ON THE WELFARE ECONOMICS OF CAPITAL PUN IS HMENT‘::

SAMUEL CAMERON

University of Bradford

I. INTRODUCTION

The present paper is intended as a debate opener rather than a conclusive piece. It seems that some economists feel that the last words have already been written on the subject. According to Sesnowitz and McKee (1977, p. 217) justifying capital punishment on deterrence grounds, “does not survive the logical application of economic welfare criteria”. This statement rests on the alleged demonstration by McKee and Sesnowitz (1976) that a world with capital punishment must have a lower welfare level than one without it regardless of the actual magnitude of any deterrence effects. Apart from a riposte to this by Reynolds (1977) and the consequent reply by McKee and Sesnowitz (1977) there have been n o other writings by economists which bear specifically on the welfare economics of capital punishment. There is a large related literature on the welfare economics of punishment (Becker, 1968; Harris, 1970; Stigler, 1970; Stern, 1978; Lee, 1983; Bone, 1985; McDonald, 1987) which is virtually silent on the issue of capital punishment. We infer that this silence reflects a n implicit assumption that death is simply the ‘highest price’ in the tariff of penalties for criminal activity. There is of course a large economic literature on the efficacy of the death penalty (e.g. Barnett, 1978; Layson, 1983; McManus, 1985; Veall, 1987). One imagines that this work is supposed to be useful because it could ultimately lead to calculations of the optimal level of capital punishment. If the arguments of McKee and Sesnowitz are correct this work becomes rather peripheral as its results have no policy relevance whatsoever as welfare economics has supposedly demonstrated objectively that there is n o case for capital punishment!

The reader should be aware that this is a pure essay on the application of economic theory to a policy problem. It does not offer solutions to the problems highlighted. Rather, the objective is to draw attention to difficulties that economists have not fully admitted to. In particular we hope t o be able to disentangle the threads of deduction from underlying value judgements which are commonly not made sufficiently explicit in this type of discourse.

11. THE ORIGINAL DEBATE

After much peroration, McKee and Sesnowitz (1976, p. 45) finally make it clear that the basis of their argument rests on Kaldor’s test for potential Pareto improvements. They

”Thanks are due for the helpful comments of an anonymous referee and Dave Golby

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make n o reference to the subsequent literature casting doubt on the validity of compensation tests because of reversibility problems etc. They cast the execution problem in terms of two states of the world: (i) a convicted murderer is not executed and we have a probability of being murder victims of p ; (ii) a convicted murderer is executed whereupon we face a probability of being murder victims of p Q where p:;: is less than p . Thus a deterrent effect of executions is supposed. So, for capital punishment to be justified a move from state (i) to state (ii) must pass the Kaldor test for a potential Pareto improvement.

The gains from capital punishment arise from deterrence so total social benefit will equal the summation of the values to individuals of the reduction in the subjective probability of being murdered. This will be a finite sum of money. If it is greater than the aggregate losses from capital punishment then capital punishment is beneficial. According to the authors, social losses, even from a single execution, will be infinite! Why is this the case? Apparently “there is not likely to be any sum sufficient to compensate an executed individual for his life” (McKee and Sesnowitz, 1976, p. 46). The upshot of this reasoning is that the optimal level of capital punishment is zero.

Reynolds (1977) has essentially two things to say in response to this. One is that the person executed does not suffer an infinite loss. The other is that even if they did it wouldn’t matter because criminals’ welfare should not be in the utility function. It follows from this that the optimal level of capital punishment might be greater than zero with its precise size depending, amongst other things, on the magnitude of the deterrence effect. His first claim is backed up by appeal to the literature on valuing life by examining willingness to pay for changes in the probability of death. In addition he says that people will accept certain death “to save lives of their immediate family, to salvage personal honour, to inflict damage upon the enemy in war, or to be assured of a place in the history books” (Reynolds, 1977, p. 105). Coming to the exclusion of murderers from the welfare function he appeals to casual empiricism about people’s preferences saying “some people d o not want to consider capital offenders responsible members of the community because murder is a flagrant violation of the social order” (ibid., p. 108). H e then adds the notion of retribution suggesting (p. 108) “some crimes are cruel and unusual enough to a substantial segment of the public that it violates their sense of justice if perpetrators just receive a life sentence a s punishment”.

