April 16, 2008
Bad incentives in the legal system

This week the Supreme Court agreed to hear the case of Thomas Goldstein. At issue is whether Goldstein can sue former prosecutors in California for his wrongful murder conviction in 1979. The prosecution's case appears to have been based on little more than false testimony by a jailhouse informant, who struck a secret deal with prosecutors for reduced jail time. The Reuters story explains more.

Goldstein's attorney, Ronald Owen Kaye, said this happened even though the U.S. Supreme Court had ruled in 1972 that informant deals should be disclosed. Van de Kamp later became California attorney general. He still practices law in Los Angeles and is chairman of the California Commission on the Fair Administration of Justice, set up by state lawmakers to look at ways of preventing wrongful convictions. Van de Kamp and Livesay appealed to the Supreme Court after a trial judge and the 9th U.S. Circuit Court of Appeals said Goldstein's lawsuit could proceed. The case will be argued in the fall.

The jailhouse informant problem is not isolated to Thomas Goldstein or to murder cases or to California. The May 2008 issue of Reason chronicles the remarkable meltdown of what looked to be locktight drug trafficking case in Louisiana. The accused were convicted and spent four months in jail awaiting sentencing. From the article (HT: Josh Hall):

But in the ensuing months, the government’s case unraveled, exposing some unsettling truths about the way jailhouse informants are used in America’s courtrooms. In December 2006, all charges against the family were dismissed. The federal judge who presided over the trial was so upset about what happened in his courtroom that he has since taken the rare step of speaking out about it publicly.

The legal fiasco was partly attributable to familiar themes of racism and overly aggressive prosecution. But the Colomb story is mostly about the war on drugs. It shows how the absurd incentives created by the unaccountable use of shady drug informants by police and prosecutors can quickly make innocent people look very guilty.

The contributions to my forthcoming book, Law withtout Romance, discuss a variety of incentive problems in the legal system. See an earlier DOL post for discussion of prosecutor incentives in the chapter by Russ Sobel, Josh Hall, and Matt Ryan. Another chapter by Roger Koppl shows how the industrial organization of forensic science institutionalizes systematic biases to convict the innocent. For the flavor, see Roger's sidebar and related Reason story from the November 2007 issue. And for much more, this by email from Roger:

The Innocence Project has found that the snitch system is an important contributor to false convictions. Thus, we have some good evidence that the case of Thomas Goldstein is not an “isolated incident.”

For the rest of Roger's excellent critique, and positive suggestions, please see beneath the fold.

Comments open....

...The snitch system has rather obvious epistemic infirmities, as the Goldstein case illustrates. The monopoly in forensics is another illustration. In most criminal cases, the state has the preponderance of resources. Thus, the process typically lacks the fundamental fairness most Americans probably take for granted. We do not adequately respect an important principle of international law, namely, the principle that there should be an “equality of arms” between the parties contesting in court. Public defenders cannot enter the jailhouse and offer cash payments or reduced sentences to contra-snitches who might exonerate defendants. We have, in other words, monopsony in the market for snitching. I suppose that means the prosecution can get its snitching services on the cheap. More importantly, however, it means that snitches have an incentive to tell the prosecution, their clients, what they want to hear and there is no countervailing force in the market.

The criminal justice system needs to be examined from the perspective of Alvin Goldman’s “social epistemology” and, of course, economics. With Goldman and others in his group, social epistemology uses economic logic and tools. One of Goldman’s followers, Leslie March, has argued that our own Hayek was the father of social epistemology. Thus, Austrian economists are in a good position to enter this under-explored area and add value. Besides all the interesting analysis they might provide, they have lots of important activism to do in this field. The criminal justice system is the place where the state-power rubber hits the civil-liberties road. We have studied commodities markets and political markets. It’s time to start looking to truth markets, too.

Posted by Edward J. Lopez at 02:50 PM in Law


The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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