Crime victims have little economic incentive to punish the perpetrator; if you burn my house down, jailing you won’t un-burn the house. If you steal my gold, I have some interest in catching you and taking it back, but no more than I do in catching some other poor shmuck and taking his gold. It’s only society as a whole that wants to make sure criminals are reliably punished and the innocent consistently safe. This is the classic situation where economists usually recommend government intervention

Examples of different equilibria:

• The Gypsies and Amish will ostracize members who defy the court – but since everyone lives in fear of ostracization, in real life they’ll just pay the fine or make their public confession or whatever.

• The English will hang criminals at the drop of a hat – but since the threat of hanging incentivizes them to bribe prosecutors, in reality few people will need to be hanged. The
• Icelandic courts could declare offenders outlaws who can be killed without repercussion – but the threat encourages Icelanders to pay the wergeld, and nobody has to get outlawed.
• The Somalis are ready to have murderous family feuds – but the possibility of such a feud keeps people willing to go to arbitration.
• Even our own legal system works like this. The police can physically drag you to jail, kicking and screaming. But more likely you’re going to plea bargain, or agree to community service, or at least be cooperative and polite while the police take you away. Plea bargains – which are easier for prosecutors, easier for defendants, and easier for taxpayers – seem like a good example of cultural evolution in action; once someone thought them up, there was no way they weren’t going to take over everything despite their very serious costs.

• More on the English example
• More on the Islandic example