HOW OPTIMAL PENALTIES CHANGE WITH THE AMOUNT OF HARM

Intuition tells us that the optimal penalty and court care to avoid er ror should rise smoothly with the harm to the victim. This is not alwa ys correct; sometimes the optimal penalty and level of court care incr ease discontinuously with harm, even when penalties deter harm and cou rt care reduces error continuously. This is shown in a model in which the social cost of crime consists of its direct harm, the cost of cour t care, and the cost of false convictions.