The Economic Theory of Public Enforcement of Law by A. Mitchell Polinsky and Steven Shavell presents the economic theory of public enforcement of law, focusing on the use of public agents to detect and sanction violators of legal rules. The paper discusses the probability of imposition of sanctions, the magnitude and form of sanctions, and the rule of liability. It examines various extensions of the central theory, including accidental harms, costs of imposing fines, errors, general enforcement, marginal deterrence, the principal-agent relationship, settlements, self-reporting, repeat offenders, imperfect knowledge about the probability and magnitude of fines, and incapacitation. The paper begins by introducing the concept of public enforcement of law and its importance in affecting various aspects of society, such as pollution, tax compliance, and crime. It then discusses the historical development of the economic analysis of law enforcement, starting with the contributions of Montesquieu, Beccaria, and Bentham, and the influential work of Gary Becker in the 1960s. The paper then presents the basic framework of individual behavior, social welfare, and the enforcement authority's problem. It discusses the different types of liability, including strict liability and fault-based liability, and how they affect the decision-making of individuals. The paper also considers the implications of enforcement theory when the wrongdoer is a corporation or organization, and how the settlement process relates to the enforcement system. The paper then explores the optimal enforcement of law, considering the probability of detection, the level of sanctions, and the standard for imposing liability. It discusses the effects of errors in enforcement, the costs of imposing fines, and the level of activity that individuals choose to engage in. The paper concludes by emphasizing the importance of public enforcement in achieving socially optimal outcomes and the advantages of strict liability over fault-based liability in certain situations.The Economic Theory of Public Enforcement of Law by A. Mitchell Polinsky and Steven Shavell presents the economic theory of public enforcement of law, focusing on the use of public agents to detect and sanction violators of legal rules. The paper discusses the probability of imposition of sanctions, the magnitude and form of sanctions, and the rule of liability. It examines various extensions of the central theory, including accidental harms, costs of imposing fines, errors, general enforcement, marginal deterrence, the principal-agent relationship, settlements, self-reporting, repeat offenders, imperfect knowledge about the probability and magnitude of fines, and incapacitation. The paper begins by introducing the concept of public enforcement of law and its importance in affecting various aspects of society, such as pollution, tax compliance, and crime. It then discusses the historical development of the economic analysis of law enforcement, starting with the contributions of Montesquieu, Beccaria, and Bentham, and the influential work of Gary Becker in the 1960s. The paper then presents the basic framework of individual behavior, social welfare, and the enforcement authority's problem. It discusses the different types of liability, including strict liability and fault-based liability, and how they affect the decision-making of individuals. The paper also considers the implications of enforcement theory when the wrongdoer is a corporation or organization, and how the settlement process relates to the enforcement system. The paper then explores the optimal enforcement of law, considering the probability of detection, the level of sanctions, and the standard for imposing liability. It discusses the effects of errors in enforcement, the costs of imposing fines, and the level of activity that individuals choose to engage in. The paper concludes by emphasizing the importance of public enforcement in achieving socially optimal outcomes and the advantages of strict liability over fault-based liability in certain situations.