Asset Forfeiture Laws and Criminal Deterrence

Asset forfeiture laws allow the seizure of assets used in the commission of a crime. This paper examines the impact of such laws on deterrence by incorporating the possibility of asset forfeiture into the standard economic model of crime. When punishment is by a fine that can be optimally chosen, forfeiture is never optimal because of the deadweight loss it imposes in the capital market. When the fine is limited by the offender’s wealth, forfeiture may or may not be desirable. Extensions of the basic model include the optimal use of forfeiture when (i) partial seizure is possible, (ii) punishment is by imprisonment, (iii) the probability of apprehension is endogenous, and (iv) enforcers are rent-seekers.