Rewards versus Imprisonment: The Impact of Choice

Imprisonment and monetary rewards for non-convictions can similarly incentivize potential offenders to refrain from committing crime. Although imprisonment is expensive, it may still enjoy a cost advantage over rewards. This is because only detected criminals are imprisoned, whereas rewards need to be provided to the remaining, much larger, population. In this article, I demonstrate that the possible cost disadvantages of rewards are mitigated when people are offered a choice between an enforcement scheme involving no rewards and another involving rewards coupled with longer imprisonment sentences. Specifically, by using rewards in this manner, one can jointly reduce crime, time served per convict, and the tax burden of the criminal justice system, under the same conditions as one could by introducing rewards without choice in an environment where there is perfect detection. Moreover, monetary rewards provide incentives through wealth transfers, but imprisonment operates by destroying wealth. This leads choice-based reward regimes to be optimal unless the imprisonment elasticity of deterrence is higher than is empirically observed