Sesnowitz and McKee reply by pointing out that changes in the probability of death are irrelevant a t the point of application of capital punishment as certain death is faced. They then claim that excluding the criminal from the welfare function is “abandoning the Pareto criterion” (McKee and Sesnowitz, 1977, p. 111). Reynolds is also criticized for irrelevantly injecting retribution into the debate and disregarding the fate of the innocently executed murder suspect (who will, like the guilty murderer, suffer a n infinite loss of welfare from being executed).

The remainder of this paper lool<s at the submerged issues in the somewhat perfunctory debate between McKee and Sesnowitz and Reynolds.

111. WHO is I N THE WELFARE FUNCTION? Arguments about inclusion in the welfare function should flow from a reasoned ethical

position and be consistent with the overall theoretical approach to crime and welfare. These two criteria will be in harmony if we regard the utilitarian Becker-Ehrlich approach to crime as essentially a normative approach. Stigler (1970), Skinner and Slemrod (1985)

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and Reynolds (1977) simply assume that a criminal act casts one out of society forever.’ This creates a two-class society consisting of the criminal ‘underclass’ and the ‘normal’ citizens. Such a situation contradicts the formal models of murderer behaviour.

As a n example of the formal model consider Layson (1983) who sets down the following utility function for the criminal:

EUi = (1-PCON) LIi(C0) + PCON(1-PE) Ui (Ci ) + PCON.PE Ui (C2) (1)

where ELI= expected utility, PCON= probability of a murder conviction, PE = conditional probability of execution given a murder conviction, U(C0) = utility of the individual if not convicted of a murder, U ( C 1 ) = utility of the individual if convicted of murder and not executed, U(C2) = utility of the individual if executed.

It is notable that Layson refers to the ith individual rather than ‘the murderer’. This is because there are n o ex ante murderers in this framework; contemplating murder does not make one a murderer. It also follows that everyone would be a murderer if they faced the appropriate set of constraints. In order that murder be explicable within the subjective expected utility maximization framework we must assume that it yields some utility. Capital crimes are then just commodities like any other with their only distinguishing feature being that markets for them have not been established.2

Although (1) refers to the ith individual, it is not truly general as the risk of being a victim is ignored. Criminogenic economists such as Bartel (1975) assume that the potential victims are also maximisers of subjective expected utility with Von Neumann-Morgenstern utility functions. Again there are no ex ante victims; victimization is determined by resource allocation decisions that flow from expected utility maximising behaviour. One has a demand curve for the danger of being murdered as marginal benefits for the increased probability of murder such as saving time by walking through a dangerous part of town may justify the incremental risk. It follows that one equation is sufficient to account for the whole population. Indeed when capital punishment is allowed, people are all potential victims of state inflicted murder.

Having more than one equation would be inconsistent with the methodological manifesto of the Chicago economists (Becker and Stigler, 1977). Their claim is that variations in behaviour reflect price and income variation rather than ‘taste’ differences. Anything which might look like tastes is redefined as the product of some specific form of human capital. A person with strong preferences for artistic appreciation has formed these through investment in ‘art capital’. Likewise, a strong preference for crime as against legitimate activities would connote simply the presence of large stocks of criminal capital. Tastes are, according to this argument, not systematically divergent hence we should not

‘ I f people are excluded from the welfare function with no prospect of rehabilitation then we have the possibility of using them as slaves or for scientific rcsearch into diseases etc. As their utility doesn’t count we can do anything we like with them so long as there is a net social gain

’It would not make any difference to the argument of this paper if we treated only murder which is instrumental, for example in pursuit of robbery, rather than the dircct source of utility. Murder would just be a factor of production with a derived demand function.

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divide the population into murderers and criminals. These labels represent ex post utility maximisation and have therefore no additional normative content.

