The Effect of Type-1 Error on Deterrence

A common view in the law and economics literature holds that equal increases in type-1 and type-2 error lower deterrence by the same amount. We demonstrate that this view is generally incorrect both when the court's error concerns the assessment of the alleged offender's act (mistake of act) and when it concerns the identity of the offender (mistake of identity). As for mistakes of act, the common view ignores that the two types of error are conventionally defined as court errors, i.e. as conditional on adjudication, and that abiding by the law reduces the probability of adjudication. This means that type-1 error exerts a lesser effect on deterrence than type-2 error. Moreover, we demonstrate that type-1 error may lead a potential offender to over-comply with the law, both when choice is binary and when it is continuous. This holds whether or not errors are defined as conditional on adjudication. As for mistakes of identity, we formalize the view that the potential offender may be falsely convicted of a crime committed by someone else whether or not he himself acts lawfully, and that type-1 error, whether or not it is defined as conditional on adjudication, therefore does not exert any direct effect on deterrence