A. Perfecting Criminal Justice Policy

      The possibility that legislators are inadvertently increasing criminal activity has profound implications for criminal justice policy. While there is growing recognition that institutional interests play a significant role in shaping criminal laws, few scholars dismiss the claim that legislators generally seek to act in the public's interest. Even those critics who allege that many recent federal and state criminal justice initiatives are “‘contrary to what almost everyone with close knowledge of the topic thinks makes much sense”’ do not attribute the failings of the criminal justice system to bad intentions. In fact, evidence suggests that persuasive policy arguments that are grounded in concerns shared by the general public can have a powerful influence on legislators. As a result, lawmakers are likely to be particularly interested to learn that the criminalization of one activity may improve a related criminal market.

      Moreover, there are increasingly urgent calls for other actors in the criminal justice system--prosecutors, judges, and law enforcement officials--to rationalize their own decisionmaking processes. Just as understanding the dynamics of first- and second-order criminal markets will help legislators make informed decisions, so too can it help these actors improve the implementation of criminal justice policy. Indeed, even if legislators and other criminal justice actors choose not to take the impact of first- and second-order crimes on each other into account when they make policy decisions, drawing attention to the capacity of second-order crimes to perfect first-order criminal markets can still improve criminal justice policy by encouraging policymakers to incorporate cost-benefit analysis into their decisionmaking.

      1. Cost-Benefit Analysis and Criminal Law.--Criminal laws are rarely evaluated based on their broad social impact. Instead, a criminal law is typically assessed in terms of the particular harm caused by the offender and the goals of deterrence, retribution, and moral judgment. This focus alone may explain the failure of commentators and policymakers alike to recognize the critical relationship between first- and second-order criminal markets. However, there is growing recognition that policymakers face multiple options for combating criminal harms and that the larger question of the public's welfare is an important consideration in determining which strategy to pursue. While the criminal justice system has yet to embrace cost-benefit analysis as a methodology for evaluating criminal law and policy, other regulatory regimes have adopted it as a useful mechanism for “improving the effectiveness of government There is a mounting consensus that criminal policies need to be more rational and that an attempt to fully assess the social costs and benefits of criminal laws, while daunting, may be productive nonetheless. Even if policymakers, prosecutors, judges, and members of the law enforcement community refrain from formally adopting cost-benefit analysis, to the extent they want to evaluate the broad impact of their choices on social welfare, they must take into account the dynamic relationship between first- and second-order criminal markets.

      2. Perfecting the Legislative Process.--The possibility that new penal statutes will improve related criminal markets should certainly be of interest to legislators as they seek to promote the public interest. First, legislators choosing among various policy options will be interested to learn that some criminal statutes carry hidden costs that may offset some of the public safety benefits that the laws were intended to engender. By taking into account a proposed statute's impact on second-order criminal markets, a legislature will be better equipped to decide whether the statute will actually promote the public interest. More importantly, by understanding the relationship between first- and second-order criminal markets, a legislature can begin to calibrate the penalties associated with each criminal statute. While economists (and law scholars who consider themselves economists) have long advocated for “optimal” penalties that are calculated to deter crime efficiently, such proposals realistically are difficult to implement. It is one thing to develop a formula which, if theoretically optimized, would lead to an efficient level of crime. It is another thing entirely to identify actual values for the formula's variables and to calculate an appropriate sanction. By recognizing the dynamic relationship between first- and second-order crimes, legislators can begin to fashion a more integrated structure of criminal sanctions. If criminalizing the sale of fake illegal drugs inadvertently improves the market for genuine drugs, a legislature might consider offsetting the impact of the new law by strengthening the penalty for the first-order crime. The result is a system of penal sanctions that, while perhaps not truly “optimized” to produce the most efficient level of crime, at least are structured to work together in concert.