It may be objected that murder is special in some way to the extent that the economic theory of crime does not provide a satisfactory explanation. After all, is it reasonable to suppose that we are all willing to seize on good opportunities for murder? i.e. if there was a very low probability of punishment and a high pay off. A more plausible explanation might be that murders are accidents arising in unforeseen circumstances. Glaser (1977, p. 255) says “most murders grow out of interpersonal altercations, frequently among relatives or lovers. Where there is a record of who struck the first blow it was the deceased in about one- third of the cases; thus chance alone often determines who is the killer and who is the victim. There is usually little premeditation in these cases and certainly not the rationality that economists postulate”. If we accept this view there is even less reason to exclude murderers from the welfare function as the majority of them would not seek to repeat the act and they have not wilfully violated social codes.

An alternative approach to deriving propositions about the constituency of the welfare function comes from contractarianism. Reynolds (1977) hints a t this as a basis for excluding murderers from the welfare function but he does not develop the idea. Under a contractarian model the murderer forfeits the right not to be murdered because of breaking a n earlier accord in which murdering rights were traded for something else such as protection from being murdered. It needs to be stressed that writers like Stigler (1970) who exclude the criminal from the welfare function refer to the criminal losing rights because of performing a heinous act are not giving a contractarian analysis but simply interjecting a personal value judgement. The problems with contractarian analysis in this area are not fundamentally different from those in other areas. These may be succinctly encapsulated in the following quotations from probably the most virulent attack by a n economist on contractarianism.

Is the state a product of its citizens’ voluntary consent a mechanism voluntarily established to attend to their common concerns? Nonsense. I have no choice about being subjected to its laws. (. . . .) Far from the state’s being a voluntary arrangement, then, its essence is compulsion. It relies as a last resort on its power to seize goods and persons, t o imprison, and to execute (Yeager, 1985, p. 284-5).

It seems difficult to find any compelling logic within the mien of economics for expulsion of murderers from the welfare function. A troubling question arises with respect to victims of murder as well as those who have been executed as punishment. Are dead people in the welfare function? McKee and Sesnowitz (1976, 1977) clearly construct their argument around the exclusion of dead people otherwise they would have had to confront the problem of what those murdered would have been willing to accept in return for being murdered. If this is a finite sum we can imagine it being included somehow in the welfare function aggregated from the still living. If we carry foward the welfare of all dead people into this function then it suggests maximising the discounted life time aggregate utility of all the people who ever lived. If we do this, strange possibilities arise that are absent in the usual atemporal scenario. For example, old people who d o not have long to live will make little impact when their utility is discounted; hence their murder or execution will cause much less loss than that of younger people. This is entirely consistent with giving people

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equal weights in the utility function as the old people have already experienced accumulations of utility not yet available to the young.

IV. WHAT FORM SHOULD THE WELFARE FUNCTION TAKE?

There are four commonly used welfare functions; the sum of utilities (utilitarian), product of utilities (Nash), paretian and Rawlsian. Defenders of utilitarianism are prone to treat all of these functions as simply different operationalizations of utilitiarianism (see Yunker, 1986). In this paper the term ‘utilitarian’ will be used to signify the simple unweighted sum of utility functions as this is characteristic of the approach of utilitarian criminogenic economists (see e.g. the papers in Becker and Landes, 1974).

In a strictly Paretian framework without compensation tests we could never punish any criminal who disliked punishment, as there would be always at least one loser (provided we accept that criminals are in the welfare function). If we bring in compensation we open up the possibility that costlessly enforcable contracts could result in pareto improvements from murder if murderers are willing to pay more than the victims require (assuming away reversibility problems). We could envisage a situation where A accepts from B ten years of high living in return for B having the pleasure of murdering him or her a t the end of the period. In neoclassical welfare economics there is nothing different in this from the high wages received by stuntmen or steeplejacks because the Von Neumann-Morgenstern utility function implies linearity all the way up to certain death with there being monetary equivalents a t all probabilities (see Blatt, 1979-1980). What would compensate a murder victim if there is a spot exchange, i.e. n o high life prelude? Barring pathological utility functions the answer must involve altruism whereby the victim uses the sacrifice of their life to enhance the existence of surviving relatives or other beneficiaries. If anyone finds this curious from a moral viewpoint they might ask themselves how different the murder contract envisaged here is from a performing a stunt with a near 100 per cent chance of dying, in order to raise money for charity.

