The Italian parliament approved this week the so called “indulto” or pardon law. According to this law, all those who have committed crimes before May 2nd 2006 will be pardoned and will not have to serve prison sentences. Although some crimes have been excluded from the law of pardon, crimes of false accounting, corruption, tax evasion and finance crimes and crimes relating to the Public Administration were not excluded.
In this post, I discuss the economics of giving pardon also to these crimes.
There are several strands of economics research that can be fruitfully used to analyze the pardon law.
One, the most obvious, is the economic model of crime, developed by Gary Becker, Nobel laureate, in 1968. Becker suggests that when considering the possibility of breaking the law, an individual will compare the expected benefits from the crime with its expected costs. The expected costs of crime depend on the probability of apprehension, conviction, and punishment as well as on the severity of the punishment. Although Becker’s model of crime has several limitations, it may be argued that it approximates quite well the decision process behind finance, corruption and tax evasion crimes, all included in the pardon law. The pardon law, I believe
decrease the perceived probability of punishment for future crimes and thereby reduces the incentive not to commit crimes. This is because it the expectation for similar pardon laws in the future. Already in the past, the Italian parliament, hungry for revenue, had approved laws that suspended possible future punishments for tax evasion (condono fiscale) or for building or modifying houses and apartment buildings without approval (condono edilizio) conditional on paying a nominal fee. For every “condono” it declared that no future “condoni” would be granted. New “condoni” nevertheless followed.
On these basis it would be not surprising if this pardon law created an expectation for future ones.
More generally the pardon law reinforces the general perception in Italy, that for a reason or another, the probability of being actually punished for a crime is relatively low.
As Persson and Siven (2006) reminds us in addition of the incentive effect of imprisonment (longer expected prison terms increase the expected cost of crimes) there is an “incarceration effect” as imprisonment disables people from committing crimes. Thus the pardon law will not only reduce the expected cost of crimes thus making it more likely, it will also enable criminals to return to their illegal activities before time.
Finally one should consider the impact of punishing crime on social norms.
Funk (2005) , for example, argues that “harsher governmental deterrence reduces crime directly as well as indirectly through its impact on social norms“.
A note: The pardon law was justified by the government by the need to guarantee prisoners a human treatment, impossible at present, given the serious overcrowding of Italian prisons.
Becker, Gary 1968. Crime and Punishment: An Economic Approach, Quarterly Journal of Economics, 76, (March/April 1968), pp. 169–217.
Persson, Mats & Siven, Claes-Henric. 2006. Incentive and incarceration effects in a general equilibrium model of crime , Journal of Economic Behavior & Organization, 52(2), pp. 214-229. (An earlier version of the paper can be downloaded here)
Funk, Patricia. 2005. Governmental Action, Social Norms, and Criminal Behavior , Journal of Institutional and Theoretical Economics 161(3), pp. 522-35.
Antonio di Pietro’s blog Those who voted for the pardon 29 July
Beppe grillo’s blog Tomorrow is another day: we will see 29 July