Punitive Damages and the Economic Theory of Penalties

Deterrence has long been considered one of the most important goals of both tort law and criminal law. However, there are different notions of deterrence advanced in the literature in these areas. The traditional notion of deterrence in the criminal punishment literature is one of complete deterrence, of stopping offenders from committing offensive acts. Generally, complete deterrence is accomplished by eliminating the prospect of gain on the part of the offender. The alternative, more recent notion of deterrence, largely observed in the torts literature, is that of appropriate or optimal deterrence, which implies deterring offensive conduct only up to the point at which society begins to lose more from deterrence efforts than from the offenses it deters. Optimal deterrence is generally accomplished by shifting, or internalizing, the costs generated by the offender\u27s conduct to the offender