The above situations apply equally to the utilitarian welfare function with the only difference being that the arguments can be cast directly in terms of utility transfer than worked through willingness to pay. Other problems associated with these utility functions arise in connection with the problem of executing innocents which is discussed below. Some recent writings by utilitarians (for example many of the contributions i n Sen and Williams, 1982) suggest a modification to the argument that it may be okay for people to murder other people as it is just a n expression of a n exogenously given preference in their utility function (i.e. only the externalities of murder matter). The recent literature puts forward the idea that we should view individuals as having metapreferences, i.e. preferences about preferences so that they have lower and higher order preference functions. Harsanyi (1982, p. 56) says,

I have argued that, in defining the concept of social utility, people’s irrational preferences must be replaced by what I have called their true Preferences. But I think we have to go even further than this: some preferences, which may very well be their ‘true’ preferences under my definition, must be altogether excluded from our social utility function. In particular, we must exclude all clearly antisocial preferences, such as sadism, envy, resentment and malice.

The word irrational is used in an unfortunately careless way. Who is to say that wanting to

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kill your neighbour for having a blue car is less rational than collectinggoldfish or dressing up like Elvis Presley? The argument here is that the higher order preferences of murderers and rapists include the desire not to be murderers and rapists but their lower order preference is to partake of as much rape and murder as possible. Thus these people may welcome restrictions on their lower order preferences such as punishment. This has bearing on the earlier discussion of membership of the welfare function. Taking this line we d o not exclude criminals from the welfare function but we exclude their lower order preferences. The conclusion of this line of reasoning is that criminals approve of punish- ment, even capital punishment as it gives them a n incentive to mend their ways. Without going into a detailed critique of the metapreference formulation we should at least point out its inherent non-falsifiability. Do criminals have higher order preferences not to be criminals? If they d o what conceivable method is there of revealing these preferences honestly?

Interpreted in the terms familiar to microeconomists, the Rawlsian function is one with extreme (infinite) risk aversion. It is arrived at by asking what form of society individuals would choose ‘in a veil of ignorance’ about the position that they will end up with. The Rawlsian function emerges from this by assuming that individuals in such a position would go for the maximin which constitutes, in terms of the subjective expected utility model, infinite risk aversion. It would seem t o follow with this approach that the average individual would not select a maximin which involves being murdered by the state. There is not much else to discuss for the Rawlsian SWF as optimal capital punishment under it is zero.

V. WHAT IS CAPITAL PUNISHMENT FOR? At this point we should stress that there is nothing in the welfare economics of capital

punishment to suggest that capital punishment is reserved for murder. It has, of course, been used for many other things. If capital punishment is a n effective deterrent then it can be used for anything. After all it would be a very efficient approach to shoplifting if it so scared shoplifters that they all retired and none were ever executed as all the social costs associated with shoplifting would be removed at no cost of enforcement. There are economists who seem (especially in the ‘no criminals in the welfare function’ camp) to be willing to countenance this possibility. Stigler (1970, p. 79 of McPheters and Stronge (1976) reprint) says that “capital punishment is cheaper than long-term imprisonment”. Given this, a tramp who steals a loaf may be optimally disposed of by execution as this saves society the costs of imprisonment and presumably generates some deterrence. Stigler faults this conclusion on the lines of the old saying that you might as well be hung for a sheep as a goat. His argument of ‘marginal deterrence’ is basically a pure substitution effect; raising the price of a trivial offence relative to serious offences leads to substitution towards ser- ious offences. Stigler ignores the ‘income’ or ‘output’ effects of changing relative crime prices which would be expected to lower all criminal activity to some extent. Marginal deterrence does not convincingly rule out execution of minor offenders. Historically execution for petty theft has not generated substitution to major crime for obvious reasons. The shift from petty to major crime may bring a greater return if successful but the probability of being caught also rises not least because many individuals d o not have adequate criminal capital for the larger crime. Stigler even appears t o admit this as, in connection with a different argument, he notes that “Fort Knox is more difficult to enter than a liquor store” (ibid. , p. 93).

