Legal rules and law enforcement: Private or public goods?

In modern economies individuals and firms supply a wide range of detection and enforcement activities, and these are purchased by consumers on markets, just like ordinary goods. For example, firms hire private security companies to protect their businesses from theft and malicious damage. Companies and individuals hire lawyers to protect their rights. Individuals put locks on their doors to protect their private property, purchase guns to protect their life and liberty.

Some of these activities benefit only the parties that undertake them. An individual who puts a lock on the door of his house largely benefits himself. But individuals also supply goods which benefit others: the individual who catches a thief benefits not only himself but his entire neighbourhood. Because private individuals supply public goods in the absence of government intervention, the relevant questions for policy analysis are: is the amount that is privately supplied efficient? If so, why? If not, how large is the inefficiency, and can anything be done about it?

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