IV. Making Victims Responsible: Restitution and Incentives

Posted on: April 22, 2019 at 09:07:37 CT

IV. Making Victims Responsible: Restitution and Incentives to Privatize

A major implication of Rothbard’s theory of justice is that criminals should be held responsible for their actions, but an equally important implication is that free individuals must also take responsibility for protecting themselves and their property. Individuals reap the primary benefits from secure property rights and therefore they should have primary responsibility for that security. They certainly may cooperate with others in fulfilling this responsibility, but the cooperation of others should come at a voluntarily agreed-upon price; it should not be expected to be provided free upon demand. Indeed, this perspective suggests that no one should be forced to pay for helping to secure other peoples’ property rights. Of course, they can voluntarily enter into a cooperative arrangement to produce security if the others in the arrangement accept them. Thus, the libertarian perspective also implies a fully privatized criminal justice system.39

As suggested above, successful restitution programs also appear to require much greater privatization than currently characterizes the United States. Only by taking personal responsibility for active involvement in prosecution and collections, either through direct participation or contracting with specialists (e.g., private police, prosecutors and collection agents), can victims expect to significantly increase the chances of collecting adequate restitution. However, legislation mandating privatization may not be necessary. When victims cannot expect to collect restitution, their incentives to report crimes, let alone participate in or pay for investigation, pursuit, and prosecution, are very weak. An explicit recognition of the primacy of victims’ property rights to restitution should create strong incentives for victims and potential victims to get personally involved in all aspects of the criminal justice process. In other words, when victims have private property rights to restitution, they have incentives to invest in claiming what is due.40

A focus on restitution for victims will also lead to a society with substantially less crime: that is, such a policy is both relatively just and relatively “efficient” compared to the current criminal justice system.

Consider the issue of deterrence, for example. Raising the “expected price of crime” for the potential criminal should reduce crime. Of course, this expected price is not the actual sentence given to convicted criminals, or even the portion of that sentence served (e.g., time in prison before parole or early release). Rather, it is determined by the probabilities that: (1) the crime is either reported to or observed by someone in a position to investigate and/or apprehend the wrongdoer (e.g., public police, private security, private citizens if they are allowed to do so); (2) the wrongdoer is apprehended; (3) the offender is charged and prosecuted after being apprehended (either through public or private justice procedures); (4) the prosecution is successful so an appropriate sentence is imposed (note in this regard that over 90 percent of convictions in the Untied States are achieved through plea and charge bargaining which lower the level of punishment relative to what the criminal would expect with a trial); (5) the sentence is actually carried out (e.g., criminals almost never pay restitution or serve the entire prison sentence that a judge hands down today). A rough approximation of this calculation can be made for some crimes using 1992 Florida data, assuming that the relevant punishment is imprisonment (e.g., that prohibition and various “intermediate sanctions” are not severe punishments, and that restitution is generally not collected). Table 1 summarizes these calculations for robbery and burglary.

Violent crimes against persons have relatively high expected penalties compared to those in Table 1, although they also do not appear to be proportional to the harms done: a murderer had an expected sentence of 2.99 years and a sexual offender expected about 338 days. On the other hand, criminals engaged in theft in 1992 could expect about 4.5 days in prison (for auto thieves it was about 10 days). Clearly, the expected prices of most crimes are very low by any standard.41 Restitution will lead to greater private sector involvement, and in turn, increase the price of crime by raising many of these probabilities.

Table I

(a) Probability of Victim Reporting
(b) Probability of Arrest Given a Crime is Reported
(c) Probability of Prosecution Given Arrest
(d) Probability of Conviction Given Prosecution
(e) Probability of a Prison Sentence Given Conviction
(f) Average Prison Sentence
(g) Average Portion of Sentence Actually Served