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So, if capital punishment is to be justified on conventional welfare economic grounds it has to be determined, on the basis of cost-benefit calculations, what activities should count as capital crimes. Arguments that it should apply only to murder regardless of cost-benefit calculations are really retributionist ones which are considered below.

The economic case for capital punishment is that it is an abatement technology for externalities. In the absence of compensation we have externalities from crime. In the welfare economics of crime no distinction is drawn between textbook externalities like smoke or noise and crimes against property or the person. In the words of Hahn (1972, p. 106 of McPheters and Stronge (1976) reprint) crime is “any activitv that causes uncompensated external diseconomies” (emphasis added). Adelstein (1979) explicitly extends this position to actual capital punishment cases.

Given the presence of uncompensated externalities there appears to be a case for state intervention. Traditional Pigouvian corrective policies would suggest the imposition of taxes, i.e. monetary penalties on offenders. This is frequently challenged by the Coase (1960) argument that externalities are two way phenomena which, in the absence of transaction costs, will be eliminated by negotiations between the concerned parties. If all victims can readily identify their own would be murderers then a Coasian outcome is logically possible. If A wants to I t i l l B and B can compensate A for not doing so then there will be n o possible harm to anybody else. In reality one may find it difficult to locate and negotiate with one’s potential murderer. The risk of being the victim of expression of a demand for murder will tend to be diffused over specific populations of individuals as in the case where a killer fires gunshots randomly into a crowd on a busy street. Thus, the optimal response may require collective provision. It is difficult to be sure of adequate voluntary collective response due to free rider and information problems (see Cameron and Golby, 1987) along with the transaction costs and strategic bargaining that may arise because of the numbers involved.

None of this guarantees a positive amount of capital punishment in the welfare optimum as there may be more efficient alternatives. According to Beclter (1968) fines are universally superior to other punishment provided that the person fined has the money to pay. This follows from the use of Von Neumann-Morgenstern utility functions as these imply that there is always a sum of money equivalent to any non-monetary punishment. Levying the sum of money instead of the non-money punishment is a pure transfer which has the advantage that resources are not used up in administering the fine. As the fine is costless and its deterrent effect never falls to zero (according to the theory employed) it would appear that welfare can be increased indefinitely by stepping up fines and keeping a very small probability of punishment. This can cause the problem (see Lee, 1983; Bone, 1985) that there is n o interior solution. It appears that this problem is solved by including criminals in the welfare f ~ n c t i o n . ~ Fines d o not toally diplace sentences in Beclter’s world

’Stcrn (1978) claims that there is no interior solution to the problem as sct up by Becker. He goes on to suggest that there is no meaningful solution at all claiming. in addition, that this does not mean that there is no meaingful solution to the traditional externality abatcmcnt problem. The justification for the latter claim is that crime is not the same as externalities because criminals d o not generate any social product. Against this we should point out: ( i ) not all criminals arc at corner solutions; some will choose a mixture of crime and licit work (i i ) crime may be an unavoidable by-product of ccrtain forms of social and economic organization e.g. urban frcc cnterprise capitalism.

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view as . . . fines can not be relied on exclusively whenever the harm exceeds the resources of offenders. For then the victims could not be fully compensated by offenders, and fines would have to be supplemented with prison terms or other punishments in order to discourage offenses optimally (Becker, 1968, p. 39 of McPheters and Stronge (1976) reprint).

H e argues that this applies to “crimes like murder or rape (. . .) that n o amount of money could compensate for the harm inflicted” (ibid., p. 39). This is distressinglyvague; if all sentences have monetary equivalents but n o amount of money compensates for certain crimes then what sentence compensates for these crimes? Perhaps there is n o optimum. Or, if we apply the logic of McKee and Sesnowitz that the execution of murderers is so harmful that infinite compensation would be needed then all rapists and murderers should be executed so that the two infinities cancel out!

If a n optimal level of capital punishment is to be produced that is not a t a corner solution then we must assume that all compensation payments, whether to criminals or victims, are finite. The answer to the question, “what is capital punishment for?”, is obviously that it is for the correction of externalities just like any other punishment. Punishments have no other role in a conventional paretian or utilitiarian welfare analysis. We are assuming for the moment that retribution/moral outrage are not externalities.

