A. Creating Second-Order Crimes
Second-order crimes are the product of two unfortunate consequences of criminalizing first-order antisocial conduct. First, the criminalization of a first-order activity can create demand for new types of goods and services that impose their own costs on society. For example, by criminalizing unauthorized entry across U.S. borders, Congress created demand for human smuggling services. Second, criminalization can create the opportunity for second-order crimes by pushing the undesirable activity underground, where the government is unable to use regulatory tools that might prevent the crime from occurring. The combination of these two effects serves to multiply the growth of the criminal law as the symptoms of criminalization lead to more criminalization--expanding criminal codes, contributing to the complexity of sentencing guidelines, and, perversely, adding to the enforcement costs associated with preventing the initial first-order crime.
1. Creating Demand for Criminal Markets.--It is not easy to eliminate crime. The threat of criminal penalties will be sufficient to deflect some people toward legal options. Others will be deterred, not by the fear of criminal sanctions, but because they simply do not want to break the law. In this respect, the criminal law does not simply increase the cost of consumption; it shapes consumer preferences and effectively devalues the criminalized conduct. However, while criminalization will tend to reduce the prevalence of an undesirable activity, it will rarely be sufficient to eradicate that activity entirely. In fact, while criminalization may deter some consumers from participating in a socially undesirable activity, it can also generate demand for goods and services that lead to the formation of new criminal markets.
Criminalization increases the price of an illegal good in two ways. First, it adds the expected cost of punishment to the price of the criminalized good. For example, assume the penalty for possession of a small quantity of marijuana were a $100 fine and there were a five percent chance of detection. If it cost $10 to purchase a bag of marijuana, then criminalization would raise the total expected cost of consumption to $15. Criminalization also raises the price of illegal consumption by eliminating legal avenues to obtain the good. Consumers must expend additional resources to find and safely access criminal markets. For example, criminalizing unauthorized entry into the United States made it more difficult for undocumented individuals to cross the border. While it is relatively inexpensive for individuals to drive through legal checkpoints, it is far more expensive to avoid the authorities and enter via remote routes that are physically dangerous and require considerably more planning and supplies.
A rise in the price of an illegal good resulting from criminalization is generally considered a good thing--this is how the criminal law is typically understood to deter antisocial behavior. However, the rise in prices and the elimination of legal avenues of access also creates the opportunity for entrepreneurs to offer services or goods that facilitate the cheap and successful completion of the crime. These might be services which lower the risk of detection (like radar detectors) or services that directly facilitate the commission of the crime (like human smuggling). The secondary market may not always impose new social costs. The imposition of a speed limit gave rise to a rich market in radar detection technology. However, while radar detectors may hamper the effort to lower the social costs of speeding, radar detectors do not impose their own independent costs on society. Unfortunately, this is not true for every secondary criminal market. In many instances, the new activity carries its own social costs, separate and apart from its effect on the first-order criminal market. As discussed below, the smuggling of illegal aliens not only frustrates government efforts to keep the border closed, it can also increase the risk that would-be immigrants will die. The political response to such independent costs is often to criminalize the secondary activity. It is this second wave of criminalization that can perversely improve the market for a crime the legislature originally tried to prohibit.
Creating demand for secondary goods and services is not the only way that criminalization generates new criminal markets. Criminalization can also engender second-order crimes by eliminating barriers that prevent secondary criminal markets from forming in the first place.
2. The Criminogenic Effect of Deregulating Criminal Markets.--Criminalization is often described as a form of regulation. In some cases, criminal and civil penalties work side by side, overlapping and complementing each other's efforts. Securities markets are governed not only by civil regulations but by the criminal law as well. When Bernie Madoff committed the largest fraud in U.S. history, he violated both civil and criminal statutes. However, the opposite may also be true--often the criminal law deregulates by pushing markets underground, beyond the reach of traditional civil regulatory tools. In many respects, criminalization represents a policy choice to eschew other methods of controlling antisocial behavior. By eliminating other regulatory options, criminalization can create the space for the development of secondary criminal markets--markets that might have difficulty forming in actively regulated industries.
Take the sale of fake illegal drugs. While the legal pharmaceutical market is subject to strict licensing, labeling, and inspection requirements, the illegal drug market is unfettered by such restrictions. Drug dealers, unlike legitimate pharmaceutical manufacturers, are not subject to surprise visits by FDA inspectors. Similarly, the tiny plastic glassine bags that typify drug packaging on the street are not labeled with the drugs' active ingredients. Criminalizing and thus deregulating the drug trade makes it far easier for dealers to sell fake drugs to unsuspecting customers. The criminalization of real drugs thus gives rise to a new criminal opportunity and a secondary market--the sale of fake illegal drugs.
Unlike the secondary markets that develop in response to the demand created by criminalization, markets that form in response to criminal deregulation do not necessarily increase the incidence of the first-order crime. While radar detectors lead to more speeding and human smuggling leads to an increase in illegal immigration, sales of fake cocaine, made possible by the deregulatory effect of criminalizing drugs, do not increase the number of real cocaine sales. However, regardless of their origin, many second-order crimes impose costs on society that are wholly independent of their impact on the incidence of the original crime. It is often these independent costs that induce legislators to engage in a second round of criminalization.
