ECONOMIC INCENTIVES AND CRIMINAL LIABILITY: DOES PUNISHMENT FUNCTION AS A MECHANISM FOR REGULATING MARKET BEHAVIOUR?

Abstract

This article presents a comprehensive, interdisciplinary study of the relationship between economic incentives and criminal liability as instruments for regulating market behaviour. The topic's relevance stems from the need to identify an optimal model of state intervention in economic relations, given the increasing prevalence of economic crime, the high latency of economic criminal offences and the limited effectiveness of traditional punitive mechanisms. The study aims to evaluate the effectiveness of criminal punishment as a means of regulating the behaviour of economic agents, determine its regulatory capacity limits, and substantiate the optimal balance between punitive and incentive-based public policy instruments. The methodological framework combines economic analysis of law with systemic, comparative, formal, logical-analytical and statistical legal methods. The research is theoretically founded on Gary Becker's economic model of the rational offender, the ultima ratio doctrine, the principle of the economy of criminal law enforcement, and contemporary approaches within the field of law and economics. The findings demonstrate that compensatory increases in the severity of criminal sanctions do not ensure a proportional enhancement of the deterrent effect of economic criminal offences under conditions of a high level of latency, and may conflict with the principles of proportionality, justice, and economy of criminal law repression. Based on an analysis of deposit and lending activity dynamics in Ukraine, the study concludes that lawful financial behaviour is influenced to a much greater extent by economic and institutional incentives, particularly the deposit guarantee system, preferential lending programmes and predictable monetary policy, than by intensified criminal law enforcement. The study also argues that excessive or disproportionate reliance on criminal law mechanisms to regulate economic activity may increase legal uncertainty, raise businesses' transaction costs, and negatively impact investment activity. The research's scientific novelty lies in the development of the concept of complementary market behaviour regulation, whereby economic incentives and criminal liability perform mutually reinforcing functions. Economic instruments shape incentives for lawful behaviour ex ante, whereas criminal law serves a protective function ex post, responding to the most socially dangerous manifestations of opportunistic behaviour. The practical significance of the findings lies in their support for the transition to an integrated criminal policy model that prioritises the use of economic incentives alongside the proportional, predictable and ultima ratio-based application of criminal law mechanisms.