VI. THE EXTERNALITIES OF CAPITAL PUNISHMENT

Capital punishment is a n externality abatement technology. It may however generate further externalities from its operation. These are innocence costs, ‘perverse deterrence’, and brutalization. These are often neglected by economists although the last two only warrant brief discussion as they should be taken account of in the supply of crime function.

The perverse deterrence and brutalization arguments suggest that capital punishment may lead to more murders and/or more other crimes. Evidence on brutalization is provided in Espy (1980), Phillips (1980) and Bowers and Pierce (1984) and on perverse deterrence in Espy (1980) and Glaser (1977). The brutalization theory is that the taking of life by the government lowers respect for life and fosters a more violent social climate with this being a positive function of the visibility of the execution. Clearly the presence of brutalization would lower the optimal level of capital punishment even for the person willing t o exclude criminals from the welfare function. The perverse deterrence argument is that some individuals will randomly murder in order to receive the death penalty, i.e. their behaviour apnears motiveless. In the subiective expected utility model this appears to be a case of pathological preferences as the person with n o special interest in Idling others and a preference for death over life should have already committed suicide. If we ignore the problem of how we measure the utility of such murders then perverse deterrence will lower the optimal level of capital punishment.

We now consider the innocence externality. Philosophers (see Honderich, 1969) have attacked the utilitarian approach to punishment for concentrating on the deterrent effect of the probability of being punished without reference t o whether those punished were guilty or innocent. The conclusion is that utilitarianism sanctions the punishment of innocent people in the pursuit of a welfare optimum. If we rule out utility interdependency then innocence only matters in so far as a n increase in the fraction of innocents punished

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exposes non-criminals to a higher probability of execution. This adds a cost to the extension of capital punishment which will be borne in the form of higher costs of protecting oneself from wrongful execution. Presumably the optimal level of capital punishment is a negative function of the innocent to total executed ratio as argued by Harris (1970). Harris is another economist who would exclude the criminal from the welfare function. If we refuse to follow him in this some new problems appear in the utilitarian framework. One consequence of executing a n innocent is that the real perpetrator gains from a substantial fall in his expected probability of punishment for the already performed crime. What if this gain exceeds the loss experienced by the criminal? O r to push the case further, what if the guilty party is a generator of considerable external benefits to society. Imagine the case of an industrious executive or a brilliant scientist who murders a tramp and is unlikely ever to repeat the act but the guilt falls mistakenly on another tramp who is executed instead. If all losses are measured solely in monetary terms society is surely better off in the wrongful execution scenario than the performance of justice scenario.

Innocence may cause a n externality from interdependent utility, i.e. we suffer a welfare loss when we find out that some other unrelated individual has been wrongfully executed. Such effects should lead to a straightforward fall in the optimal level of capital punishment. A problem remains that we d o not generally know how many wronged innocents there are. If we knew presumably we could acquit them and the problem would vanish. If we only find out their innocence after execution we are in the uncomfortable position of not being able to pay compensation. This is, of course, not a problem if dead people drop instantly out of the social welfare function! If they don’t then the onlyway to proceed is to assign a standard money valuation to the loss that is ask people how much they would have been willing to pay if money could have prevented the wrongful execution. It is thus clear that the utilitarian approach does sanction the execution of innocents provided the deterrence (and other) benefits of execution outweigh the costs. This also applies t o the Paretian approach so long as there are monetary equivalents to all lives.

VII. OPTIMIZATION A N D EQUITY

The above discussion has already brought out some conflicts of equity with welfare maximization. In the case of innocence we have ex ante equity if the probability of wrongful execution is not correlated with personal characteristics. Absenting such correlation there is obvious ex post inequity from the execution of innocents. Consideration of how the optimum is to be reached brings up some further equity problems. Continuous punishments like prison sentences or fines can be marginally adjusted to reach an optimum. The optimum application of such punishments can involve equal punishment for identical individuals.

