Incentive-Based Criminal Justice Reform

by Ross Ulbricht (2019)

A good criminal justice system (CJS) must accomplish four goals:

1. Protect the public from being victimized by criminals
2. Pay victims appropriate restitution
3. Rehabilitate criminals
4. Cost the public as little as possible

I. Victims, the public and criminals

The interests of crime victims should be of primary importance to any CJS. If the purpose of a CJS is to protect the public from crime, then a criminal incident is a breakdown or failure of the system. However, once someone has been victimized, it is in their interest to be paid restitution as quickly as possible.

Next are the interests of the public. People wish to avoid becoming crime victims in the first place and to pay as little as possible for that protection.

Finally, there are the interests of criminals. These people wish to spend as little time as possible incarcerated in as low a security setting as possible. They also wish to be treated with at least basic dignity during that time.

Restitution, the most important need to be met, is often inadequate or missing altogether in the current CJSs in the United States. Vast sums are seized and spent by members of the criminal justice apparatus — for example by law enforcement organizations (LEOs) through civil asset forfeiture — while victims are left with little or nothing. The only satisfaction given this primary stakeholder is vengeance, which often takes the form of locking offenders in high-security prisons for extremely long periods, even decades or lifetimes. A desire for vengeance, while natural, is not civilized or moral and has no place in a modern CJS. I contend that, if proper restitution were afforded a crime victim and was paid by the specific perpetrator who harmed them, the victim’s desire for vengeance would be mitigated or expunged completely.

Of course, it is not in the criminal’s interest to pay restitution. However, this interest is subordinate to the victim’s and the loss is partially offset by a CJS eschewing vengeance and focused on rehabilitation. Such a rehabilitative system would also go a long way toward meeting the public’s need to avoid being victimized as former criminals stop committing new crimes. The current CJSs have some rehabilitative qualities, but mostly serve to institutionalize, dehumanize and harden prisoners. Their method is to protect the public, not by rehabilitating offenders, but by locking them away for much of their — or their entire — lives, even for non-violent offenses. This is effective but inhumane and subverts the public’s interest of paying as little as possible for their CJSs because the costs of long-term incarceration are astronomical.

It is well established that the CJSs in the United States are among the most costly and bloated in the world. Criminals are routinely held for far too long and in unnecessarily harsh conditions. Many are sentenced for victimless offenses and pose no future threat to the public, yet they are subjected to overkill. Both they and their families could be considered victims of an unjust CJS themselves.

II. A better way

Supplanting current CJSs all at once is unlikely but it is essential to have a destination before beginning a journey as important as criminal justice reform. What follows is an idealized CJS centered on victim restitution and crime prevention.

We begin with crime prevention because if we are successful in this domain, the issue of restitution is moot. While LEOs often do an admirable job keeping the public safe, crime still plagues many areas. Part of the problem is that LEOs are not directly beholden to the people they serve for revenues but rather to politicians. Their only motivators to prevent crimes therefore are altruism and bureaucratic inertia.

I propose that LEOs be remodeled as insurance agencies that insure the people they serve against being victimized by crime. Like any insurance agency, premiums must offset claims, so there would be a strong economic motivation — in addition to altruism — for LEOs to prevent their customers from becoming victims. In other words, LEOs would have skin in the game. Ideally, they would receive their revenue directly from private customers insuring against crime, and customers would have multiple LEOs to choose from. This would lead to efficiency through competition.

Let’s look at what happens when someone claims they’ve been a victim of a crime and how the interests of the victim (we’ll call Vicky), the public, and the criminal (we’ll call Chris) are handled. As with any insurance agency, an LEO acting as one (we’ll personify it as Leonard) must investigate any claims for fraud. If none are found, Leonard must pay his client (Vicky) according to the terms of their contract. Thus, before our criminal Chris is even apprehended, Vicky is paid restitution and the most important function of the CJS is fulfilled.

It should be noted that the amount of restitution needs to be set carefully to avoid perverse incentives. If set too high, Vicky may be able to profit from false claims. If set too low, Chris may find that crime pays.

Now Chris, being liable for damages, must be brought to justice and the public must be protected from his potential future crimes. Leonard, having paid Vicky, now has an economic incentive to apprehend and prosecute Chris, stopping him from committing more crimes and forcing him to reimburse Leonard for the damage already caused.

Although they are also in need of reform, the operation of the courts is outside the scope of this essay. Thus, we will fast forward to a successful prosecution. Chris should then be sentenced to reimburse Leonard for the restitution Leonard had paid Vicky. At this point, Chris becomes a ward of Leonard, who is responsible for paying out any future damages caused by Chris through criminal activity. For this reason, Leonard will house Chris in a security setting that will minimize the chance of Chris victimizing someone else while giving him employment opportunities to earn money to pay down his restitution bill.

But what about Chris’s interests? At this point, he is at Leonard’s mercy and Leonard could treat him like a slave, extracting as much value from his labor as possible without concern for his wellbeing. To incentivize Leonard to treat Chris with human dignity, Chris must be given the option of leaving Leonard and choosing a different custodian (we’ll call her Connie). Connie would be subject to all the same liabilities as Leonard in terms of protecting the public from Chris, but if she offers Chris better terms, he will choose her and Leonard will lose his business. Consequently, Leonard and Connie are incentivized to offer Chris the best job opportunities and living conditions as cheaply as possible while keeping the public safe from him.

Additionally, if Connie can rehabilitate Chris, she can keep him in increasingly lower security settings without fear of a costly claim resulting from his criminal behavior and may eventually be able to release him into the general public. She has an economic incentive to do so because lower security is cheaper, she’ll save money. More importantly, Chris has an incentive to reform because he wants the freedom and opportunities that lower security provides.

III. Baby steps

LEOs and prisons will, of course, resist restructuring in such a dramatic way. However, incremental change toward this ideal may be possible.

First, LEOs come in many flavors, from the FBI and BoP down to county sheriffs, city police and state troopers, and there are foreign jurisdictions as well. A pilot program may be more acceptable in a niche jurisdiction that can serve as a proof-of-concept before trying to effect large-scale change.

Additionally, not all laws need to be reformed at once. It is easier to imagine using the proposed CJS with crimes involving property damage, such as arson, than with ones like murder or those without victims.

Most—if not all—jurisdictions employ just a single LEO, but this LEO could be shaped and prepared for a transition to the proposed CJS by passing laws governing its operation. For example, it could be required to pay victim restitution or give prisoners the right to choose their prison or make prison liable for damages caused by people in their custody.

It could also be possible to charter multiple LEOs and prison systems within a given jurisdiction and give people the choice of which to patronize from a more limited set that the market may support. In such a scenario, one could easily imagine a voucher system in which all residents are sure to be covered, but LEOs are still required to compete for their revenue.

IV. Conclusion

The CJSs employed today have failed to adequately meet the needs of those most affected by them. A broad and growing political consensus has formed that criminal justice reform is needed. However, that consensus has thus far only agreed on superficial solutions, such as changing mandatory sentencing laws. While such changes are needed, they do not address the underlying incentives facing LEOs and prisons that have led to the current state of affairs. The proposed alternative does, and steps should be taken toward it.