      Focusing legislative attention on the potential for second-order crimes to perfect first-order criminal markets may have the added benefit of shifting the political discourse in a way that will promote more rational criminal justice policies. For several decades, the politics of crime have been dominated by forces which tend to promote punitive approaches that have been regarded as unproductive by many criminal justice experts. Several scholars have suggested that the perceived need for politicians to appear “tough on crime,” and the “culture of fear” created by the graphic depictions of crime in news and entertainment media have combined to ensure that the consistent political response to crime is to increase sanctions and expand criminal liability. More recently, psychological research has identified various cognitive biases which amplify these forces, further distorting criminal justice policy in ways that are ultimately unlikely to increase public safety. Cognitive errors resulting from the “availability heuristic,” overconfidence, overgeneralization, inaccurate estimation of risks and benefits, and biased information processing combine to skew judgments in ways that are unlikely to produce effective criminal justice policy. Fortunately, a deliberate and careful consideration of costs and benefits can provide an institutional check on the cognitive biases that often distort policy decisions.

      Focusing policymakers on second-order crimes' impact on first-order criminal markets can supplement and encourage the kind of rational cost-benefit analysis that is likely to result in better policy choices. This is not to say that cost-benefit analysis should entirely substitute for the intuitive moral judgments of policymakers. But it does suggest that increased attention to some of the overlooked costs of criminalization will do more than just incrementally add to the information at policymakers' disposal; it will actually encourage a type of analysis that is resistant to cognitive error.

      3. Perfecting the Implementation of Criminal Justice Policy.-- Even if legislators attempt to internalize the impact of second-order crimes on first-order criminal markets by adjusting the crimes' respective penalties, the prices they set for crimes are, at best, “suggested retail prices.” In fact, the true price of crime is shaped as much by the actors who implement criminal justice policy as it is by the policymakers themselves. Focusing attention on the potential for second-order crimes to perfect first-order criminal markets can improve the implementation of criminal justice policy by helping such actors make more informed decisions and optimal allocations of limited resources.

      a. Perfecting Prosecutors.--Prosecutors play a crucial role in determining the price of crime. They decide whether to initiate or decline a prosecution and whether to offer a defendant the chance to plead to a lesser charge. Prosecutors can recommend a particular sentence to a presiding judge and, in some jurisdictions, make a plea deal contingent upon that recommended sentence. Prosecutors also enjoy broad discretion to shape criminal justice priorities and to “move resources effectively from one area to another depending on social They can shape alternative sentencing opportunities by devising or influencing the development of drug and domestic violence treatment programs, juvenile justice facilities, and community-based courts linked to social service agencies. They also coordinate with law enforcement to set policing strategies. Each of these decisions impacts the price of crime by either changing the probability of being arrested and charged or by shifting the expected penalty that will be applied to those found guilty.

      Because prosecutors play such an integral role in setting the price of crime, their decisions regarding one crime have reverberations in other criminal markets. If prosecutors routinely offer lenient pleas to defendants charged with selling fake narcotics, they will lessen the impact that the crime has on the first-order drug market. Conversely, the decision to prosecute a crime to the fullest extent of the law may have counterintuitive implications for the overall crime rate. As prosecutors make decisions concerning second-order crimes, they will want to consider carefully the impact those decisions have on related criminal markets.

      Unlike many administrative actors, prosecutors are not obligated by statute to consider the costs and benefits of their decisions. This does not mean, however, that cost-benefit analysis cannot assist prosecutors as they implement criminal justice policy. Indeed, the Department of Justice has begun to incorporate an explicit accounting of the costs and benefits of prosecutorial action in its own guidelines. Recognizing the dynamic relationship between first- and second-order criminal markets is an important step toward successfully utilizing cost-benefit analysis to guide prosecutorial discretion. Moreover, as discussed above, a careful analysis of costs and benefits will not only help ensure that prosecutors consider the full implications of their decisions; it may also counter the same cognitive biases that can distort legislative decisions.