Execution can not be varied in its rate of application to a given individual. Variation in the rate of capital punishment can only take place by varying the percentage of offenders executed. If we were to have mandatory capital punishment for certain offences then there is ex post equity as identical offenders found guilty receive equal treatment. There will also be ex ante equity if the probability of detection and punishment is equal for all offenders. In this case optimising will take place through variations in the resources devoted to the pursuit of offenders. In the absence of mandatory capital punishment optimising will still take place in this way but there is an additional consideration of the ex post choice of the

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optimising percentage of offenders found guilty to be executed. It has to be considered whether, once we have decided capital punishment does bring net benefits, optimisation is consistent with anything less than mandatory execution. If ex pos t marginal costs of increasing the percentage executed increase with the execution rate or marginal benefits decrease with the execution rate then there may be an internal solution. Factors which might lead to the above functional relationships are, for example, brutalization externalities that are a function of the number of executions rather than the existence of execution o r a diminishing marginal deterrence effect.

Given that optimal capital punishment may involve a decision to execute only some of those found guilty who are eligible for capital punishment there is a problem of horizontal inequity for criminals. Some criminals who have been found guilty are executed whilst others are not. If we choose capital punishment because it is cheaper than a genuine life sentence then we will have arbitrary bias towards execution of the young as they will cost more in terms of future confinement. Shavell(l987, p. 109) writes that the death penalty “is more likely to be optimal when j is large since then society will save more in imprisonment costs” ( j is the number of periods of life left to the individual offender). The decision as to who to execute (ignoring age considerations) is essentially arbitrary as the punishment is handed out for functional (externality abatement) rather than moral reasons. There has been no discussion of this point although Thurow (1970) has implied that equity between criminals should be an element in punitive policy. Most discussion of this issue by legal scholars concerns whether arbitrariness does exist. Of more interest is the argument of Van Den Haag that “the guilty d o not become innocent or less deserving of punishment because others escape it” (Van Den Haag, 1978, p. 56). This is a retribution argument which leads us into the next section.

VIII. SHOULD RETRIBUTION BE I N T H E WELFARE FUNCTION? Economists thinking about punishment have sometimes come to the conclusion that

retribution is a more appropriate framework than the traditional approach (Stern, 1978; Reynolds, 1977). In the absence of retribution punishment simply influences the level of welfare through deterrence and any externalities generated by punishment.

What is retribution? The commonly held view of retributive justice is that punishment should be proportional to the nature of the crime rather than a function of deterrence. This brings a fundamental cleavage with the traditional approach. If outrage was great enough conventional economic costs would cease to function as any type of constraint. Take the extreme case of the ‘Lex Talonis’ eye for an eye argument. This implies that all murders should be pursued until the perpetrator is found regardless of the costs involved. There is no welfare calculus to be gone through if we arrive at this position as we are willing to sacrifice other goods and services for the sake of punishment without weighting the expected costs and benefits. So barring some swift redefinition of terms pro-retribution economists have talked themselves out of a job. Not surprisingly such redefinition has been attempted by Adelstein (1978) and Ehrlich (1982). Their efforts amount, as they inevitably must, to making retributive justice a perfectly divisible commodity which can thus be traded off a t the margin against other commodities until a n optimum is achieved. Adelstein (1978) has recourse to a notion of moral costs which measure personal welfare losses from a sense of injustice from direct or indirect experience of the crime, 2.e. our disgust a t

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criminal acts perpetrated on others is t o be included. Ehrlich (1982) regards retribution as the source of a social cost of ‘incomplete justice’ due to the guilty going unpunished.

The fundamental divergence of these approaches and the normal definition of retribution is that making justice a commodity implies that it has monetary equivalents. Hence there would be some amount of money that would make a family indifferent between accepting it and the execution of someone who had brutally murdered their children. Adelstein’s approach may even be contradictory to normal ideas about justice (see Rizzo, 1979, p. 271-272) in that the size of the moral outrage factor depends on the concern of other people for the victim of the outrage and the amount of information, i.e. if a crime receives very little publicity then moral outrage is less although there is no change in material circumstances.

