduce the probability of conviction too much. However, it would also result in a harsher punishment for wrongly convicted innocent people, which will be inevitable since the justice system is not perfectly accurate. Therefore, there is a potential tradeoff between deterrence and wrongful punishment. It is difficult to estimate the frequency of wrongful convictions, because in many cases, culpability can never be ascertained completely. However, it is possible to measure the deterrent effects of punishments.

Ehrlich (1975) provides the first empirical analysis by an economist of the deterrent effects of capital punishment. This work was highly controversial and led to extensive additional analysis, most of it a reanalysis of Ehrlich’s data. Results have been mixed: several authors found a deterrent effect, while several did not. Recently, several more authors have reexamined the possibility of a deterrent effect using more advanced statistical techniques than those used by Ehrlich, and analyzing more complete data.

Dezhbakhsh, Rubin and Shepherd (2003) examine the deterrent effect of capital punishment using county-level panel data from 3,054 U.S. counties over the period 1977–1996. This study finds a substantial deterrent effect; both death row sentences and executions result in decreases in the murder rate. A conservative estimate is that each execution results in, on average, 18 fewer murders. The main finding, that capital punishment has a deterrent effect, is robust to several different ways of performing the statistical analysis and to several ways of measuring the probability of an execution. Several other studies find similar results, although there has also been heavy criticism of these results in the literature.

The papers collected in this book demonstrate how economics can be fruitfully applied to analyze individual rights and freedoms. We believe that this is a very fruitful area for further research. For example, game-theoretic analysis can be applied to additional legal protections, since the adversarial legal system exactly lends itself to this form o...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of figures
• List of tables
• Acknowledgements
• 1 Introduction
• 2 The economics of the First Amendment: the market for goods and the market for ideas
• 3 An economic analysis of the law of false advertising
• 4 Freedom of speech vs. efficient regulation in markets for ideas
• 5 A free press is bad news for corruption
• 6 The market for news
• 7 The impact of gun laws: a model of crime and self-defense
• 8 Crime, deterrence, and right-to-carry concealed handguns
• 9 The effect of concealed handgun laws on crime: beyond the dummy variables
• 10 Effects of criminal procedure on crime rates: mapping out the consequences of the exclusionary rule
• 11 An economic theory of the Fifth Amendment
• 12 The effects of a right to silence
• 13 Noisy juries and the choice of trial mode in a sequential signalling game: theory and evidence
• 14 Runaway judges? Selection effects and the jury
• 15 Reasonable doubt and the optimal magnitude of fines: should the penalty fit the crime?
• 16 The deterrent effect of capital punishment: a question of life and death
• 17 Does capital punishment have a deterrent effect? New evidence from postmoratorium panel data