[Adapted from "Protected Lying: How the Legal Doctrine of 'Absolute Immunity' Has Created a 'Lemons Problem' in American Criminal Courts" in the Spring 2018 issue of the Quarterly Journal of Austrian Economics.]

In his famous speech to a gathering of federal prosecutors in 1940, Attorney General Robert Jackson reminded his audience that their job was to do justice. He declared: “While the prosecutor at his best is one of the most beneficent forces in our society, when he acts from malice or other base motives, he is one of the worst.” With apologies to George Stigler, one suspects that such a speech from a modern U.S. attorney general to prosecutors would be met with “uproarious laughter.”

Jackson continued:

Nothing better can come out of this meeting of law enforcement officers than a rededication to the spirit of fair play and decency that should animate the federal prosecutor. Your positions are of such inde-pendence and importance that while you are being diligent, strict, and vigorous in law enforcement you can also afford to be just. Although the government technically loses its case, it has really won if justice has been done. (Emphasis ours)

The modern standards that the American Bar Association lays out for prosecutors show that at least some of Jackson’s idealism has not disappeared. Parts (a) and (b) of Standard 3-1.2 of the ABA’s Fourth Edition of the Criminal Justice Standards for the Prosecutorial Function declare:

(a) The prosecutor is an administrator of justice, a zealous advocate, and an officer of the court. The prosecutor’s office should exercise sound discretion and independent judgment in the performance of the prosecution function.

(b) The primary duty of the prosecutor is to seek justice within the bounds of the law, not merely to convict. The prosecutor serves the public interest and should act with integrity and balanced judgment to increase public safety both by pursuing appropriate criminal charges of appropriate severity, and by exercising discretion to not pursue criminal charges in appropriate circumstances. The prosecutor should seek to protect the innocent and convict the guilty, consider the interests of victims and witnesses, and respect the constitutional and legal rights of all persons, including suspects and defendants.

This clearly is not the American criminal justice system described in sections I and III of this paper, but explaining why this is the current situation requires something much different than exhorting the players in the system to “serve the public.” If there is anything clear, the players in the system, from police to prosecutors to the judges do not serve the interests of the “public,” but rather their own interests.

Economists in the Austrian and Public Choice camps should not be surprised at this situation. Bruce Yandle wrote of his experience with the Federal Trade Commission and how oblivious its staff economists seemed to be to the problems of regulatory issues. He writes:

Not only does government rarely accomplish its stated goals at lowest cost, but often its regulators seem dedicated to choosing the highest-cost approach they can find. Because of all this, I and others in academia became convinced years ago that a massive program in economic education was needed to save the world from regulation. If we economists could just teach the regulators a little supply and demand, countless billions of dollars would be saved.

As he received his “education” in bureaucratic thinking, however, Yandle came to realize that the regulatory dynamic was not what he originally had imagined. He continues:

…instead of assuming that regulators really intended to minimize costs but somehow proceeded to make crazy mistakes, I began to assume that they were not trying to minimize costs at all—at least not the costs I had been concerned with. They were trying to minimize their costs, just as most sensible people do.

Those costs, he pointed out, included costs of making mistakes, costs of enforcement, and political costs. Those firms being regulated, he noted, also had goals that were well outside what the public perception of regulation was supposed to be. Writes Yandle:

They want protection from competition, from technological change, and from losses that threaten profits and jobs. A carefully constructed regulation can accomplish all kinds of anticompetitive goals of this sort, while giving the citizenry the impression that the only goal is to serve the public interest.

Most of the regulation literature focuses upon the relationship between government and private firms that government agents regulate, but while courts are entirely government entities and the analogies between the various players in the courts and those in the regulated marketplace are not exactly the same, nonetheless there are similarities. First, and most important, as Robert McCormick and Robert Tollison write, all of those who take part in the systems—both markets and in government—are self-interested individuals:

They (government employees and politicians) are economic agents who respond to their institutional environment in predictable ways, and their actions can be analyzed in much the same way as economists analyze the actions of participants in the market processes.