As will be obvious from our earlier discussion of metapreferences, some utilitarians might regard the desire for retribution as part of people’s lower order preference function with the consequence that it should be disregarded and only the higher order preference function entered into the welfare optimization process. After all if we acknowledge a taste for retribution and accord it equal status with all other goods in a mono-utility function then how can we deny the legitimacy of lynch mob revenge murders or street vigilantes taking the law into their own hands? These things are surely sanctioned in the approaches of Adelstein and Ehrlich. Their only explanation for centralisation of retribution in the state would be in terms of scale economies and free rider problems. These possibilities would still not explain a refusal to allow private revenge as the state does not normally, in a free market economy, prevent people from acting in a particular way just because it is inefficient.

Rubin (1982) has a discussion that implies that retribution should not formally be in the social welfare function but because it was once there (before tastes changed) punishment may be sub-optimal because of a reaction against it. H e argues that anger and the desire for revenge are efficient tastes that are learnt through evolutionary adaptation. Survival is promoted for the basic reason that potential criminals d o not mess with the individual who has demonstrated a high degree of vengefulness. As society develops, centralisation of punishment takes over from private vengeance on efficiency grounds. In contemporary society punishment is in the hands of decision makers who have little personal involvement in the effects of the crime. As this arouses less anger they have a tendency to under-punish (Buchanan, 1975). Rubin says that this does not justify vengeance on an individual level. His conclusion appears to be that society has become confused by identifying vengeance with lower order preferences to the point where this blurs the functional (utilitarian) uses of punishment. It should be emphasized that this argument does not assign an independent role to retribution. The argument is not that retribution should be in the welfare function; Rubin thinks that those outside the immediate circle of the victim experience little retributive verve. What should therefore be in the welfare function is the deterrence benefits of punishment. Given that these may be over-ruled by sentimental decision makers who identify retribution with savage lower order preferences then feelings of moral outrage may help correct this example of bureau failure.

So, where does the introduction of retribution lead to? If retribution is allowed in under its conventional definition all considerations of economic calculation in the administration of punishment vanish as justice, in this sense, i s not to be rationed. If justice is to be rationed then feelings arising from the response to punishment are externalities in

264 AUSTRALIAN ECONOMIC PAPERS DECEMBER

individual’s utility functions. All pairs of crime and punishment will appear alongside the usual commodities and the expected value loss of being a criminal victim. Punishment thus appears directly as well as indirectly through its influence on the expected value loss of being a victim. Is there anything wrong with this? The answer to this question depends o n whether one subscribes t o Harsanyi type metapreference arguments and additionally whether one requires symmetry in the application of such arguments. If murder is a lower order preference then so too is retributive punishment as this condones murder in response to murder. Thus a symmetric application of metapreferences rules out retribution. We have questioned the refutability of metapreference arguments so it behoves us to point out that the same is true of the retributionist position (cf. Rizzo, 1979). It is difficult to see how retributionist preferences can be truthfully revealed as there are incentives to overstate them given the problem identified by Rubin and Buchanan that others may give very little support to the retribution of those with whom they have little connection.

IX. SUMMARY

A paper like this does not really have a conclusion as such. The origin of this paper was the examination of the proposition that welfare economics lead logically t o the conclusion that capital punishment should not be used regardless of the magnitude of deterrence effects. We have shown that this proposition is incorrect. A particular formulation of the problem predicated on specific value judgements leads to the above conclusion. This formulation equated the absence of a compensating sum of money for the loss of life through execution with the requirement for an infinite sum of money a s compensation.

This leaves the question of how much capital punishment there should be. An economist may still conclude on the basis of a personal value judgement that there should be none o r that it should be mandatory for certain crimes, however this has nothing to d o with the ‘logic of welfare economics’. If one does not have value judgements that override all economic considerations the optimal level of capital punishment will become a n empirical question amenable to cost-benefit analysis (see Hofler and Witte (1979) for a rare cost- benefit analysis of capital punishment). There are still value judgements to be input to this c a l c ~ l u s . ~ It is hoped that posing the questions in the section headings of this paper provides a map for the economist assessing his/her position on capital punishment.

“We should also recognise the implicit value judgements of microeconomic theory as open to debate.

1989 O N THE WELFARE ECONOMICS OF CAPITAL PUNISHMENT 265

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