(1) Restitution and the probability of reporting. According to the Bureau of Justice Statistics’ most recent victimization survey, only about 39 percent of all Index I crimes (murder and manslaughter, sexual offenses, aggravated assault, robbery, burglary, larceny, and auto theft) are reported in the United States. Reporting varies by crime type, as suggested in Table 1, with about 50 percent of the victims of violent crimes reporting the crime, for instance, compared to 41 percent for household crimes, 92 percent for motor vehicle theft, and 15 percent of the crimes of larceny resulting in losses of less that$50.42 Thus, a major impediment to the public-sector criminal justice system’s ability to deter criminals occurs at this first step of essential involvement by private citizens, and an important question is “why don’t victims report crimes?” One reason may be apparent from reporting statistics. Motor vehicle thefts are likely to be reported because victims expect to recover their losses through private insurance, and the insurance companies require that the theft be reported. When an expected insurance payment is not forthcoming, the primary expected benefit that a victim anticipates from cooperating with police and prosecutors is that the criminal will be punished. But given low clearance rates, early release programs, plea bargaining that reduces sentences, and so on, such expectations are not very strong. Furthermore, any hope that cooperating with police and prosecutors will protect the victim or others from the same criminal is a false one. After all, the actual periods of incapacitation are apparently not sufficient to deter most criminals from further crimes: roughly 70 percent of the offenders released from prison are rearrested for committing another crime.43 So the benefits of reporting are low.

Victims’ cost of reporting a crime and then cooperating with prosecution can also be staggering. After all, “In contemporary America, the victim’s well-being and fair treatment are not the concern of the criminal justice system or any other institution. The victim has to fend for himself every step of the way.”44 In addition to the initial loss to the criminal, victims face the costs of cooperating in the prosecution, including: (1) out-of-pocket expenses such as transportation, baby sitting, parking, etc.; (2) lost wages in order to meet with prosecutors and appear in court, often through several delays; (3) considerable emotional and psychological costs brought on by having to confronted an assailant or endure a defense attorney’s questions; (4) considerable uncertainty about the likely outcome of cooperation; and conceivably (5) retaliation by the offender who is either unsuccessfully prosecuted or not confined for very long if prosecution is successful. Many of the costs that victims must bear are dependent on the rest of the criminal justice system. For instance, victims can lose wages as they endure seemingly endless delays and continuances due to the huge caseloads that prosecutors and the courts have. Furthermore, “the criminal justice system’s interest in the victim is only as a means to an end, not as an end in himself. The victim is a piece of evidence.”45

If restitution were to become the primary goal of criminal justice, much stronger incentives for greater victim reporting and cooperation in prosecution would obviously arise, thus increasing the certainty of punishment and generating greater deterrence. If there was a right to negotiate and arrange to collect restitution in conjunction with or before criminal prosecution takes place, or even in the absence of criminal prosecution, as in Japan and France (see discussion below), incentives for victims to pursue criminals would obviously be much stronger. But a focus on restitution would also lead to investments that would increase the probability of arrest, prosecution, and effective punishment.

(2) Restitution and the probability of arrest. Private security is relatively effective at protecting property. Thus, private security is the second fastest growing industry in the U.S. There are almost three times as many private security personnel as there are public police in the U.S. today, up from roughly a one-to-one ratio 25 years ago.46 However, investigations of crimes already committed still tends to be dominated by the public police, who’s clearance rates for reported crimes hover around 20 percent. There is a “private investigator” market, of course, but much of its work focuses on non-criminal investigations (e.g., search for evidence to be used in a divorce or some other civil litigation). Insurance investigators do provide investigative services under some circumstances when the victim has insurance (e.g., when the losses are large enough to warrant the cost of investigating), and many private organizations and businesses (e.g., the railroad industry, American Banking Association, and American Hotel-Motel Association), rely on private investigative services because they do not get satisfactory results from public police. Furthermore, internal security organizations investigate most employee crimes for many business enterprises, partly in reflection of the very low priority public police put on such crime.47 Historically, rewards offered by private citizens have also led to private pursuit of criminals, including investigative services, although such rewards are probably more likely to be offered for return of stolen goods than for successful prosecution, as public rewards tend to be. Similarly, the private bail-bonding system relies on private bounty hunters today. However, by focusing on restitution for victims, the potential scope for private investigation and pursuit of criminals would expand considerably.

As with any private property right, the right to restitution should be transferable. Victims could offer bounties or rewards, but a more likely scenario in modern America would be, in effect, the sale of the right to collect a particular fine. If the right to restitution is a marketable claim for a victim, such as it was in medieval Iceland, then it can be sold to someone willing to pursue the offender. Specialized firms (thief-takers, bounty hunters) could arise to pursue criminals and collect fines. However, the more likely alternative is that individuals would contract with “protection firms” and those contracts would include insurance which pays clients who are victimized, thereby giving the right to collect restitution to the firm which then pursues offenders to recover the payment.48

(3) Restitution and the probability of prosecution.49 Every accused criminal is guaranteed counsel, but the same is not true for victims. The public prosecutors supposedly represent victims, but they clearly do not.50 Prosecutors are, in large part, political animals who pursue their own interests by responding to the demands of powerful interest groups, rather than the interests of crime victims.51 Beyond that, there appears to be far too many crimes and victims for the number of prosecutors that exist, so prosecutors dismiss or plea bargain away many crimes as a means of generating large numbers of low-cost convictions while handling the huge number of accused criminals. Thus, as Valentine explains, “the fact should be faced that the employment of private prosecution is in some cases and in some jurisdictions the only way for victims of crime to get justice. You either have private attorney to assist the state in prosecuting [the accused] … or he just does not get prosecuted.”