If one can compare the actions of prosecutors to business owners, one can apply Murray Rothbard’s analysis that individuals will seek to gain psychic gains and also can suffer psychic losses. There is one important difference, however: Should the individuals in private business—entrepreneurs and the capitalists—engage in error or disseminate false information over time, they well may suffer real economic losses, losing their own resources.

Prosecutors, on the other hand, use state-owned resources, are protected from their own personal losses by both the legal doctrine of absolute immunity and the refusal of the so-called watchdog agencies such as state bar discipline committees to hold prosecutors accountable for lawbreaking and other wrongdoing. Furthermore, their actions force others to use their own resources, and when prosecutors target business owners, losses and occasional bankruptcies follow.

Chris Calton reinforces this point by likening the courts to a commons or, more specifically, a “public good” that is owned by the state, and the government players have no incentive to economize on resources financed by taxpayers. He writes:

Because the government holds a monopoly on the justice system in the United States, courtrooms are treated as public goods. For public goods, costs are socialized, so there is no individual cost to using this resource. From the perspective of the criminals, of course, this seems like a no-brainer—a defendant is hardly going to pay the cost of his own conviction. But the socialized costs of courtrooms remove the incentive to economize for two specific groups of people: legislators and police officers.

Calton explains that legislators can expand the criminal code to look “tough on crime” without having to use their own resources, while police gain from making more arrests, even though most of the people they collar are likely to be non-violent lawbreakers. To put it another way, the gains for the government players in the system, including police, prosecutors, judges, and lawmakers are private while the costs themselves are socialized.

While we use market analysis, nonetheless, we emphasize again that courts are not markets, and that plea bargain sessions are not exercises in mutual exchange. In economic exchanges, all parties involved anticipate being better off afterward, while in the courts, one party will be better off and the other will be worse off. Rothbard writes about government intervention:

On the market,…, there can be no such thing as exploitation. But the thesis of an inherent conflict of interest is true whenever the State or anyone else wielding force intervenes on the market. For then the intervener gains at the expense of the subjects who lose in utility. On the market all is harmony. But as soon as intervention appears on the scene, conflict is created, for each person or group may participate in a scramble to be a net gainer rather than a net loser—to be part of the intervening team, as it were, rather than one of the victims.

Prosecutors generally are winners in their interactions with people who are accused of crimes, and given the high conviction rates and the high rates of plea bargains (that serve as convictions), prosecutors benefit well from the existing system. This does not mean that society as a whole benefits from how the courts operate, however, and when innocent people are convicted and the courts and prosecutors refuse to rectify the errors, not only are the wrongfully-convicted individuals done irreparable harm, but also family and loved ones of the victim. Furthermore, every refusal to correct official wrongdoing that goes unpunished (and that is nearly every one of those cases) creates perverse incentives for prosecutors and judges to do more of the same.

As we have emphasized before, for all of the talk about how prosecutors “serve society,” the system is one in which many of the actors, such as prosecutors, gain individually from the system, but the benefits to others are not as clear. While it is true that most people would benefit with dangerous and violent criminals being punished and “taken off the street,” close to half of people in prison are there not for violent crimes like robbery, rape, and murder but rather for using or distributing drugs such as marijuana or cocaine. While one can argue whether or not such substances should be legal, nonetheless usage of these substances does not necessarily post a threat to the lives and property of others.

