prior probability

There is a fascinating and lively academic literature on the law and economics of the crime of blackmail. (Type in the word “blackmail” in Google Scholar and let the fun begin; also, for what it’s worth, you will find our contribution to this scholarly literature here.) In sum, legal scholars and economists differ on whether a purely consensual activity like blackmail should be illegal in the first place. Keep this in mind as we turn to the pending criminal prosecution of the former Speaker of the House, Dennis Hastert, who was allegedly blackmailed by one of his former students with whom he allegedly had sex with when he was a teacher many years ago. Federal prosecutors have not charged the former speaker with sexual abuse of a minor. (After all, sex crimes are State–not federal–offenses, and the statute of limitations for such a prosecution in this case has probably expired under Illinois law.) Nor was Mr Hastert charged with bribery or theft. Instead, prosecutors have charged Mr Hastert with “structuring” or making repeated withdrawals from his bank in amounts under $10,000 to avoid generating any cash transaction reports. (U.S. banks are required to send a cash transaction report to the federal government under the Bank Secrecy Act for every transaction over $10,000. According to this report in the N.Y. Times (we know, not the most reliable of sources these days), over 15 million cash transaction reports are generated each year.) In other words, Mr Hastert was charged with taking his own money out of his own bank the wrong way. Does this make any sense? Is it fair?  Continue reading →