Private prosecution is actually possible in the United States in a limited way.52 A private prosecutor does not take over a case in the United States, however. Rather, a victim’s attorney helps the public prosecutor (or badgers the public prosecutor when he tries to postpone, dismiss, or plea bargain the case). Indeed, a victim may have to employ an attorney “just to get a straight answer as to a trial date.” However, a private attorney acting for a victim generally must obtain the district attorney’s approval before becoming involved. But why, for instance, should a victim not be allowed to pursue prosecution without approval, even when the district attorney does not want to?

Most victims do not want to invest the time and effort it takes to cooperate with police and prosecutors, of course, so why would they invest money on top of that time and effort? Perhaps to increase the probability of successful prosecution and the severity of the resulting sentence. Revenge may be a strong motive, and the fact that some private attorneys are occasionally employed suggests that it is a sufficient motive for some victims, but we can not anticipate large investments in private prosecution without supplementing its costs or increasing its potential benefits. A restitution-based system would effectively turn crimes with victims into intentional torts, where the victim has strong incentives to pursue prosecution in order to collect damages.53 This is not a far-fetched idea. For instance, in Japan, mediated negotiations between the victim and the offender over the appropriate restitution actually occurs before criminal prosecution, and in a very significant way it substitutes for such prosecution, as explained above. If the negotiations are successful, actual public prosecution may be waved entirely, or may involve a summary procedure resulting in only moderate additional punishment. Similarly, in France, a crime victim has the right to file a civil claim against the accused, but this claim can be filed in a criminal court and considered at the same time as the criminal case is being prosecuted by a public prosecutor. Furthermore, the civil suit can be filed even before the filing of a criminal proceedings. As a result, “Private prosecution is very popular in France, since it enables the victim to collect damages quickly and inexpensively.”54

Encouraging private prosecution through establishment of a restitution- based program should substantially increase the probability of prosecution, as victims will have much stronger incentives to pursue a case than public prosecutors do. Fewer cases will be dismissed, and fewer crimes will be forgiven by prosecutors through plea bargaining. This does not mean that bargains will not be struck to avoid the costs of a trial, however, and forgiveness of crimes might also arise, but it will be the victim who grants the pardon, not a prosecutor or judge. Indeed, restitution should include both payments for the costs that the crime has inflicted on victims and the cost of collecting the restitution, including the cost of prosecution (and post- prosecution supervision, as explained below), and this creates strong incentives for the guilty criminal to bargain with the victim in order to avoid the higher restitution payments that will be required after a trial.55 Indeed, the incentives are quite similar to those in Japan where guilty criminals have strong incentives to bargain with victims in order to “buy” forgiveness and avoid the harsh punishment that public prosecution is likely to lead to when the criminal does not have a letter of pardon.

(4) Restitution and the probability of conviction. Court crowding is a major factor in limiting the deterrent effect of the probability of convictions. Prosecutors do obtain large numbers of convictions through plea and charge bargaining, of course, but these bargains almost inevitably involve reduced numbers and/or severity of the charges relative to the actual crimes committed. The private sector has responded to the impact of civil court crowding with a rapidly expanding system of private alternatives such as arbitration, mediation, and the new for-profit court firms.56 However, the potential for private courts to relieve criminal court crowding is clearly limited under the existing criminal justice focus on punitive sanctions. Civil liberty concerns about private judges mandating prison sentences and other forms of punishment will probably prevent the development of any formal private sector criminal courts. Informally, of course, sanctions including restitution are being imposed within business firms, and by various other groups of private citizens.57

Formal private courts would probably move into criminal justice very quickly if the system was refocused on restitution. The issues of criminal law would be determination of damage payments, at least for most crimes. Deciding damage awards is a frequent function of private arbitrators and mediators. In Japan, for instance, restitution awards are determined through mediation before criminals ever go to court, and if this mediation is successful the criminal trial is a brief summary proceeding. Furthermore, the traditional outcome of mediation is the establishment of a contract, so mediation (or arbitration, for that matter) between a victim and offender can produce a legally binding contract that specifies the amount of debt and how it should be paid. Contract issues are regularly handled by private mediators and arbitrators today.58 Thus, refocusing criminal justice toward restitution would open up a much wider avenue for privatization in order to increase the probability of conviction, as the number of courts available would expand dramatically, thereby reducing plea/charge bargaining as currently practiced.