Ludwig von Mises provides a number of insights into bureaucratic mind. For the purposes of this paper, we look at the “justice” system as a bureaucracy, as opposed to dealing with whether or not elected prosecutors behave differently than appointed prosecutors, a subject for later research. Commenting on the differences between private enterprise and a bureaucratic office, Mises writes:

The objectives of public administration cannot be measured in money terms and cannot be checked by accountancy methods. Take a nation-wide police system like the F.B.I. There is no yardstick available that could establish whether the expenses incurred by one of its regional or local branches were not excessive. The expenditures of a police station are not reimbursed by its successful management and do not vary in proportion to the success attained. If the head of the whole bureau were to leave his subordinate station chiefs a free hand with regard to money expenditure, the result would be a large increase in costs as every one of them would be zealous to improve the service of his branch as much as possible. It would become impossible for the top executive to keep the expenditures within the appropriations allocated by the representatives of the people or within any limits whatever. It is not because of punctiliousness that the administrative regulations fix how much can be spent by each local office for cleaning the premises, for furniture repairs, and for lighting and heating. Within a business concern such things can be left without hesitation to the discretion of the responsible local manager. He will not spend more than necessary because it is, as it were, his money; if he wastes the concern’s money, he jeopardizes the branch’s profit and thereby indirectly hurts his own interests. But it is another matter with the local chief of a government agency. In spending more money he can, very often at least, improve the result of his conduct of affairs. Thrift must be imposed on him by regimentation.

While no one doubts that even prosecutors face scarcity constraints (even though critics may say prosecutors have “unlimited” resources), nonetheless there is an economic calculation issue facing a defendant that prosecutors do not share. Because individuals charged with crimes are expected to pay for their own representation—or face the tender mercies of an overworked public defender that is unlikely to offer an adequate defense—they are likely to face resource problems. Prosecutors, on the other hand, are using resources of others and face a much different calculus than do defendants. Mises explains, at least in part, the process:

In public administration there is no market price for achievements. This makes it indispensable to operate public offices according to principles entirely different from those applied under the profit motive.

Now we are in a position to provide a definition of bureaucratic management: Bureaucratic management is the method applied in the conduct of administrative affairs the result of which has no cash value on the market. Remember: we do not say that a successful handling of public affairs has no value, but that it has no price on the market, that its value cannot be realized in a market transaction and consequently cannot be expressed in terms of money.

As Mises points out, market prices and behavior will at best impose only partial constraints upon the bureaucrat’s actions, and given that the kind of economic calculation that constrains entrepreneurs and capitalists does not fully restrain prosecutors, the system then requires restraints of another kind imposed by a political process or the whims of an administrator. However, as Yandle notes, the regulator is interested in minimizing his own costs, not to mention reluctant to limit the power of his office. In other words, there are plenty of reasons for those who either supervise the prosecutor or are able to impose discipline for prosecutorial misconduct to shirk their assigned duties, as to do so in the long run would diminish the power of the prosecutor’s office, thus reducing all of their authority.

While this paper does not advocate reform for prosecutorial offices, nonetheless it is clear that the denial of using the tort system takes away the one remedy that one wronged by a prosecutor directly can take against his false accuser. Every other remedy—from other prosecutors charging the offending prosecutor with a crime to the state bar imposing discipline up to taking away the prosecutor’s law license—requires those who are government officials and also have a vested interest in preserving their own power and authority to do something that in the long run undermines their own power.

Such a state of affairs should surprise no one. Mises notes in Bureaucracy that one cannot really reform the bureaucratic insti-tutions other than try to limit their influences. He pointed out that bureaucracies cannot run an economy with any success or replace a market. Likewise, one cannot impose “market-based” reforms upon bureaucracies; people charged with crimes cannot refuse to submit to prosecutors and the courts, and average citizens have no power over the system other than to serve on juries and, on occasion, impose their own form of “justice” through jury nullification.

By creating an atmosphere in which prosecutors nearly are invulnerable to legal accountability, the courts also have unleashed a situation in which F.A. Hayek described as one in which “the worst get on top.” Hayek—as well as Austrian economists such as Mises and Rothbard—warned that a collectivist system is more than likely to empower people who are more likely than not to abuse that power. He writes:

The principle that the end justifies the means is in individualist ethics regarded as the denial of all morals. In collectivist ethics it becomes necessarily the supreme rule; there is literally nothing which the consistent collectivist must not be prepared to do if it serves “the good of the whole,” because the “good of the whole” is to him the only criterion of what ought to be done.