NYU School of Law

At the core of the economic analysis of law lies the concept of expected sanctions, which are calculated by multiplying the sanction that is applied to wrongdoers by the probability that it will be applied. This probability is a result of several sequential probabilities that involve the different actors responsible for sanctioning wrongdoers (e.g. police, prosecutors, judges, jurors, etc.). Generally, legal economists treat different legal probabilities as fungible and simply multiply them much like any other sequential probabilistic situation. In this paper we challenge this assumption, and demonstrate that different types of legal probabilities are perceived by people as different and are expected to affect their behavior in distinct ways. More specifically, we show that uncertainty associated with legal ambiguity and uncertainty associated with imperfect enforcement should not be treated as equal.

To test these predictions, we designed a series of between-subjects experimental surveys that measured and compared participants’ attitudes toward compliance in conditions of uncertainty. We used a sample of several hundred students both from Israel and the United States who received a description of a hypothetical scenario in which the dimension that was manipulated was related to whether the source of uncertainty was in the legality of the behavior or in the likelihood of enforcement (while holding the expected sanction constant). Overall these studies confirmed our main hypothesis that people will comply less, when the source of uncertainty is in the law itself, in comparison to situations where the source of uncertainty is in enforcement but the illegality is clear.

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