      b. Perfecting Judicial Decisionmaking.--Like prosecutors, judges play an important role in determining the price of crime. While the ascendance of plea and charge bargaining and, until recently, the dominance of mandatory sentencing guidelines helped to shift the locus of power from judges to prosecutors, judges still play a critical role in deciding the price that a guilty defendant ultimately pays for his or her crime. As a result, just as legislators will want to consider the dynamic relationship between first- and second-order criminal markets as they calibrate the statutory penalties for each crime, so too will judges want to consider how their sentencing decisions affect other criminal markets. This does not necessarily suggest that a judge should sentence a defendant charged with a second-order crime more leniently. Rather, judges, like legislators, may need to coordinate their sentencing philosophies. It is possible that the need to harshly penalize a second-order crime will sometimes suggest a stronger sentence is needed for the first-degree crime as well. Conversely, as judges consider “sending a message” with a severe sentence for a second-order crime, they may want to consider what kind of message they will be sending to related criminal markets.

      c. Perfecting the Allocation of Law Enforcement Resources.--In his pioneering article introducing his economic approach to crime, Gary Becker explained that deterrence is a function of both the severity of punishment and the probability of detection. While Becker's original work presumed that the probability of detection and the severity of sanctions were largely fungible, some studies suggest that an increase in the probability of apprehension is likely to have a greater deterrent effect than a similar increase in the size of the penalty. As a result, decisions affecting the likelihood that a criminal will be detected and apprehended may have a greater deterrent impact than legislative, judicial, and prosecutorial decisions affecting sentencing. The dynamic relationship between first- and second-order criminal markets is thus at least as relevant to decisions affecting the probability of apprehension as it is to decisions regarding the severity of punishment.

      While criminal deterrence (and thus public safety) is largely a function of the probability of apprehension, the probability of apprehension is, in turn, largely a function of the allocation of resources. As a result, one of the most important criminal justice policy decisions revolves around how to spend scarce law enforcement resources so as to get the most “bang for our buck.” The use of high-tech mapping and information-management systems has been heralded as “the most revolutionary public-sector achievement of the last In addition to improving accountability, “data-driven policing” is intently focused on helping law enforcement efficiently allocate crime-fighting resources. Compstat, the pioneering data-mapping system implemented in New York City in 1994 and replicated in a number of U.S. cities over the last decade, has been praised for enabling the rapid redeployment of police resources based upon a rise in a particular type of crime or the recognition that a particular area is experiencing increased criminal activity.

      Given the amount of money and attention devoted to optimizing the allocation of law enforcement resources, surprisingly little attention has been paid to the impact that allocation decisions have on related criminal markets. If legislators and law enforcement officials want to maximize the impact of their limited resources, they should consider whether the allocation of resources to fight one crime might help to improve the market for a related crime. As discussed above, the criminalization of fake drugs can improve the market for genuine illegal drugs. An increased allocation of police officers to seek out and arrest fake-drug dealers can similarly improve the genuine drug market. Just as increased penalties for selling fake drugs increase users' confidence that they are purchasing “quality product,” the allocation of departmental resources to fighting fake drugs will reduce the costs associated with seeking out known dealers and lower the risk premium that users demand from dealers. At a minimum, the relationship between criminal markets suggests that law enforcement initiatives that seek to broadly reduce individuals' incentives to engage in crime are likely to have a greater social impact than programs that are targeted against a specific criminal activity. Perhaps more importantly, the relationship between first- and second-order criminal markets suggests that resources employed to increase arrest rates in a particular criminal market may provide less of a public safety benefit than might initially be presumed. An accurate assessment of the true benefit of allocating resources to increasing arrest rates may ultimately suggest that policymakers should reevaluate the relative merit of alternative crime prevention measures that may, ultimately, provide a greater public safety “bang for the buck.”

      4. Perfecting the Policy Debate.--Even if one is skeptical of lawmakers' and other criminal justice actors' ability to deter crime by manipulating criminal laws and penalties, the relationship between related criminal markets is still relevant to current debates over criminal justice policy. The impact of second-order crimes on first-order criminal markets suggests a level of complexity that has been missing in the public dialogue over criminal law. At a minimum, the interconnected nature of criminal markets indicates that lawmakers' perpetual solution--to ratchet up punishment and criminalize antisocial activity many times over --may appeal to the public's desire for simple and straightforward solutions but may do little to promote public safety. Perhaps the recognition that further criminalization can promote crime will lead to a more nuanced discussion about the ways in which society can best deter antisocial behavior.