Scarlet Letters (and Numbers)

In Ohio, drivers convicted of drunk driving will be issued special red on yellow license plates. From an economic point of view, fines are the best punishment because they benefit the punisher as they punish the violator and imprisonment is the worst punishment since it punishes the punisher as well as the violator.

Many people don’t like fines, however, because they seem to allow the rich to get away with anything so long as they pay the price (see Tyler on progressive fines). But in theory, if the fine is set equal to the expected cost of the crime, everyone should face the same fine irrespective of wealth and if the benefit of violating the law exceeds the fine then paying the fine and violating the law is the efficient solution. Economists think this argument is obviously correct but it leaves most people cold.

Fines do have another disadvantage if you don’t trust the government (i.e. take this disadvantage seriously). Precisely because the fine is a revenue to the government it encourages them to fine more. And precisely because imprisonment is costly we expect government to be more restrained in its use.

Social sanctions punish the violator, and are perhaps a better signal to others about the costs of crime than are fines, but have neither benefits nor costs to the punisher – thus they lie in-between fines and imprisonment. If fines are thought unfair or too dangerous and imprisonment is too expensive then social sanctions seem ideal. It’s surprising that we don’t see this form of punishment more often.

Addendum: Thanks to early reader William Sjostrom in Ireland (read his Atlantic Blog) and Stephen Laniel at Unspecified Bunker for reminding me about the disadvantages of fines and the signaling quality of social sanctions.