Crime and Punishment: On the Optimality of Imprisonment although Fines are Feasible.

A general result of the literature on crime and punishment is that imprisonment is not optimal if fines can be used instead. This paper presents a positive model which predicts the opposite for serious crimes, namely that imprisonment will be used, even if offenders could pay a correspondingly high fine. Hence, this model can explain mandatory prison sentencing, which is often found in practice for serious crimes. In contrast to the standard normative model in which a social planner chooses the detection probability and the type of punishment, this model separates these two decisions. In the first stage of the model, the individuals determine the type of punishment in a referendum. Given this decision, the government chooses the detection probability in the second stage. The main result is that individuals vote unanimously for imprisonment if the harm caused by the considered crime – and therefore the size of the penalty – is large.