(5) Restitution and the privatization of punishment. Several states have laws urging judges to sentence criminals to restitution, leading to a number of experimental programs. Consider the restitution experiment in Tucson:

“When “Fred Stone” broke into the Tucson house and stole the color TV, he had little idea that he would be caught. Still less did he expect to be confronted face-to-face by the victim, in the county prosecutor’s office. In the course of the meeting, Stone learned that the TV set was the center of the elderly, invalid woman’s life. With the approval of the Pima County, Arizona prosecutor, he agreed not only to return the TV, but also to paint her house, mow her lawn, and drive her to the doctor for her weekly checkup. By doing so he avoided a jail sentence, and saved Tucson area taxpayers several thousand dollars.59”

This example makes three important points here. First, even though such restitution arrangements are sanctioned by public prosecutors and courts, some have found it desirable to produce private restitution contracts negotiated between the offender and the victim. In these cases, the prosecutor and court become an arbitrator-mediator, clearly a service that can be privatized, as noted above. Second, restitution need not be a monetary payment. If the only restitution option is a monetary fine, criminals may be judgment proof. However, restitution should allow for working off the fine, either by working directly for the victim or by selling labor services, perhaps in a prison industries environment. Third, restitution is a relatively efficient form of punishment.60 By comparison, imprisonment uses resources like guards and other personnel, and the prisoners’ idle and therefore wasted time. Restitution requires far fewer resources. Some offenders may require close supervision in prison-like work places to ensure payment, but the prisoners produce marketable goods and services to pay off their debts, including the cost of supervising them to collect the debt.

If victims perceive little risk that a debtor will renege, they may allow continuation of a trade so the criminal can make periodic payments, or a contract may specify work to be done for the victim, as in the Tucson example. Both may be rare, of course (although they apparently are not in Japan). If a risk of reneging is perceived, the debt contract with the victim might specify that a criminal contract his labor services with a “collection” agency. The criminal may or may not be required to work off the debt in a secure facility, of course, so a range of environments with varying degrees of monitoring and security will develop to maximize the likelihood that payments are made at the lowest possible costs. Indeed, such collections firm might pay the victim the discounted value of the anticipated restitution and then collect the payments itself, recovering the payment plus costs and profits.

Variants of this idea actually can be observed. For instance, in a restitution program called EARN-IT, in Quincy County Massachusetts, forty local businessmen provided jobs to offenders unable to find them elsewhere. The employers acted as supervisors during work hours, and offenders reported to probation officers.61 In other experimental restitution programs, offenders returned to jail or a “half-way house” at night (most half-way houses are contracted out to private organizations, which clearly could also collect and distribute restitution payments). This model can be extended to include private firms employing labor in secure prisons. A competitive market for such labor, in which the convict has the right to withdraw from the contract with a particular prison firm (but not with the victim) if the prison firm does not live up to its agreement, means that the convict would be able to make the highest possible wage and earn his or her way out of prison as quickly as possible — a characteristic that should be attractive to the victim or bonding firm as well as the criminal.

A restitution program should actually add to the rehabilitative effects of a prison (or non-prison criminal) work program. As Poole stresses, “by integrating the offender into the work force and making him assume responsibility for his offense, restitution may just do more to rehabilitate offenders than all the fancy programs dreamed up by psychologists and sociologists over the past quarter century.”62 Furthermore, when a criminal is working off a predetermined fine the sentence takes on a self-determinative nature: the harder a prisoner works the faster he obtains release. “He would be master of his fate and would have to face the responsibility. This would encourage useful, productive activity and instill a conception of reward for good behavior and hard work.”63 These incentives could significantly enhance the rehabilitative impact. Indeed, there actually are a number of reasons to expect rehabilitation to be quite effective under such a system.64 Japan’s restitution-based arrangements appear to produce relatively low recidivism rates, at any rate.