Deterrence and Uncertain Legal Standards

Abstract

When private parties know exactly what a legal rule requires of them, sufficiently large penalties combined with a sufficiently high probability that violations will be penalized should create incentives for exact compliance with the rule. The threat of penalties can make it unprofitable to risk incurring those penalites by doing any less than what the law requires. At the same time, if the law's requirements are really known with certainty, then anyone who satisfies those requirements can be confident of not being punished, so there is no incentive to do more than the law requires either. In the real world, however, legal standards (and their enforcement) are seldom certain. Rules are often phrased to prohibit such things as unreasonable behavior or substantial injury, and even when the language is more precise the enforcement policies of prosecutors (or the vagaries of the trial process) may also be uncertain. As we pointed out in a previous paper,1 this changes the deterrent impact of legal rules by creating two opposing effects. Uncertainty creates a positive chance that someone who violates the legal